Washington Research Council Blog

2/3 supermajority for tax increases headed to Supreme Court after King County judge rules it unconstitutional

King County Superior Court Judge Bruce Heller today ruled that the voter-approved supermajority requirement is unconstitutional. The ruling puts the issue back in the hands of the state Supreme Couurt. 

Andrew Garber reports the decision in the Seattle Times.

Patrick Peter Callaghan provides important background and context, including this.

Three previous times the top court has been asked to decide whether an initiative can create a two-thirds majority requirement for tax increases. Three times the court has found a way not to rule on whether the state constitution’s requirement for a simple majority trumps any statute or initiative.

He also provides his earlier column describing the legislative set-up for the lawsuit. 

While it's unclear when the Court will take up the case, voters are likely to have an opportunity yet again to approve the supermajority requirement. Signatures are being gathered for Initiative 1185, which would reinstate the requirement last imposed by I-1053 in 2010. 

Public charter schools play important role in improving education

Last week, a coalition of education reform groups filed an initiative to allow public charter schools in Washington. 

The coalition including the League of Education Voters, Stand for Children and Democrats for Education Reform has until July 6 to collect nearly 250,000 valid voter signatures.

In my column this morning, I write about the success of public charter schools in improving education in New Orleans. 

Seattle isn't New Orleans; Washington isn't Louisiana. But we can learn from them. Caroline Roemer Shirley, the head of the Louisiana Association of Public Charter Schools, cites three critical factors: accountability, autonomy and choice. With the framework in place, set high standards: "The lower the bar is, the lower we will perform."

Assuming the measure qualifies for the ballot, this will be the fourth time public charter schools will be before the voters. I close the column this way.

There's nothing radical about an initiative authorizing just 40 public charter schools. With 5,400 public charter schools serving 2 million students nationally, there's no shortage of examples of how to get it right. It begins by ending the prohibition.

The National Alliance for Public Charter Schools celebrates its 20th year next month. Their website is a useful source of information, including this video by U.S. Secretary of Education Arne Duncan.

The Way We’re Taxed: A Brief History

Here's a link to the WRC's new policy brief: The Way We’re Taxed: Brief History.

 

Why Coal Continues to Matter

In his column today, AWB president Don Brunell weighs in on the "war on coal." Specifically, he looks at the mounting challenges to proposed shipping terminals in the Northwest. Don points out that, although such projects are already subject to a review process including an Environmental Impact Statement, opponents want more.

But opponents want to insert a second, more expansive layer of environmental review, which some are calling a Programmatic EIS, which would have to be completed before each individual project EIS could begin. This additional review would include all of the Washington and Oregon proposals and expand to analyze their potential "cumulative" economic and environmental impacts across the region, the United States or perhaps the world.

A PEIS is historically reserved for assessing the broad national impacts of a federal action or a new federal policy. But the activists want to apply that same scope of review to a local shipping terminal.

Read Don's column to understand the dangerous implications this new standard would have for major developments in our state. It's sobering.

Sobering ... and timely. A commentary by Robert Bryce in Slate, which notes the proposed EPA rule banning construction of new coal fired plants in the US, points out the increased global demand. The war on coal is the wrong war.

Coal use is soaring because demand for electricity is soaring. Between 1990 and 2010, global electricity production increased by about 450 terawatt-hours per year. That’s the equivalent of adding one Brazil (which used 485 terawatt-hours of electricity in 2010) to the electricity sector every year. 

Why coal?

...coal continues to present a compelling value for electricity production because deposits of the fuel are abundant, widely dispersed, easily mined, and not controlled by any OPEC-like cartel

... Global coal consumption is now about 71 million barrels of oil equivalent per day, which is approximately equal to the daily oil output of more than eight Saudi Arabias.

Bryce has been busy. In the Wall Street Journal, he explains why renewable energy won't run the cloud.

 U.S. data centers are now consuming about 86 terawatt-hours of electricity per year, or about 43 times as much electricity as is produced by all the solar-energy projects in America.

WIth our hydro power, Washington is home to several productive data centers, the benefits of which are abundant (like our energy resources). For a long time to come, coal will be a significant part of the global grid. Sensible energy policy will recognize reality.

Public Pensions Face a "Painful Reckoning"

Over the weekend, the New York Times ran a good overview of the problem with public pension assumed rates of return on investments. As the article begins, "Few investors are more bullish these days than public pension funds."

The issue is that many public pension funds assume rates of return around 8 percent -- much higher than in the private sector, and not reflective of the actual risk involved. In assuming a high rate of return, states are expecting investment returns will lessen the need for contributions to pay for future benefits. This practice understates pension costs.

The focus of the article is on New York City, whose actuary has proposed to lower the assumed rate from 8 percent to 7 percent. That change is estimated to require an additional $1.9 billion each year.

As we discussed in a policy brief earlier this month, the Washington legislature reduced the assumed rate of return for public pensions from 8 percent to 7.9 percent for 2013-15, to 7.8 percent for 2015-17, and to 7.7 percent for 2017-19. We went into more detail on public pension issues in an April 2011 brief, Reforming Public Pensions.

Preliminary Economic Forecast Posted by Economic and Revenue Forecast Council

The preliminary quarterly update to the Economic and Revenue Forecast Council’s forecast of the state economy was posted on Wednesday. The summary memo to the Governor’s Council of Economic Advisers is here. Detailed tables are here. The preliminary forecast will be reviewed at a public meeting in Olympia on May 31, and may be revised before the June revenue forecast update is released on June 20.

Compared to the February economic forecast, state personal income is up a bit in the new forecast due to federal legislation extending the payroll tax cut and emergency unemployment benefits through the end of the year. The forecast for employment is little changed, with the positive impact of this federal legislation offset by the negative news that Boeing employment would peak at the end of this year and decline gradually thereafter, even as production rates climb, as the result of improving labor productivity.

The probability of a negative "shock" driving the economy into recession remains unusually high. The situation in Europe is one potential source of such a shock. A second is the fiscal situation of the U.S. federal government, where, under current law, large tax increases and spending cuts will kick in at the beginning of 2013.

New Brief: Increasing the 2011-13 Capital Budget

When considering the state budget, we tend to focus on the operating budget. Shifting gears, in a new policy brief, we discuss the 2012 supplemental capital budget. Unlike the operating supplemental, which reduced spending, the capital supplemental (enacted in April) increased spending by over $1 billion. About half of the increase is funded with general obligation bonds.

Increased Federal Tax on Sales of Partnerships Will Cost Washington Jobs and Income

Recent federal proposals would apply ordinary income tax rates rather than capital gains rates to gains from sales of investment service partnership interests.  According to our analysis, this change could reduce annual personal income in Washington state by almost $300 million. Our Policy Brief on the subject is available here.

New Brief: Balancing the Operating Budget

At the end of the first special session, the legislature passed SSB 6636. Beginning in 2013-15, the legislature will be required to enact operating budgets that are balanced over four years. Right now, the governor must propose a balanced budget, but there is no requirement for the legislature to actually pass one.

Additionally, the Economic and Revenue Forecast Council will have to appove a budget outlook every November (plus outlooks based on the governor's proposed budgets and enacted budgets). Outlooks are very useful in considering how current programs will affect the budget in later years. The Office of Financial Management produces an outlook occasionally, and Kriss has created outlooks based on the different budget proposals this year (see, for example, here).

In a new brief today, we look at SSB 6636 in detail.

April 11 to May 10 general fund-state revenue collections were $7.6 million less than forecasted

The Economic and Revenue Forecast Council’s monthly Economic & Revenue Update is out today. For the April 11 to May 10 month, general fund–state revenue collections were a modest $7.6 million less than the forecast. For the three-month period from February 11 to May 10, collections are cumulatively $9.6 million greater than the forecast.

The story is not quite so positive when one focuses on “Revenue Act” taxes (the sales, use, business & occupation, public utility and tobacco product taxes), which arguably are the taxes most directly tied to economic activity. For the recent month, collections from these taxes were $30.2 million less than the forecast. For three months, the shortfall is $36.4 million. One-time refunds and payments during the March 11 to April 10 period accounted for $7.2 million of the latter amount.

Among non-Revenue Act taxes, the real estate excise tax collections over the last month were $13.6 million greater than forecast. Of this, $6.1 million is due to the sale of the Russell Investments Center (formerly the Washington Mutual Center) in downtown Seattle.

The Update is here and the press release is here.