Author: Ross

I am the Director of the Department of Early Learning for Washington State. I formerly represented the 48th Legislative District in the State House of Representatives, chairing the Appropriations committee and spent many a year at Microsoft.

Misc. Budget Notes

I’ve answered a lot of mail on the budget so far. Some items come up over and over again – Adult family homes, family planning funding, Children’s Hospital, and the State Auditor and his I-900 audits. Here are some notes on these things.

Family Planning

There has been about $10 million in the state budget for family planning services. Since the state pays for 57% of all births in the state, increases in the ability of couples to plan for when they will have a child can save us a lot of money – this is a reasonable investment, and with a short return timeframe (9 months.) The $10 million has been in the budget to backfill a federal cut during the Bush administration. We’re expecting the feds to restore this cut in the 2011 budget. Our money is in the first year of the biennium, with the expectation that we’ll come back next year and put the money back in if the feds don’t come through.

Children’s Hospital

The original budgets had a provision that had a disproportionate effect on Children’s Hospital and the Seattle Cancer Care Alliance (theOutpatient Prospective Payment System.) These facilities interact differently with Medicaid than “regular” hospitals do, and one of the cuts seemed to have an overly large cuts to children’s and SCCA. We’re still working on fixing this. Something was done to help Children’s in a different way which somewhat mitigates the problem, but that is not to say that the budget doesn’t affect Children’s and SCCA – we make devastating cuts to our healthcare safety net in order to deal with the most dramatic economic downturn since the great depression.

Adult Family Homes (AFHs)

AFHs are part of the network of businesses that provide long-term care for our seniors and those who are disabled enough to not be able to care for themselves. Our support ranges from paying for individual providers of home care services, adult family homes, nursing homes, skilled nursing facilities, etc. We have a Medicaid responsibility to provide this care in nursing homes, which are very expensive. Most folks would prefer to have care at home, in a small facility, or somewhere in their community rather than go to a nursing home, so we apply for several federal waivers to allow us to provide care that’s lower cost and more popular with the recipient. We provide about half of the money and the federal government provides half.

We try our best to be balanced and cut all of these providers about 5% in their reimbursement rate. The federal stimulus plan provided some additional short-term funds which we apply to this part of the system. Before we used this money it was 14%.

I-900 Audits

The auditor started up his performance audit program after the passage of I-900, an initiative I supported. It took some time for him to expand the program to the level provided for in the initiative, a reasonable measured approach. He didn’t use all the money the initiative provided in the early years of this program, and we use some of that to rebalance the current budget shortfall. We fund his entire current workplan, but are trying to share the overall budget cuts fairly across the entire government operation.

Sad duty

NE 116th Street Bridge in Kirkland
NE 116th Street Bridge in Kirkland

This week all six legislators from the 45th and 48th districts sent a formal letter to the chair of the Transportation Commission asking that the NE 116th Street Bridge over Interstate 405 be renamed the “Kollin Nielson Memorial Bridge.”

Kollin Nielson was a Project Engineer with the Kiewit Pacific Construction Company when he tragically lost his life. While working on the I-405 Kirkland project he was hit and killed by a drunk driver.

We believe that this would be an important symbolic gesture to the family and co-workers that Kollin left behind, and an important reminder to the community about the dangers of drunk driving.

This is unrelated to the current legislative session, but is something that we’ve been trying to take care of for a while.

Tax Policy for the Internet Age

Tax downloads? What is he talking about?

Let me explain. Today if you buy a copy of “Gladiator” at Barnes and Noble you pay sales tax on it. If you rent it from Blockbuster you pay sales tax. Rent from Netflix? Pay the tax. Download it from Amazon? Pay the tax. However, if you watch the same movie as a stream that doesn’t stay on your hard drive you don’t. Why?

The same thing happens with games. Buy a game at a local store and pay the tax. Download the game from Amazon and pay the tax. Many new games have a significant on-line component. My son is a very serious pirate in “Eve Online,” a massively multiplayer online game. He pays $15 a month for this game experience which isn’t taxed, but a similar game he would download would be.

More concerning is the amount of data a corporation buys today that is a key element of how they run their business. The department of revenue and the business community disagree somewhat on how this will be taxed. This generates uncertainty and lawsuits.

This is crazy. There needs to a simple way to figure out what’s taxable and what’s not, and however we do it we shouldn’t have some business models create a loophole that other ways of buying the product don’t have. We all want to avoid paying taxes, but I would think we could agree that people buying the same product should pay the same tax, regardless of the form they acquire it.

The last time the section of law in Washington that defines sales tax for software was substantively overhauled is about 30 years ago, long before Al Gore thought up the Internet. The world has changed significantly since then. Currently we pretend that downloadable music is a “tangible personal product” in the tax law, something that is becoming more intellectually difficult to defend.

I’ve been working with the business community, including major game manufacturers, to try to simplify the tax treatment of “digital products” as they become more important in the future. A task force met for 18 months to try to resolve the issue and create a bill we could all agree on. We have that agreement today. The key goals we all agreed on were:

  • Revenue-neutral. The bill is not an attempt to raise money – it’s a balancing act to have a better-working tax system.
  • Technology-neutral. A product should either be taxable or not, and the tax treatment shouldn’t depend on the specific business model in which it’s distributed.
  • Protect Washington businesses. Whatever we do should not disadvantage Washington businesses, particularly our high-tech industry which generates many jobs.
  • Durable. The bill should be able deal with changes in technology over the next 20 years without big re-writes every few years.

House Bill 2075 mostly moves things around in the tax code – for example moving books, music and videos from the “tangible personal product” category to the “digital goods” category. The bill is designed to create a durable platform for taxation in the future. It creates as many things that are not taxed as things that are, and the current fiscal note shows that for the next ten years the bill actually reduces taxes slightly. It is not an attempt to raise new revenue.

Washington is a sales-tax state. We don’t have an income tax, and aren’t likely to have one any time soon. A successful sales tax program taxes products broadly so that the rate can stay as low as possible. This keeps the tax from affecting decisions consumers and businesses make. It’s not fair if a game that has a disk costs less than a game that’s accessed on-line, only because of the business model. Trying to keep this platform technology-neutral helps keep rates low statewide.

HB 2075 creates a sales tax platform for the 21st century, or at least for the next 20 years until the world changes again.

Hobbesian Choices

The chairs of the House and of the Senate budget committees both introduced their budget proposals this week. The committees will vote on them soon, though none of us can say exactly when at this point. Typically the bills are introduced and passed in about 3 days. The minority party always whines that they don’t have enough time to even read the bill before it passes. Not this year. It’s not clear to me that we have the votes to pass the budget in the House Ways and Means committee, nor is it clear in the Senate.

Both budgets make deeper cuts than we’ve seen since the early 80s, and would be like we saw in the depression if it were not for the federal stimulus plan. Our revenue projection would be almost a billion dollars lower if not for the plan’s predicted effect on the economy, and there is about $3 billion in direct aid to the states. It all comes with stringent rules for its use (“strings”) and is hard to track in the budgets.

For the first time in modern history, this budget is less than the previous 2-year budget, by about $1 billion. This is despite significant inflation in the costs we face and increases in population. For example, there are more students in public school, and not just because of population increases. When the economy tanks, people transfer from private schools to public ones, increasing the caseload even more. This happens in other areas too – our Medicaid caseloads are up, as are many other costs of providing the same services we did last year.

What this means is that we won’t provide the same service we did last year. Current budgets include:

  • Raising class sizes and laying off the teachers. We’ll lay off 3-5 thousand teachers from the 728 program. The senate budget cuts it more.
  • Eliminating support for 10,000 “slots” in higher education. This is 10,000 fewer students in Washington that will be able to get a college education.
  • Cutting much the Basic Health Plan, a program that provides health care to low-income working adults.
  • Reducing the rates we pay to nursing homes that take care of our low-income elderly on Medicaid. We squeeze these pretty hard, and they’ll get squeezed harder by this. It will be harder to find a nursing home or other long-term care facility near your home, particularly if you are in our district where the real-estate prices are high.
  • Laying off thousands more workers in other parts of state government.

I can go on. You can find the budgets online if you want, or you can read the news stories about what we’re cutting in the papers, should we still have any next week.

Continue reading “Hobbesian Choices”

Updates to Basic Ed Financing

The Senate released their budget yesterday. The House releases its today. I’ll opine later on the differences. Both are mostly no-new-revenue budgets. The Senate packages up closing some tax loopholes. The House comes out later this morning so I can’t comment on it now.

Both bodies have passed a version of the Basic Education Finance Task Force bill. The House bill was the stronger of the two. HB 2261. You can get details here:  http://apps.leg.wa.gov/billinfo/summary.aspx?bill=2261&year=2009

Our staff has written an analysis of the two that may prove helpful.

summary-of-sen-striker-to-2261 is a short summary of changes made to the senate bill in committee.

comparison-house-senate-as-passed-comm-2 is a longer summary of the differences between the original House bill and the bill as it passed out of the Senate Education committee yesterday.

We still need to decide what form the bill will take in the end game and how we convince the Governor to sign it. There is much resistance to a bill that creates serious stakes in the ground for education.

Tolling 520

One of the issues that must be resolved this year is a plan to generate enough money to pay for the SR 520 bridge replacement project. There is no way to do this without tolling the 520 bridge. I am unhappy about this, but it is a reality we must deal with. It’s a complex problem – we need to balance the interests of lots of parties and come up with a plan that can move forward. We get closer and closer every year, but I have to say that I have a lot of frustration at the glacial pace of decision-making. (This is a personal problem – I’m not sufficiently “Northwest” in loving process, despite having spent more than half my life here, and most of the adult portion of it.)

Rep. Clibborn, the chair of the transportation committee in the House introduced a bill (HB 2211) that allows tolling on 520, which is a key part of moving forward. I’m OK with this concept, but I would like to see the entire plan before I move forward. I will vote NO on the bill as it is currently written. To be fair, Rep. Clibborn has proposed a substitute bill to the first draft that is more balanced, but I’m still not there.

To get background on the tolling problem, including projections of how much revenue can be raised with different options you should read the final report of the tolling implementation committee. They have a website www.build520.org that has lots of information about the possible choices.

HB 2211 implements Option 6 in the final report. I do not believe this is the best option – I think we should implement option 9, one that tolls both 520 and I-90. It generates enough revenue to build the bridge, prevents horrendous diversion to the I-90 bridge that would turn it into a parking lot, and is a more balanced look at the entire regional East-West corridor. It’s supported by most of the Eastside cities. One of our biggest concerns is the traffic congestion that diversion would cause on 405, which is already congested at rush hour, and on Bellevue Way, which often backs up from I-90 to the Chevron station, and sometimes all the way to Bellevue High School.

Rep. Eddy and I will introduce a bill next week that implements option 9. We can’t just modify the existing bill because it has a title that restricts it to only tolling 520. Unlike the US Congress we cannot make random amendments to bills – they have to be related to the topic in the bill and described by the title of the bill. Crafting titles is somewhat of a legisaltive art.

Differences between the House and Senate versions of Ed Finance Reform

The House and Seante passed VERY different versions of the reform legislation. Below is a staff summary of the differences in language that’s reasonably easy to understand, though still somewhat “inside baseball.” The Spokesman-Review in Spokane captures it in language that makes more sense to the casual reader when they say

What’s emerged in the Senate is a “We Love Education” bumper sticker.

The hollowed-out bill states an intent to really, really do something about this issue in the next biennium. The following have been removed: Core 24 (the state board of education’s wish to increase the number of required graduation credits from 19 to 24), all-day kindergarten, preschool for low-income children, an increase in transportation dollars, school accountability and changes in teacher certification, assessments and pay. Spokesman-Review full editorial

It’s too easy to demonize one side or the other in this debate, and difficult to come to an agreement about the most important thing we do as a state government. We’ll keep working on the overall plan and try to get to a final agreement that makes sense and does more than just move the ball forward.

quick-comparison-house-senate-march-10

House Approves Ed Finance Bill

Last night the House approved the current incarnation of our ed finance reform bill – HB 2261. I’m including links to some summaries of the bill, including the AP story from the Seattle PI site (out of nostalgia). It’s depressing that Curt Woodward was the only reporter physically present on the floor when we passed the bill – there used to be many, many more.

AP Story in the Seattle Post-Intelligencer

Staff Summary of ESSB 2261

The bill includes an amendment from me that creates the strong legal definition of “basic education,” a key element of requiring the Legislature to step up to the level of funding required to provide students with the opportunity to earn a meaningful diploma.

We have more work to do as you can tell from the following comparison of this bill to our initial proposal. I can guarantee that we won’t do a bill exactly like our first proposal, but we need to address all the same categories of decisions. We are making progress and I hope to continue.

Comparison of HB 1410 and ESSB 2261