(Note: While this is a personal blog not paid for with any public funds, I rarely discuss overtly political issues or campaigns. This entry is intended to raise the financial issues associated with a proposed initiative before the public.)
Our state budget is complex. The nearly $40 billion biennial budget struggles under the constant pressures of constitutional, statutory, federal mandates and moral directives to support public education, health care, housing, environmental cleanup, foster youth, nursing home and child care center inspections and so much more.
Financial risk is inherently part of the deal of running a multi-billion organization serving seven million people. Still, we as a state–regardless of party leadership–rarely recklessly ignore legitimate financial risks to our credit ratings, balanced budget and critical services.
Today, however, it seems Washington is now dangerously flirting with serious financial risk as I-1515–Just Want Privacy— begins the process of hiring paid signature-gathering firms to reach the initiative ballot. The opposition is organizing simultaneously led by the business community I suspect in large part because of the financial risks involved. They see what is happening in North Carolina. This is exactly the same social policy regarding transgender people and bathroom access that is bringing North Carolina to it’s knees as the federal government directly threatens the state with reductions in federal support due to that state’s aggressive pursuit of discriminatory legislation.
A new report from the respected Williams Institute–a policy shop out of UCLA–outlines in detail how Washington would likely realize at least $4.5 billion in annual federal spending reductions if the initiative reaches the ballot and ultimately passes. The Stranger, hardly a bastion of conservative fiscal discipline, outlined the risks as well.
Education support, state and local matches in key programs and much more would all be endangered if Washington follows the same path as North Carolina. More than 50% of the entire state budget is dedicated to early learning, K-12 and higher education. Why would we risk our entire financial partnership with the federal government in order to pursue a controversial social policy that has yet to be shown to even be an actual problem? The entire issue seems to have surfaced only after conservative social organizations raised the concern based on anecdotal complaints.
I’m a risk taker in pursuing disruptive technologies and new market opportunities in my business and entrepreneurial life.
Regardless of politics, policy, ideology, ethics or social values that’s not a hat I suggest we wear as citizen legislators. We have a fiduciary obligation as budget writers in the Washington State Legislature on behalf of seven million people to minimize risk not purposely detonate a financial bomb.
Your partner in service,
Does a tax break work? Does it provide a compelling return on investment for taxpayers? The public now has a new level of visibility to decide for themselves. In my view, today we are able to learn first hand with hard data that the deal Washington taxpayers struck with The Boeing Company is, in fact, a win-win.
One of the driving passions of my work in the Legislature has been the powerful idea that the public has a right to know the value of a tax preference for companies, organizations and industries so they can more effectively and objectively determine the return on investment themselves. The legislation I crafted as chair of the House Finance Committee has transformed the accountability, transparency and analysis of tax preferences and in many cases opened the books for the public. Following the legislation’s passage, the public activism for open data and transparency by the Seattle Times played a key role as well in pushing and prodding for comprehensive disclosure.
As an architect of the Boeing tax and investment package, I’m proud of the fact that today Boeing proactively met the spirit of the law as well as the letter and opened the books of their tax preferences. They did so in a comprehensive, responsible fashion that provides broad context to allow the public to measure the effectiveness of the tax preferences granted by the Legislature in both 2003 and 2013.
Boeing received in 2015 tax preferences valued at $305 million. That number–previously hidden from public view– should be analyzed in the context of the overall $13 billion investment in our state including wages, supplier payments, capital investments, state and local taxes paid, community giving, tuition waivers for employees and more.
Washington is the global center of innovation in the aerospace sector. In 2003 we represented about 32% of Boeing global workforce. Today, we represent about 49% of their global workforce at more than 79,000 employees. While that is down slightly from 2013, it is up dramatically since 2003 as we continue to grow as the anchor of Boeing’s workforce.
I worked hard with our team strongly behind accountability to negotiate solid accountability provisions in the Boeing package. We proposed formal job requirements, levels, clawback provisions, inclusion of engineers in the package and much more. We did pass key provisions to secure the future of carbon fiber in our state and those elements will help our state for generations. Many of the other accountability provisions did not survive the final cut, and I regret the Legislature’s failure in that area. I hope the company and machinists and engineers and others can continue to build bridges to protect the jobs of tomorrow. Yet, I stand by the overall package as a compelling return on investment for the taxpayer of Washington as we march into the 21st Century of aerospace with the 777x and carbon fiber as the material of tomorrow.
I learned and grew a great deal during the Boeing tax negotiations. The special session was personally difficult and politically fraught, and yet we found a pathway forward. The idea that we can come into special session and pass a major tax package without more due diligence, process and transparency itself remains frustrating. It was a flawed process that did not serve the public as well as a longer, more thoughtful effort could have. But in the end, our state moves forward, learns and adapts to the economy of tomorrow.
In my view, we are a great state in part because of the enormous economic powerhouse of our aerospace sector. Today’s public data is just more hard, objective evidence that respects the intelligence of the public and allows them to judge for themselves.
Your partner in service,
The big picture of the 2016 Legislative Session spans the state budget, McCleary, body cameras, voting rights, ethics and more. In the more mundane, daily business of legislation, however, there are also hundreds of relatively modest bills that float under the radar of public attention.
House Bill 2839 effortlessly passed the House of Representatives with a strong 84-13 bipartisan vote during the rushed hum of internal deadlines. Nate Silver would likely grant a 99%-plus probability of flying through the Republican-controlled Senate.
In government language, the bill grants a new tax preference by eliminating the sales tax on the construction of a building facility for airplane maintenance and repairs. In English it’s a tax preference for one company, Clay Lacy Aviation, to construct and lease their new facility at Boeing Field in Seattle for private airplanes. The tax preference eliminates the sales tax on the construction of their new facility.
It’s a benefit we granted to Boeing as part of the broader $8.7 billion package, so the policy framework is hardly inconsistent or unreasonable from the company’s perspective. One also assumes, as an aviation firm, the company benefits from the same generous B&O rates the broader aerospace sector enjoys.
It’s also an understandable request from the firm given that Washington is one of only five states that charges sales tax on most forms of construction, with many other states providing modest variations or exemptions (such as primary residence, etc.) But we’re also only one of seven states without an income tax thus freeing any local executives and staff from personal tax liabilities, so there are tradeoffs everyday.
The immediate financial impact of the bill is relatively modest since the Legislature has quickly learned to hide the true cost of spending and tax legislation outside of the four-year budget horizon.
Yet on a serious public policy level the bill offers a teachable moment of reflection and education about tax policy and politics for the public and lawmakers alike.
While there are dozens of tax preferences reducing or eliminating the business and occupation tax for companies, industries and sectors, there are relatively few that eliminate the sales tax on construction of buildings. It is one of the few remaining categories that as a general statement the Legislature has been reluctant to aggressively institutionalize as tax exemption policy. Nine of the 10 exemptions were granted between 1996 and 2008, so the idea itself is less than 20 years old.
The reason this thoughtfully constructed bipartisan tax bill is so important to understand—and worthy of a rigorous public dialogue—is that it unfortunately represents what I see as the next generation of tax preference requests we will see in Olympia for years to come. It is time to decide whether we will respond to such proposals with intentionality or quiet acquiescence.
The sales tax accounts for 47.3% of Washington’s revenue collections in 2015, among the highest in the nation. Construction activities from both residential and business accounted for $821 million, with businesses paying 57% or $472 million and residential construction accounting for 43% or $349 million. When the Great Recession hit in 2009, sales tax on construction saw an immediate and ferocious downward spiral.
Today, of the 694 tax preferences in Washington, only 10 eliminate the sales tax on construction with a modest total fiscal impact to the budget. Other examples of the elimination of the sales tax on construction include farm worker housing, incentives for manufacturing in high unemployment areas of the state, air pollution control facilities, warehouses and grain elevators, anaerobic digesters for dairies and semiconductor materials manufacturing facilities. Boeing’s carbon fiber plant for the 777x is eligible for this benefit, and due to transparency legislation that former Sen. Rodney Tom and I passed in 2013 the Seattle Times reported the company realized sales tax savings on construction of $19.5 million in 2014. Agriculture and aerospace seem to account for the overwhelming majority of the benefits.
The bill, carefully crafted by veteran and well respected Olympia lobbyist Steve Gano, clearly meets both the letter and spirit of our transparency legislation requiring greater accountability and return on investment for taxpayers. First, the company will pay the sales tax on construction of the new building; then the state will reimburse the company once it has been certified that construction occurred with at least 100 construction jobs between January and June of 2021 with average annualized wages of $80,000; the value of the tax preference becomes public under the law and the audit committee will study the results.
Fair enough. The bill is unquestionably more analytically and financially rigorous than in years past, and the company deserves credit for the seriousness of its proposal. I offer no critique of the company, lobbyist or short-term return on investment. They are merely advocating for their own financial interests as any of us would in a similar position. They wrote a reasonable bill that would provide a substantial and impressive return on investment for their investment in legislative advocacy as is their democratic right.
A profoundly important and serious public policy problem for legislators, however, is that the central premise of the bill rests on the idea that the company will not construct the facility without this tax preference. This is inherently a subjective question. The company testified that Washington’s sales tax on construction makes us uncompetitive, and they are likely to build elsewhere without this tax preference. A ‘game theory’ argument can be made that the key customers of the private airplanes the company wishes to serve are located in the Seattle market, and better supporting those key clients requires facilities here at Boeing field regardless of state tax policy. The company operates, according to its site, “two full-service jet facilities at Los Angeles’ Van Nuys Airport and Seattle’s Boeing Field, with regional offices and aircraft operations based at 10 additional U.S. cities.”
Still, the much more important question remains whether it is the job of state tax policy to politically select winners and losers based on the political sophistication of the company?
We have a broader public obligation to ask a series of tough policy questions: Are we in the business of mitigating the negative externalities of our tax system for select companies at the promise of jobs regardless of the number, or is our job to depoliticize our tax code with fewer winners and losers contests, and let the market function with less government interference? Do we grant tax exemptions at the promise of any number of jobs under any conditions in an era when the Seattle region has an unemployment rate of 4%? What is our actual criteria for Keynesian-type public investments? What would those 100 jobs be worth in Grays Harbor County versus King County? What is the policy rationale for why would we grant this tax exemption to an aerospace firm serving private airplanes and not a multi-billion skyscraper construction project for a Fortune 100 firm in downtown Seattle?
We are a sales tax state. That is not an inconsistent secret. The market functions and companies make choices everyday whether or not to serve the Washington consumer with goods and services. Sales tax on construction is an unpleasant byproduct of our state’s broader tax structure, but it is equally unfair and annoying for residential homes, commercial skyscrapers and leasing companies for private corporate airplanes.
A more structural problem with the bill is that it inoculates us to the next generation of tax preference proposals to eliminate the sales tax on construction for businesses of all sizes, shapes and industries. As this legislation likely passes, it is assured as January rain in Seattle that we will see many, many more such requests from individual companies, industries and sectors in 2017 and beyond.
Over the years the Legislature has, in its wisdom, generously reduced or eliminated from meaningful contribution of the business and occupation (B&O) taxes key sectors industries including information technology, aerospace, agriculture, timber and more. With the B&O tax largely combed over for tax preferences by companies, legislators and lobbyists alike, we now move onto the sales tax. No thank you.
We are so much more than what we’ve become.
Your partner in service,
Recently the state Senate transportation budget included resources to clean up the unsanctioned homeless encampment under I-5 in Seattle known as The Jungle, a concentrated area that is extremely dangerous including multiple murders, sexual assaults, extreme drug activity, fires, environmental damage and more. City officials have responded to more than 750 calls for emergency assistance in five years. The debate of how to compassionately and safely clean up and secure the area has been a source of dialogue in various shades for years.
Last week I issued a statement in which I failed to accurately and fully explain my views for how we might safely clean up and responsibly secure the area, coordinate between city, county and state officials and effectively help with genuine homeless transitional support services. As a result of my overly broad statement, the notion of a large, generic fence may have been seen as Plan A from Olympia. It is not.
First, state DOT, Seattle fire, police, utility and public health representatives testified that officials will not move forward with full scale clean up and safety work until hands-on, short term, transitional support services are identified and coordinated. This includes emergency shelter access, mental health, addiction services and more to connect people to real services. It may perhaps include additional sanctioned, semi-sanctioned encampment areas or even surplus property, as well as medium and long term efforts around housing first options. City, county and state officials must double down on transitional support services as part of the emergency declaration. And this does not include, in my view, sanctioning this dangerous area aside I-5 as an endorsed encampment with plumbing, water and other facilities.
I recognize that cleaning up and securing The Jungle slowly, carefully, compassionately and with hands-on support services is not a department down the hall. It is complex and difficult and requires real resources and strategies. Public safety officials stated it may take 6-9 months or longer before this approach would be ready. The language in the budget bill is extremely flexible for city and state officials and safety approaches may include limited fencing, lighting, access modifications and more.
Mayor Ed Murray’s administration has made it clear that a coordinated, holistic approach is vital for all parties–city, county and state–to safely, compassionately and responsibly move forward. I share the Mayor’s view that the state’s role does not begin and end with cleaning up around I-5, it also must provide broader financial support to city and county officials to assist with the full range of homeless services. We are fighting in Olympia for more resources.
Second, my statement about installing a fence was overly broad and poorly outlined, and I failed to articulate that I believe we need modest, limited fencing in select, highly dangerous and volatile areas where individuals can access and impact the freeway endangering themselves and the public. I regret not being clearer that cleaning up and securing the most volatile and dangerous parts of The Jungle likely requires limited, targeted fencing not expansive installations. The ultimate decision of logistics should be made by not by elected officials but by a coordinated technical and policy examination by city, county and state officials.
Still, statements from some local public officials about the use of any safety fencing near The Jungle–a dangerous area where murder, sexual assault and violence is a cold hard reality–being equated to installation of a xenophobic wall along the national border is deeply offensive and below our city’s civic dialogue. The rhetoric inflames debate and thoughtful analysis rather than contributing in any meaningful way to real problem solving of one of the most complex societal issues facing our nation.
Third, lost in the tactical debate and logistics over clean up and safety fencing is the broader battle in Olympia of statewide support to address our state’s homeless crisis. We have fought ferociously for more resources across the board in mental health, addiction services, domestic violence, emergency shelter support, youth beds, crisis LGBT outreach support, health care, public safety and much more. Our Senate Democratic team proposed a massive infusion of state dollars in additional services, and the final budget terms are likely to increase priority spending on key programs.
Our current 2015-2017 two year budget–combining state and federal dollars–includes a total of approximately $631.3 million for alcohol and substance abuse services statewide, with many focused on Seattle. Thanks to House budget writers last year this reflects an increase in total funds of $180.9 million (40 percent) from the 2013-15 biennium. This includes an increase of $3.1 million in total funds for increased substance use disorder treatment costs.
Our current budget includes the largest increase in mental health services in state history.
We increased mental health funding by $105.8 million. It includes $11.8 million for secure and semi-secure crisis residential centers, HOPE beds, and outreach to street youth programs. We include an additional $1 million in Washington Youth and Families Fund grants for supportive services in conjunction with housing to address underlying causes of youth and family homelessness.
On the capital or infrastructure side, we include $75 million in Housing Trust Fund dollars designed to support a minimum of 1,900 homes and 500 seasonal beds. We include $32 million for essential Community‐Based Behavioral Health Beds. There is $2 million for for new community‐based substance abuse and mental health facilities. At the institutional level, we included $57.8 million for state Mental Health Facilities (Eastern and Western State Hospitals).
The issue of homelessness crosses every boundary of our social fabric. Families struggling with homelessness on the streets of our city, county and state shakes the status quo of our sense of justice, our societal complacency and our vision of ourselves as a community. It agitates us–in a healthy and forceful way– to reflect more deeply on how a wealthy nation can allow such inequality.
It forces us to act.
Your partner in service,
I’m an extremely modest drinker. A glass of wine on Friday nights for Shabbat celebration with friends or an occasional glass with a special meal. Despite the strength of the craft brewery industry in Washington, even a cold beer is a rarity for me. Like most adults, I have dabbled with marijuana but find it uninteresting at best.
And yet as a parent of four kids ages 18, 16, 14 and 9–and a legislator looking closely at data, costs and broad bases fiscal impacts–I find myself reflecting more seriously on the new normal of the perception of socialization of alcohol and marijuana.
I passively and rather lazily voted in favor of the Costco-funded initiative to deregulate alcohol. I acknowledge that I didn’t think too critically about the impact on the front lines in the long run and retreated to vague ideas that market competition rather than a strict government monopoly would work well for our state.
Today, I deeply regret our state’s tidal wave of deregulation of alcohol. The critics were right in terms of the socialization of alcohol.
The idea that every corner Bartell’s and Safeway is bursting with hard alcohol seems to me to openly and boldly introduce alcohol to kids without filter or context. The idea that alcohol is available in virtually any type of food store adds to the common acceptance, and I find it troubling on many levels.
Has our state seen a spike in the amount of alcohol consumed and related social problems? I haven’t tracked down the data but suspect it’s worthwhile to explore. The data itself is always changing but is important.
As the lead sponsor of important ‘clean up’ legislation regarding marijuana regulation, I dove into the policy issues in 2015 and still consider our state’s grand experiment important public policy. I voted for the marijuana initiative and believe we needed to take a legitimate step forward as a state in this area due to the nation’s paralyzed lack of dialogue about drug policy. We had as a state and society damaged ourselves with the heavy criminalization of marijuana over so many years. In effect, a case can be made that a jolt to the national and international markets in tackling society’s approach to marijuana was inevitable, and like others I thought few states were better positioned than Washington. That’s the theoretical idea and there is some meaningful validity to the point. But that does not fully capture the reality on the ground for youth, parents, teachers and others deeply concerned about the implications of full scale socialization of marijuana among youth.
To me a strong case can be made that perhaps we went too far too fast with too little structure, especially given the lack of framework to our medical marijuana system.
Perhaps we should have started with a well crafted decriminalization effort for two or three years rather than open the gates of social acceptance for youth so quickly and dramatically? We could then have ironed out the complex issues such as coordinating the recreational and medical markets, determining zoning and preemption issues with cities and counties, and better understood how to effectively design a youth prevention programs with our educational system.
Our state–driven by a long standing and genuine libertarian streak–has moved forward on the broad based acceptance of alcohol and marijuana usage. The socialization of substance abuse for youth has a lot of implications that we are just beginning to see in the halls of our schools.
I don’t yet have data about whether we have categorically socialized alcohol and marijuana for youth but I intend to look into the question more deeply as the state Department of Health explores ways to impact kids in this critically important public health arena.
It’s not merely about socialization, of course, as I’ve been highly critical of the shameless addiction of lawmakers to the revenues from marijuana. The political battle to reserve even a modest amount of the revenues for youth prevention was an epic fight in 2015, and one that I’m proud to have led successfully. I was wrong (and the GOP was right) about the appropriate level and rate of taxation, but I was right (and the GOP was wrong) about the need for stronger investments in youth prevention.
For youth, counseling, mentoring, prevention education, awareness of the signs of depression and suicide, gun violence and other public health issues and many other concerns will never go away. But we can use today’s thinking about health, education and awareness to more wisely inform our policy debates. We can think more intelligently about evidence-based best practices, and we can help our schools and universities with a broader approach to public health.
We can’t go back into hiding in an old fashioned rhetoric and constraints of yesterday but we can most certainly look forward more critically with today’s generation for our kids, families and society.
We can redefine our very definition and strategic approach to public health for our youth and society.
You can be a hip parent, and even a hip parent-legislator, and still think we may have blindly charged down a new path with global implications without much caution about the journey ahead.
Your partner in service,
It’s disappointing to report that bipartisanship broke out in Olympia this week! Senate Republicans and House Democrats quietly aligned to allow strong ethics legislation to quietly fail in each chamber.
My legislation–crafted in partnership with Attorney General Bob Ferguson and introduced for a second year–would have created a one year ‘cooling off period’ before lawmakers and senior government officials could leave public service and become paid lobbyists. The bill has overwhelming support from the public and editorial boards statewide.
The public’s confidence in the integrity of government is not a irrelevant, trivial side note to the health of our democracy. Our state prides itself on campaign, lobbyist, financial and budget disclosure. Yet on this issue–ensuring there is a clear line between public service and private interests–seems to be a blind spot for lawmakers despite the intrinsic connection in the public’s mind.
I introduced this legislation because I was deeply troubled in my previous role as chair of the House Finance Committee when senior government officials and legislative colleagues would complete public sector work on a Friday and return to work on Monday as a paid lobbyist.
How long had those negotiations been underway? What information was inadvertently shared? I impugn no individual in this charge. I criticize the institution of government with a tone-deaf failure to see the discomfort of this unsteady ethical line.
We know how we can better define the line between public service and the private interests. This bill would have helped our state achieve that goal. The post-public service employment limits our state already has in place are a good starting point, however, we can do better to create greater transparency, protections and accountability in the area of government ethics.
A 12-month cooling off period is a reasonable length of time to consider and would create a large enough wedge to effectively slow down our state’s current revolving door. Despite having the support of many editorial boards across the state, from Spokane to Everett, and from Olympia to Wenatchee. From Vancouver to Seattle, we had unanimous support and we heard their message loud and clear.
On the record, no one is satisfied with the grade that our state recently received from The Center for Public Integrity, and neither should our taxpayers. Our state received an overall grade of D+ in the 2015 State Integrity Investigation. In individual categories, our state earned a grade of D- for Legislative Accountability. In most classrooms the grade of a D+ or D- would not pass muster. Why should the State of Washington continue to accept an all-but-failing system and not attempt to strengthen our relatively weak post-employment restrictions? Off the record, clearly too many believe it would hinder future job prospects or restrict options.
It’s only a 12 month line of division and yet the payoff for the public is exponential.
Our state would not, of course, have been the first to adopt legislation of this type. The federal government has adopted a cooling off period and more than 33 other states across the country have enacted similar legislation, according to the National Conference of State Legislatures.
This bill is not meant to deter former legislators or others from moving on and making a living elsewhere. It is meant to ensure that lawmakers, cabinet secretaries, and other senior staff are not placed into situations where information they were privy to in a previous job can help influence the outcome of their new position. It is meant to build confidence that there is, in fact, a clear distinction between public service and private interests. We can not make that claim today.
I appreciate and respect the work of Attorney General Ferguson and will continue to partner with him until we pass this essential legislation.
We are so much more than what we’ve become.
Your partner in service,
As the 2016 Legislative Session begins on January 11, 2016, and I walk for the first time into the Senate Chamber as a member, I would like to pause briefly to express my gratitude and appreciation to my colleagues, staff and friends with whom I served in the state House of Representatives for seven years.
I first walked into the House Chamber in 1979 as a 14-year-old page from Bellingham. I remember looking up and seeing “Whatcom” on the county list, and pondering the reality of how big our state was compared to my small town. In 20098 when I walked on the House floor as a new member, I sat at desk number 36 on the floor. It was a coincidence but I took it as a special blessing.
There is a saying that “every members is given a mulligan your first year.” It means, simply, that it’s easy to make mistakes, and I had my share of them. I’m proud of the substantive policy work that year and since as I found my footing as a legislator.
A deeply private and treasured memory is walking late at night through the House Chamber that first term with the late Scott White, my friend with whom I had been elected in 2008, and talking about how blessed we were to be husbands, fathers and elected representatives in the people’s body. My dear friend Scott had the opportunity to serve in the Legislature for less than three years as he passed away unexpectedly at age 41 from a previously undetected heart enlargement. I miss him a great deal and find myself thinking about him during this transition.
The House Democratic Caucus is a dynamic, energetic and fiercely dedicated team of citizen activists for our quality of life. I’ve enjoyed sparing with my GOP friends and colleagues, and finding common ground when possible, with equally good people equally dedicated to our collective future.
There are few honors greater than serving in public office. The state House of Representatives–and the people who make it work–are the best of the best and reflect the values of our state.
Thank you my friends for the honor of being your partner in service.