This week’s Q&A is with Sheryl Hutchison, communication director for the Employment Security Department. The department is responsible for tracking employment statistics, maintaining WorkSource offices around the state and much, much more.

Q: What’s the latest unemployment rate? Is the economy recovering yet?

Hutchison: Let’s start with the first question. We announced today that the unemployment rate in June dropped to 8.9 percent, which is the lowest since April, 2009. That’s obviously a better direction.

The next set of statistics for July will come out Aug. 17.

In all likelihood what we’ve been seeing when the rate has dropped as much as this one did, chances are it will be revised up to 9 percent.

But, it’s just exciting to see something less than 9 percent. This is the third month in a row that it has declined. Since the start of the year, we’ve had a net job growth in this state of more than 23,000 jobs. For us, that’s a lot more exciting than what the unemployment rate is. You’re seeing things turn around – it’s not a steep U-shaped recovery where it’s going right back up. But it is the right direction….last year (in the same five-month period) we had lost about 77,000 jobs. So that’s a big sea change.

Q: Part of high unemployment is that it depletes the Unemployment Insurance trust fund. When the Legislature increased the benefit payout, there was some concern the trust fund would be depleted too far. Where does that stand?

Hutchison: We still have the healthiest trust fund in the country. Thirty five states and territories have bankrupted their trust funds. Furthermore, we do not anticipate triggering any surcharges.

One of the benefits going into the recession with a healthy trust fund is it allowed us to increase benefits. At the end of May, the trust fund reserves were at 13.9 months. Typically, the federal government advises that you go into the recession with at least 12 months. We’ve come down, but we’re still healthy.

Q: Do you anticipate the fund dipping further?

Hutchison: No, we really don’t.  Part of the reason is that through our governor and the Legislature, we’ve created a responsive system that reacts before we get to a critical stage. The result is you do start to see taxes start to rise, but it should happen in a gradual manner — rather than in other states when you see these sharp ups and downs, ours will kind of undulate for a while. They’ll go up for two or three years – that provides more stability.

Q: Have rates increased already?

Hutchison: They did start to increase this year. They’ll go up a little bit again next year. Probably … in 2012 they’ll start to flatten out. We don’t know yet – there’s a lot to happen between now and then. In 2011 it’ll go up again a bit more.

We call them “taxes,” but for the most part it’s really an insurance system with insurance premiums. So if you’re an employer who uses the program more, you’re going to pay a higher premium than an employer who doesn’t.

But it is an insurance system, which means shared costs. Some people who don’t use it at all are going to pay some of the freight for the people who do. There is more cost shifting going on right now – the people who haven’t used it are having a larger percentage increase than those at the top.

Q: Are you hearing complaints about that? From people who haven’t laid anyone off but are seeing a large increase in their premiums?

Hutchison: You always do. No one likes taxes. Some understand the system – they’ve been with it for a long time. If you’re someone at the bottom of the system whose rate is small – less than 1 percent of payroll – you might have seen your premiums double.
There’s two parts of the rate – there’s the experience rating and then there’s the piece that’s a socialized cost. That cost-shifting component varies more frequently. Experience rated taxes are averaged out over four years. They’ll see some increase over four years rather than just in one year. But it does mean there’s more cost shifting right now to make up for the loss in the trust fund. Our system is designed to increase the socialized cost to help even that out.

Q: Let’s talk about the Unemployment Insurance changes required by federal law. What needs to happen, and when does the Legislature need to make changes?

Hutchison: The Department of Labor has been encouraging states to do what we call “modernize” the unemployment system. (more…)

Tags: economy, Thursday Q&A, unemployment, WorkSource

This week’s Q&A is with Reps. Cary Condotta and Sam Hunt. They serve on the House caucus campaign committees (Condotta for Republicans, Hunt for Democrats). What’s that mean? They explain and discuss what they’re doing now in preparation for the November elections, when both hope to win more seats.

First up, Rep. Cary Condotta.

Q: Tell me a little about what you do for the campaign committee.

Condotta: I’m co-chair of HROC , the House Republican Organizational Committee. Each caucus appoints members to help with the campaigns during the off-season and (Rep.) Skip Priest and I have been co-chairs for several years. Skip handles the west side, I handle the east side.

We oversee the campaign organization. Our political director is Kevin Carnes. We hire, fire, we work with leadership to draft candidates. Kevin is our director and we oversee Kevin.

Q: How do you recruit?

Condotta: HROC is the clearinghouse for candidates. If someone wants to run for the House – and we only handle the House (there’s an SRCC, a similar organization for the Senate), in the House if someone wants to run, they contact us. We don’t tell people whether to run or not run. There are places where we look for candidates – where we’re actively searching. Sometimes we’ll call people and go out and talk to them. So we just coordinate the actions. (more…)

Tags: 2010 elections, campaigning, House, Thursday Q&A

I know: You’re watching the Husky game. But when you’re done, here’s this week’s Q&A — with Sen. Joe Zarelli and Sen. Lisa Brown. I talked to them earlier today about the budget and tax negotiations and the lawsuit filed by Attorney General Rob McKenna over federal healthcare legislation.
First up, Sen. Joe Zarelli.

Q: Gov. Gregoire has said she’ll cut 20 percent of budgets if the Legislature isn’t done in the 30 day special session. Do you support that? Can she do that?

Zarelli: I think from an executive position she does have discretion under certain agency spending that’s under her office. I would hope that if she does, she would look at a perspective of higher priority to lower priority. You wouldn’t want to cut corrections to the point you might want to cut some more discretionary spending.
That’s probably similar to her Book 1 budget, which was a no frills, no taxes approach. It sounds like a solution.
I don’t know to what extent she can achieve the savings. I don’t know what that number would look like. I don’t know what she’d do – her choices might be different than mine, but if these folks in the majority can’t agree on something, that’s what she’ll have to do.

Q: The Senate voted today to go into conference over the revenue package – and you’re on the conference committee. Is this a sign of progress?

Zarelli: No, it just means that nobody desires to roll the bill back to second reading and deal with the amendments and debate again with the taxes that they’re raising and the jobs they’re going to kill.
A conference just means you put some people in a room, work out differences and then it gets an up or down vote without amendments. They’ve already in each body decided what direction they want to go with taxes.

Q: But you’re on the conference – does that mean anything?

Zarelli: I don’t know. It’s one thing to get on it, it’s another whether I’m invited to the discussions.

In the past, when we’ve done conference on the budget, usually I’m just asked to show up and sign the committee report at the end. I haven’t heard yet when they expect to hold those discussions. And the House isn’t in, so the request has to go back to the House and be accepted before technically a conference committee could meet. So the soonest that might happen would be Monday.

Q: Do you think you’ll be done at the end of the 30-day special session? (more…)

Tags: Thursday Q&A

Today’s Q&A is with House Speaker Pro Tempore Jeff Morris, who I spoke with this afternoon.

With a week left in session, Morris talked to me about taxes, the budget, the possibility of not getting out on time, and how he handles long floor sessions.

(Apologies on the late hour — there was an income tax hearing to attend to.)

Q: First, I have to ask if you’ve seen the proposal to create a high-earners income tax and drop the sales tax.

Morris: No, I haven’t. We’ve just started to do some I think vote counting amongst our caucus and there’s two or three camps on taxes. And you know right now I would say as a single group the non-sales tax group is probably the largest single group but the other two are split between how they’d vote on a sales tax.

Q: So would that bill have a realistic chance in the House?

Morris: I think first we have to agree to the budget and what that new revenue may be and what it may buy back. I think something that’s not been widely talked about is not adopting a budget at all is an option. We have a supplemental budget -– if we didn’t adopt one and if we got into a cash flow issue, the governor has the authority to start doing across-the-board cuts.

Q: Really? And that’s a viable option?

Morris: Well, if we can’t get people together with either an agreed to budget number or what taxes are need to buy state services back then that would be an option. That would probably be the most draconian but one that would be the most expedient.

(more…)

Tags: Morris, Thursday Q&A

Today’s Q&A is with Sen. Adam Kline and Rep. Mike Hope. The two disagree substantially on how the state should amend the Constitution in order to change the bail system.

Bail is a Constitutional right in Washington for all but capital crimes. In the wake of the Maurice Clemmons shooting, when a three-strike criminal facing life in prison was let out on bail and went on a killing spree, the Legislature is reconsidering that policy.

If they pass a Constitutional amendment, it would be put to the people. Here, lawmakers discuss in depth what they think should happen.

First up, Sen. Adam Kline:

Q: Tell me where you’re at now on the bail issue.

Kline: The goal is a Constitutional amendment that does the least violence to the Constitutionally protected right to be released on bail when one is presumed innocent pending trial. The governor had a proposal that was worked on by law enforcement and prosecutors and it was rather broad. It would have allowed the judge to deny bail not just in capital cases, where it’s already deniable, but also in cases in any charge regardless of the charge in which the judge feels – and I want to say feels, because there isn’t a way to describe that any differently — feels that the defendant may be dangerous.

There isn’t any psychological assessment tool that allows us to predict dangerousness with any accuracy. So what we’re left with is a hunch
If we’re going to allow judges to keep people in jail with a hunch, I have a problem with that. There’s a certain tradition in America that we don’t deprive people of their freedom unless there’s a very good reason to keep them in jail. The governor’s proposal would have allowed judges to deny bail based on a feeling of dangerousness regardless of the charge. We felt that was too broad.
In the Senate and House, there are now competing versions that don’t necessarily track.

In the Senate, the bill is written by Sen. Carrell – it was somewhat narrower but, I felt, not narrow enough. And so Sen. Carrell and I worked out a compromise by which it would allow but not require judges to deny bail to a person to, in addition to capital offenses, a person charged with any offense that could result in a sentence of life without parole.
There were 30 or 40 charges in the last year in which that bill would have applied. Those are third strike cases, aggravated murder, or second strike in certain sex offense cases.

The House, at the same time, had a very different version that was also not the governor’s. We – Sen. Carrel and I – thought it was way too broad.
It would have allowed in about 1,300 to 1,400 cases a year in which charges were brought. It went far beyond just life without parole charges. They sent it over here, we sent ours over there and that’s when the fun began.
We have the House version here and we’re going to amend it. The amendment will reflect language Sen. Carrell worked out. It expands it a little bit over our original version to a list of behaviors – not referring to the crime, because the criminal definitions can change in statute — but a Constitutional amendment stays there. So we listed behaviors like intentional murder. That’s first degree, murder in the second degree and aggravated murder 1. Also, intentional assault in which great bodily harm is done – so assault 1 or assault of a child 1. And sex offense punishable by life in prison – that’s rape 1 and 2, child molestation 1, and rape of a child 1 and 2. Any Class A felony committed with sexual motivation.
And then additionally, the third strike of a three-strike case. Second strike of a two strike sex offense.
It adds up in terms of charges. This past year there were 643 charges to which this would apply.
That’s expanding it and it, I believe, reaches a compromise. I believe this is not as narrow as I would have wanted nor is it as broad as I would want. But that’s the nature of compromise. (more…)

Tags: Hope, Kline, Thursday Q&A

This week’s Q&A is with Marty Brown, Gov. Chris Gregoire’s director of Legislative Affairs. Read what he has to say on taxes, the 960 bill, the Constitutional amendment and more.

Q: When Gov. Gregoire introduced her tax package yesterday, she indicated it wasn’t a temporary package. Can you say more on that?
Brown: I think it’s at least through next biennium. We haven’t finished up all the bills. What we’d looked at was exactly how to make sure we raised some money for 2011-2013 biennium, too. We haven’t looked out any further than that. I think she’s considering them to be at least last three years.

Q: Why not go with a sales tax increase?
Brown: I think she thinks that it is probably our most regressive tax. It hits folks that can least afford it the hardest and I think that’s the main reason right there.
Will the Legislature still consider it? Possibly. I know they have at least one bill to do that.

Q: How much did you consult with the Legislature in putting together the tax package?
Brown: We had meetings with legislative leadership, we talked about some of the direction she was going. Obviously some of the issues have already been introduced.
We met with finance, Rep. Hunter and Sen. Murray, about things they were talking about. It wasn’t like people signed off. Much like when she put forth her budget, it’s what she proposes, understanding that the Legislature will have different ideas.

Q: Let’s talk about reform. There’s one proposal to fold the Parks and Fish and Wildlife commissions into the Department of Natural Resources. I’m wondering if that’s an idea the governor would consider?
Brown: A couple things: We considered DNR-natural resources reform and doing the same thing that some of the legislators are talking about. We are not convinced that it saves much money up front. There are lots of policy questions, but we understand the Legislature is working on that.
We have several reform things working right now. In natural resources, we’re trying to combine growth management hearings boards into trying to slim down other environmental hearings boards. We’ve got bills in on boards and commissions – to get rid of a bunch of those. The Legislature always has a hard time doing that. We’ve got a proposal to put Medicaid into the Healthcare Authority. We think that putting all of the health purchasing in one place is a cost savings we could work on. So quite a few things are moving right now. Whether or not the Legislature will be able to do it or not is an open question.

(more…)

Tags: 960, Constitutional amendment, Governor, liquor privatization, Marty Brown, taxes, Thursday Q&A

This week’s Q&A comes just past the mid-point of session: The Initiative 960 bill has just passed — clearing the way for tax votes — the revenue forecast is on Friday and, though lawmakers have passed some cuts and freezes, there remains a $2 billion-or-so problem.

Last week, I talked to House members. This week, I spoke with Senators Joe Zarelli and Rodney Tom, two experts on the budget in the Senate. Sen. Zarelli was unable to talk in person, so his interview was conducted over e-mail. I met with Sen. Tom this morning in his office.

Topics include: Sin taxes (they’re on the way), privatizing liquor stores, cutting tax exemptions, creating jobs,  what Oregon’s tax vote means for Washington (real estate sales in SW Washington), and much more. Enjoy.

Sen. Joe Zarelli:
Q: Maybe a logical place to start is: What are your thoughts on the effort to change Initiative 960. Can the budget at this point be fixed without taxes? And is this the right way to do it?

Zarelli: I personally do not see where we could effectively go, in the form of raising taxes, that would not have a negative impact on the economy, given that sales or B/O taxes would potentially take a toll on two of the three key components of our system of revenue. Additional sales tax would only hamper the desire of the consumer to spend and those businesses hardest hit by the economy would certainly feel the effects of any type of B/O tax increase or surcharge. Every day that passes the challenge becomes more difficult, this is why – to a certain extent- I get a bit frustrated. I have been asking for a joint effort at resolution starting at the end of last year seeing where things were going much the same as I did in the fall of 2008 prior to the 2009 session.

But can it still be done? Yes, but all need to be willing to reform what has been built over the last several decades and be willing to accept the fact that some will not like the decisions, and it needs to be in conjunction with an all out effort to improve our prospects for job growth through various competitiveness initiatives. If we reform government, make prudent decisions (based on a priorities approach) to what we should buy, and work diligently to encourage job growth, we can do it and most importantly would be turning the tide against what figures to be even tougher choices over the next couple of years.

Q: On the subject of cuts: The Legislature has passed several savings bills – like freezing state worker pay, hiring, out-of-state travel and bonuses. But there’s quite a ways to go in the next 29 days to get to a balanced budget. What substantial cuts would you like to make?

(more…)

Tags: Thursday Q&A

This week’s Q&A is all about jobs: The Governor, Senate and House Republicans, House Democrats and Senate Democrats have each introduced their own “jobs packages.” I wanted to find out: What are the philosophies behind (a couple of) them, who would benefit, and where is there common ground. I spoke with Sen. Jim Kastama, a Democrat, and Sen. Janea Holmquist, a Republican.

I always learn something in these interviews, and this week is no exception. Keep reading and you’ll find details on plans that are still in the works, including a BRAC-style government reform commission, a bill to protect Initiative 960 and more.

First, Sen. Kastama. This interview was conducted Wednesday evening in his office.

Q: There are four jobs packages. What are the crucial elements of yours?

Kastama: I think the Senate we have made it pretty clear we are continuing on the economic agenda we set last year.
We have to focus on the here and now. Sixty-five percent of the employment growth that we’re going to get coming out of this is in small business. That’s what our proposal is focused on.
First, work force. We’re going to make sure that there’s money in the budget to educate approximately 6,000 people who are unemployed and could be working in these jobs that are highly in demand. We’re going to make sure that happens.
I just had a proposal in higher education to create a dedicated funding source by converting the lottery’s purpose to higher education specifically. In other states where they have done it, it’s allowed them to market the lottery for the purpose it goes to and they sell far more tickets. In Georgia, it increased sales to $800 million and they’ve sent a million students to college with their Hope Scholarship
Our lottery, unfortunately, has flattened out. We bring in $130 million. We really can’t market it for what it goes toward, which is K-12 education because if we say it’s going to education, local school districts worry their bonds and levies won’t pass. So what they tell people is, buy a lottery ticket and you’ll get a swimming pool or a nice house. They’ll buy a lot more if they think it’s going to an altruistic purpose.
So, we’re looking at the workforce and infrastructure. We had a tax increment financing bill – a minor adjustment to the tax increment financing bill that we passed last year. For very little money — $2.6 million — you can bring thousands of jobs to Washington state.
And we want to coordinate the whole green industry in order to do weatherization better, to emphasize job growth.
Transportation: We will keep the $4 billion that we have in transportation going through the biennium. That’s a good budget item that actually does provide good paying jobs.

We also want to invest in entrepreneurship. We want to make sure that Washington state is a good place for companies to thrive and to start, so we’re putting in place many things that will help. One is that small business assistance will be able to expand services.

(more…)

Tags: Holmquist, Jobs, Kastama, Thursday Q&A

This week’s Q&A is with Arun Raha, the state’s chief economic forecaster. Every quarter, his office puts out a comprehensive forecast of how much money the state will collect and what the economy will do. Lawmakers use the report to write budgets. Since his first forecast in November 2008, Raha has had to deliver negative forecasts. But … maybe things will change in 2010?

Q: You mentioned earlier this week in a committee hearing that revenue collections for the two months since the last forecast are up about $50 million.

Raha: Yes, revenue is $51.8 million higher than we had forecasted in November for the two months of collections that we have data for.

Q: What would it take to have a positive revenue forecast in February?

Raha: Well, there are two aspects to the forecast. One, of course, is the collection, which is a small part. The other, of course, is the condition of the economy. Our forecast of revenue for Washington state depends on our forecast for Washington’s economy, which depends on our forecast for the national economy.

So, if economic conditions are better in February than November, that would have a bigger impact on positive revenue than the collection.

The collection, all it points to is the fact that all this while our model was overforecasting revenue. We’ve finally gotten to where the model is underforecasting. So it’s like revenue’s reached a turning point. That’s all I can conclude from it. It’s positive news, but that in itself is not enough to guarantee a positive revision to the revenue forecast.

Q: The next forecast is less than a month away. Walk me through what you’re doing between now and then to produce a forecast.

Raha: Right now, we are working on our national and state economic forecast — the economic forecast, not the revenue forecast. We are collecting revenue collection data, which is what’s coming in the door. And we are also looking at national and state economic indicators. We don’t have all the indicators we need yet to do our national and state economic forecast. We’re waiting on a few important indicators.

Most importantly, we’re waiting on what’s known as “rebenchmarked” employment numbers. When employment numbers first come out, they’re based on a sample and then they are rebenchmarked based on the entire unemployed population, so there are revisions. So we’ll get rebenchmarked data for the third quarter in Washington – we’re waiting for that. So our model can pick up whatever is there. So once we get that, we’ll have both Washington and national figures.

Typically, there’s a process of oversight. We have these workgroups of legislative and executive staffers who come and look through our forecast and give us feedback on what appears to be right and wrong, what needs to be considered and so forth. The second part of the process is, on the fifth we take it before Governor’s Council of economic advisers and get their input. We survey them before so we know where they stand.

You can’t do it in one week; we already have most of the numbers. We finalize it after we’ve got the feedback from the governor’s and the work council and our own council. We have a public meeting on the 5th (of February) in the afternoon.

So, then we finalize the revenue side for the revenue forecast. The other thing we do is meet with other agencies — the smaller revenue agencies like lottery, Department of Licensing – and we let them do their forecasts based on models we have given them in the past. Those numbers are very small, so it doesn’t make much of a difference.

We get their updates and factor that in, we talk to the Department of Revenue about whether there are any special assessments or refunds or special factors. We add that into the forecast.

So: We do the revenue forecast, there’s an economic part, then a fine tuning part based on exceptions, then we release it on the 12^th and everybody cheers. (more…)

Tags: Arun Raha, economic forecast, Thursday Q&A

I just talked to the state’s chief economic forecaster, Arun Raha. I’ll post the entire interview tomorrow — it’s this week’s Thursday Q&A — but I wanted to give you a slight preview to the 1,500-word interview.

On the next economic and revenue forecast: “We release it on the 12th and everybody cheers.”

Really?: “I have no idea. I have no idea. So far, nobody’s ever cheered after a revenue forecast.”

On the recession: “Here’s why people are feeling they’re still in a recession: They’re still anxious … the reason I’m optimistic is that we’re not falling any deeper.”

On job growth: “We are seeing increases in temporary help … But we’re still losing construction jobs. And until that stabilizes, you know, it’ll be a drag on the jobs recovery.”

On when forecast joke writing: “It’s usually the night before. So it’s usually very tired, sorry, lame jokes.”

Raha had much, much more to say. I’m cleaning up the typos now and will post tomorrow.

Tags: economic forecast, Raha, Thursday Q&A