Category: Budget

Good News on the Budget

This morning the US Senate approved legislation extending the “enhanced” federal match for Medicaid for another 6 months, starting in January. This is good news for Washington state. The Senate paid for this change with other adjustments in the federal budget, so it doesn’t have an impact on the federal budget deficit, also a good thing. The House has been called back next week and is expected to pass the bill as-is.

The Seattle Times writes about it here: http://seattletimes.nwsource.com/html/localnews/2012535921_senatevote05m.html

We had expected about $480 million from the federal government in this extension. It will deliver about $320 million.

This change keeps the Washington State budget in the black for the time being. The budget and policy act does not allow the governor to do acros-the-board cuts unless there is an official predication of a cash flow problem, so she is unlikely to make any immediate cuts in this situation. We are not yet out of the woods and are watching the current tax collections carefully.

I expect you’ll hear more about this as we move through the fall. The economy is quite unsettled and very difficult to predict at this time. I’m spending more of my time on this than I would like.

Current Budget Situation

Awesome budget Cutting GraphicLast week Kelli Linville, the chair of the House Ways and Means Committee, and I sent a letter to Gov Gregoire outlining our recommendation that she use the authority she has to make across the board cuts in the budget. We did this because changes in the economy and lack of action at the federal level have changed some of the underlying assumptions we made in drafting the budget last Spring. In particular,

  1. Congress has changed their mind about providing states with an extension to improved matching rates for the federal Medicaid program. This leaves about a $480 million hole in our budget.
  2. The state Revenue Forecast Council (www.erfc.wa.gov) lowered estimates of revenues in the 2009-2011 biennium by $200 million.
  3. Initial collections reports based on activity in May came in about $85 million below the revised estimates.

A budget is based on assumptions, and if changes on the ground affect the assumptions, it’s prudent to react as early as possible. The text of the letter is included below if you’re interested.

Continue reading “Current Budget Situation”

Retire-Rehire Program Abuse

The Seattle Times has a great story on the use of the “retire-rehire” provision in state law that allows someone to retire, and then be hired back by the state or another governmnet but still collect his or her retirement. When I searched on the issue on the internet I hit a bunch of similar stories from 2003, the last time this program came up. Same problem.

Retired, then rehired: How college workers use loophole to boost pay

A Seattle Times investigation has found that at least 40 university or community-college employees in Washington retired and were rehired within weeks, often returning to the same job without the position ever being advertised. That has allowed them to double dip by collecting both a salary and a pension.

Seattle Times June 26, 2010

I’ve gotten some mail from constituents about it and am sending the following reply:

Continue reading “Retire-Rehire Program Abuse”

Paper: The Top Enemy of Efficiency

I sat through a briefing this morning on “Provider One,” the state’s new $200 million Medicaid claims processing software implementation exercise. We expect to go live with the software on May 6th, after 12-18 months of delay rolling the product out. I believe the implementation will mostly work at that point (this is a big improvement over 6 months ago) but that many, many medical providers will not have engaged in the work necessary to get connected to the new way to pay their claims.

For example, only 1100 of 2900 “key” submitters have even started testing their connection. Since it takes 4-5 weeks to get working, lots of people are going to be very frustrated on May 7th when they can’t get paid for Medicaid work they have done. The 1100 represent over 70% of the claims volume, but we will still have a big problem. Just so you have some context, billions and billions of dollars flow through this system annually.

What I expect to happen is that they will submit their claims on paper instead of electronically. Arghhh.

Today about 5% of claims volume is on paper. If this goes up to 10% the cost to the state will be horrendous. Even the 5% we have today cost us a huge amount of staff time scanning the forms, typing numbers into the computer, sending it back and forth and finding something to do with it when it’s processed.

We have to go paperless. This will be painful for some people who file infrequently, but they can get paid faster if they just type the answers into a website instead of onto a paper form. The same thing is true in the Dept. of Revenue. Last year we switched all monthly tax return filers over to electronic submission, and I think we need to move everyone over.

I intend to file legislation next year that will start this process in several key areas. Tax returns, Medicaid payment claims, any other high-volume communication area in the state. I’m open to suggestions.

Rob McKenna and Healthcare

Earlier this week Attorney General Rob McKenna joined a lawsuit filed by a number of other AGs nationally to attack the new healthcare bill adopted in the other Washington. Here’s his press release on the suit: http://www.atg.wa.gov/pressrelease.aspx?&id=25402

He’s using 10th amendment grounds to do so, and my personal read is that the suit is unlikely to succeed and part of the increasingly dysfunctional way we discuss serious political issues an America.

Many people have suggested that the legislature cut off funding to his office as a result, or that we somehow forbid spending on this particular lawsuit. I don’t support this because I believe it’s important to have an independent AG in Washington, even when he’s wrong. He’s wrong in this case.

I’m not going to debate federal healthcare policy here. This is a vote that happens at the federal level, not at the state level where I represent you. It’s a debate worth having, and we’ve had that for the last year in the newspapers, on the blogs, on TV, and in coffeeshops and laundromats across the country. There isn’t too much disagreement that everyone should be able to have adequate healthcare; the question is about paying for it.

The 10th Amendment is important, but has been used as a platform to launch many seriously loony proposals, including a raft of bills this year that would have:

  • Prohibited federal law enforcement officers from making arrests in Washington unless they had a signed permission slip from the County Sheriff.
  • Required the state to hold all money that we collect on behalf of the federal government (gas taxes, etc.) and use it to fund “unfunded mandates” from the federal government before we send it to them. The bill would also have required private citizens to pay their federal excise taxes into the fund, to be forwarded to the feds if the legislature thought it appropriate.
  • Allowed people to purchase and carry machine guns as long as they were “made in Washington.”

Most legal scholars think McKenna unlikely to prevail. I agree. The voters of Washington elected the guy, and it’s his job to allocate the budget we send him. If he does it in ways the voters don’t support they’ll hire a new AG in 2012. I don’t like his lawsuit, but I don’t intend to interfere in how he spends his budget.

Interesting Pension Fund Data

The following was included in the most recent issue of Capitol Ideas, the magazine published by the Council of State Governments:

“A new report from the Pew Center on the States finds a $1 trillion gap between the $2.35 trillion states have set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises. The report, The Trillion Dollar Gap: Underfunded State Retirement Systems and the Road to Reform, found in eight states more than one-third of the pension liability was unfunded as of the 2008 fiscal year, while two states—Illinois and Kansas—had less than 60 percent of the necessary assets on hand. The Government Accountability Office says 80 percent is the preferred benchmark funding level.”

As you can see on the map, Washington is doing relatively well compared to other states. This data is from 2007 when our pesnion fund was at the height of the market. We are not currently at 100% funded given the declines in the market value of our portfolio. Nevertheless, I would be surprised if our fund has declined significantly relative to other states.

Mr. Yuk

Mr. Yuk came by to lobby for the poison control center in the budget. It’s easy to get attention when you wear crazy costumes, though it looks like it’s difficult to get through doorways. I spend a lot of time at my desk, but he got me out of my office. I’m glad I don’t have to wear his costume – it looked hot.

Using the Gavel

I’ve had a couple of questions about the hearing we held this weekend on the Senate bill to temporarily suspend Initiative 960. I’ll write about the bill elsewhere but I wanted to talk briefly about how difficult it is to manage a large hearing on a contentious issue. This particular hearing was held at 9:00 on a Saturday morning and was the largest hearing in Olympia this year, or in my memory. We held it in the largest hearing room we have and had 4 overflow rooms, all of which we used.

I prepared extensively to try to avoid a disaster. We managed the room layout so that we had seats for almost everyone. We had sign up sheets distributed around in the hallway so there was not a crush of people trying to sign up. We had discreet security, which fortunately we did not have to call on. I spent more time preparing for this hearing than I have any other hearing I’ve done in 8 years in the Legislature. Most people thought it went very well.

I announced a set of rules at the beginning of the hearing that almost everyone chose to follow.  The rules we follow in committee are the same as the rules of decorum we follow on the House floor.

 Here’s what I said at the beginning of the hearing:

 I am fully committed to letting as many of you speak as possible. 

 And to that end, let me lay out the ground rules for today’s meeting so we’re all clear.

 At no time will I allow anyone to impugn the motives of any person or any piece of legislation being discussed. We all care deeply about our state and the families and businesses within its borders. We might disagree about how to manage this budget situation, but I will insist that today’s hearing remain focused on the merits of the bills in front of us.

 At no time will I allow anyone to use threatening language or disruptive behavior. I will not indulge members of the audience in cat-calling, name-calling, whistling, cheering, booing or any other disruption to the hearing.

 I will keep a strict time limit of two minutes for every speaker. Two minutes is about 200 words. Two minutes is 120 seconds. Every speaker will get two minutes and no more.

The ranking Republican member Rep. Ed Orcutt made similar remarks, which I thought were very gracious and made the same points.

 I used the gavel to interrupt one speaker because I felt he was impugning members of the legislature. Other than a brief 20 second interruption we heard his entire commentary, which was fine. He got 2:47 to make up for the time I used up. Immediately after I asked the one person to confine his remarks to the bill the crowd clapped. I gaveled them down too. The media covered this because that’s their job.

 I’ve had this particular person in front of my committee several times and he always does this. If you don’t force him to confine his remarks to the bill he becomes more and more outrageous until you do. It’s hard to figure out exactly how to play it – my goal was to be as fair as possible, give everyone a chance to share their views on the bill, hear as many people as possible (I had 40 pages of people who wanted to testify) and have a hearing that was a legislative event and not theater. If you don’t use the gavel the hearing can get out of control. If you do, you can be perceived as a bully. I have used the gavel 3 times in 8 years. Twice with this one individual and once with another legislator who was badgering a witness.

I alternated between pro and con panels until I ran out of con. Everyone got exactly the same amount of time. I had about 4 times as many people who wanted to speak for the bill as against, but I balanced the time 50-50. It’s difficult to keep events like this dignified. I feel I succeeded.

New Economic Forecast Available

The Washington Economic and Revenue Forecast Council (of which I am a member) released its Washington State Economic Review on Friday. The document is a pretty good read. It comes out a week before our revenue forecast does and experienced tea leaf readers can often predict the revenue forecast from this document.

Flat is the new up.

We’re expecting a relatively flat forecast. This means that for the first time in almost 2 years our previous forecast will line up with our new forecast. This is a pretty good sign, but one I will have to eat if we have a significant negative surprise in the forecast on Friday.

http://www.erfc.wa.gov/pubs/feb10.pdf

Taxing Gold Bullion?

One of the first things new legislators say to me when they review the “Tax Exemptions 2008” report from the department of revenue is that we should eliminate the tax exemptions for gold bullion and bull semen sales. They stick out as crazy exemptions. NPR even did a story on the bullion loophole.

Governor Gregoire talked about it on the campaign trail in 2004. Last week when she proposed closing some tax loopholes she included removing the bullion exemption in her proposed legislation. She removed both a B&O exemption and a sales tax exemption bullion dealers have had for a long time. I sponsored her legislation (a routine courtesy offered by committee chairs to Governors) and had a hearing on it early this week.

The coin and bullion industry made a compelling case that removing the sales tax exemption would result in a significant loss of sales. The fiscal note from the Department of Revenue confirms this, estimating a loss of 70% of the business. This is why there is a sales tax exemption.

Continue reading “Taxing Gold Bullion?”