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March 22, 2011

Dear Friends and Neighbors,

There is a lot of information to update you on since my last e-mail from Olympia. Below is an update on the hot button topics in Olympia.

Telephone Town Hall

Senator Linda Evans Parlette, Rep. Mike Armstrong and me will hold a “ telephone town hall” meeting on Thursday to update you about the current legislative session, allow you a chance to provide some input and ask questions. We will also have three exciting poll questions that you can participate in and get the results.

The meeting will be from 7 to 8 p.m. Those wishing to participate can dial the toll free number at 1-877-229-8493, and enter the code 15405#.

Economic Revenue Forecast

Last week the state's chief economist, Dr Arun Raha, released the quarterly revenue forecast for Washington.

The revenue is expected to be $778 million less for the combined 2009-11 and 2011-13 budgets:

• $79.8 million less for the 2009-11 budget, creating a $229 million shortfall.
• $698.4 million less for the 2011-13 budget, creating a $5.1 billion shortfall.

This means the 2011 Legislature must address a projected total shortfall of $5.1 billion. I say projected because that assumes a budget of $37 billion, or roughly a 15 percent increase. In the current economy we cannot expect to increase spending by 15 percent. The revenue forecast itself is 13.5 percent more than the previous biennium. At $32.5 billion, it is our highest revenue number ever. (See chart below, to see larger version, click on it)

That said, this will require major adjustments since many, many programs were added or expanded, and even more promises were made before the downturn. Like the rest of the economy, we are now having a hangover from our years of exuberance. I will give you a view of the budgets when they are presented in the next few weeks.

Closing Tax Loopholes

The majority party and a number of their supporters continue to push for additional revenues despite the projection they will exceed the expenditures in our current budget cycle. They are calling on the Legislature “close tax loopholes to balance the state budget.” What these special interest groups are actually talking about are “tax preferences.” One of the largest tax preferences is food. I don't think many of us would want to close that so-called tax loophole. It is important we are clear about what we are talking about on this issue. Here are just a few of the new tax preferences, or tax loopholes, proposed this year:

I agree each tax preference should be reviewed for effectiveness, because there are many that are beneficial. You may recall the tax incentives we passed in 2010 for aluminum companies such as Alcoa. It allowed them to restart additional potlines at the Wenatchee Works plant.

A sales and use tax exemption for server equipment and computer data centers in Quincy also provided many jobs. Without these preferences for potential or current employers, they would have continued to build elsewhere – just as they did when the tax preference was ended. The tax preferences can be beneficial to our economy and can get Washington working again.

Workers' compensation reform legislation update

I have continued to meet with the governor on workers' compensation reform. I believe we still have an opportunity to get this passed even though labor and the House Democrat leadership are blocking the bill. I am confident we have the votes to pass it if we can get the bill to the floor for a vote. The Democrats would rather do nothing on this issue this session. To me, that is not an option. Here are some reasons:

• The Department of Labor and Industries (L&I) pays $1.84 in benefits for every $1.00 in premiums it collects, the highest “combined ratio” of any public or private workers' comp insurer in the country.
• According to L&I, t
  hese costs are not sustainable without annual double-digit premium increases on employers that pay into the state fund.
• The 2008 Washington Pension System Review (Upjohn Institute) confirmed one reason for the highest number of long-term disability cases and pensions in the nation is the absence of a voluntary settlement option that exists in 44 other states.
• Total benefits paid in Washington grew from $1.3 billion in 1998 to $2.2 billion in 2008. That's an increase of 70.4 percent, compared to 34.2 percent growth for all states.

To dispel some misinformation, Senate Bill 5566 does not reduce or amend a single statutory benefit level for injured workers. Rather, it provides a more flexible benefit option to workers, giving them more choices on what is best for them and their families. The Seattle Times editorialized in favor of this legislation as did the Everett Herald and Tacoma News Tribune.

Getting people back to work and improving our economy will help address our budget situation. This legislation would give employers certainty in taxes and allow more cost controls in the system to avert complete failure.

Finally, as we head into the most challenging part of the session, I welcome your input. Please understand I read every e-mail and letter but may not always be able to respond quickly, due to the volume I receive. However, I do read all of them and appreciate every one of who you calls and writes.

Please let me know if you have any questions on these issues or any others before the Legislature. I hope you found this e-mail informative.

Thank you for allowing me to serve you.

Sincerely,

Cary Condotta