Are state officials engineering a slow death for I-601?

May 15, 2006

By Terry Corbell
King 5 news

Olympia, WA - A taxing drama is slowly unfolding in Olympia. At issue is whether state officials and the Washington Supreme Court will listen to voters.

State officials and employees – including members of the Legislature, Office of Financial Management, Expenditure Limit Committee, the governor, and even the attorney general – continue to appear opposing the will of voters on state spending.

That’s why a coalition of business and consumer watchdog groups has been battling in court over spending-limit violations of Initiative 601.

For the most part, Snohomish County Superior Court Judge James Allendoerfer recently ruled in the coalition’s favor. He ruled the state’s collection of certain taxes are illegal and that the Legislature improperly increased the state’s spending limit in 2005, after allowing evidence of incriminating e-mails between Democratic lawmakers and state employees.

The e-mails showed budget writers knowingly violated the law and shifted funds around to artificially increase the spending limit. A recent column included a link to some of the e-mails.

Newly released e-mails also reveal a furtive dialogue involving Office of Financial Management strategies that manipulated funds for new spending in the 2006 supplemental budget. Here’s a link provided by the coalition: www.effwa.org/pdfs/601e.pdf.

Within minutes of losing the case, the attorney general’s office filed a notice of appeal to Washington Supreme Court. The state’s highest court is considering the motion.

Afterward, the coalition also petitioned the high court to require the state to put the questionable tax funds in an escrow account until the I-601 issue is resolved. Meantime, officials continue to collect taxes that were ruled unlawful.

The coalition includes: The Washington Farm Bureau, the National Federation of Independent Business, the Washington State Grange, the Building Industry Association of Washington, the Washington Association of Realtors, and the Evergreen Freedom Foundation. Their online address: www.save601.org.

Why I-601? Times were tough about 12 years ago. Figuratively, Washington voters erected a big red stop sign at the state capitol and passed I-601 to halt skyrocketing tax increases. Voters were concerned about public-sector indifference.

Even the Washington State Association of County Assessors took note of voter attitudes. In late 1994, the group invited me to advise them on PR strategy to reduce property taxes. As I sat down following my pro bono seminar, I’ll never forget my disappointment when I heard Scott Noble, who was then the interim King County Assessor, decline to participate in the effort. “It will never work,” he said. But most assessors were receptive to lowering property taxes and they successfully persuaded state lawmakers to reduce property taxes in the 1995 session.

Several years after passage of I-601, the Legislature apparently became adept at circumventing the spending-limit law. The loophole exploitation allegedly kicked into high gear during the last recession when Legislators increased the budget cycle’s spending limit in a shell game. In 2001, they shifted a total of $676 million. In effect, they raised the spending limit by that same amount.

Tired of the same chicanery last year, members of the coalition filed suit over the $250 million budget-shift by Democratic lawmakers who wanted to avoid triggering a budget election and the wrath of voters.

The losing side also sarcastically poked fun at a coalition’s complaint that the spending increase was approved after just 25 minutes of consideration by the state’s Expenditure Limit Committee, which has authority to increase the state’s spending limit.

The committee is comprised of Victor Moore, director of the Office of Financial Management; Maureen Hart, the Attorney General’s representative; Sen. Margarita Prentice, chair of the Senate Ways and Means Committee; and Rep. Helen Sommers, chair of the House Appropriations Committee.

Minutes from the committee’s meeting on November 25, 2005 illustrate why the coalition was concerned. The meeting was short because all the substantive discussions took place earlier, which the incriminating e-mails demonstrate. With Hart recusing herself, the brief meeting concluded with an unanimous vote to increase the state’s spending limit.

In another development, Janelle Guthrie, Attorney General Rob McKenna’s director of media relations, has accused me of three inaccuracies in a recent column: “ Groups perform dance of defiance to WA state spending; lessons from Subway franchising fight.”

Guthrie’s claim No. 1: She alleged I was in error when I wrote this sentence: “Business and consumer groups are feverishly choreographing their opposition to Attorney General Rob McKenna’s effort to overturn the state spending limitations of Initiative 601.”

Her preferred spin: “Business and consumer groups are feverishly choreographing their opposition to the efforts of the Governor and the Legislature to defend their ability to raise taxes in the 2005 legislative session.”

However, her spin defies logic. For example, documents show the attorney general tried to prevent the coalition from seeing those incriminating e-mails and he also tried to justify the questionable vote of the Expenditure Limit Committee.

Gurthrie’s claim No. 2: She alleged I misstated her boss’s statements in this sentence: “I-601 is headed to Washington Supreme Court after a Snohomish County judge on Monday denied a claim by Attorney General Rob McKenna that I-601 is unconstitutional.”

Her preferred spin: “The lawsuit over tax increases approved during the 2005 session is headed to the Supreme Court after a Snohomish County judge on Monday rejected the Governor’s and other defendants’ request for reconsideration.”

Ironically, Guthrie also made the same constitutional argument as her boss did in court: “Secondly, the Washington State Supreme Court has already held that statutes requiring voter approval of future tax increases are invalid (Amalgamated Transit Union Local 587 v. State). The plaintiffs made the voter approval provision of 601 a central issue in their lawsuit, which triggered the legal response that such voter approval provisions had already been categorically struck down by the Supreme Court. The Supreme Court is the one that has ruled on this issue of constitutionality – not the Attorney General’s Office.”

I strongly disagree with her, but I interviewed a trusted authority for his analysis:

“As a matter of judicial policy, all laws passed by the people or legislature through valid procedures are presumed constitutional unless shown otherwise beyond a reasonable doubt,” said Kris Tefft, general counsel of the Association of Washington Business (AWB). “The AG's office is charged with defending the constitutionality of state laws like I-601. We don’t often see the state argue against the application of a law by claiming the law is unconstitutional.”

Guthrie ought to re-read her own words. By citing a precedent involving the I-695 case (Amalgamated Transit Union Local 587 v. State), the attorney general did indeed argue that I-601 is unconstitutional.

Guthrie’s claim No. 3: She alleged I misrepresented the facts when I wrote, “His spokesperson didn’t respond to a request for comment.”

“I responded two minutes after receiving your message,” she said.

Well, yes she did and no she didn’t. To her credit, she apologized for not keeping a promise to advise me whether McKenna was going to appeal the case and she sent me copies of the attorney general’s court filings. However, unlike her opponents, Guthrie never supplied me with comment as I requested. Multiple coalition participants, including the lead attorney and a watchdog activist, sent me documents, and each of them responded to my request for comment.

By the way, the governor’s office also failed to keep me informed.

Appearances are important. Such state officials and employees apparently wish that the media would ignore their questionable activities and legal maneuvering. Unfortunately, they give the impression that they’re working diligently to engineer a slow death for the I-601 spending limits.

(Note, I’m not a member of any of the coalition groups, but I’m a member of AWB and have interviewed Kris Tefft as host of the “Washington Business Weekly” radio program on Spokane and Tacoma radio stations. The program is also podcast to business leaders around the state.)

From the Coach’s Corner, a recent report offers good news for real estate entrepreneurs, bleak reminders for homeowners, and bad news for state and local revenue officials – county real estate auctions will be hectic this year.

With the exception of fast-appreciating upper-end properties, real estate is cooling as a sector.

RealtyTrac reports a huge increase in Northwest foreclosures since Q4 2005:

• Washington, 81 percent
• Oregon, 42 percent
• Idaho, 37 percent

Many of the foreclosures are for one bathroom homes in modest neighborhoods.

To view the report: www.realtytrac.com/news/press/pressRelease.asp?PressReleaseID=99.

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Terry Corbell has been a Seattle-area management consultant since 1992. His business-coaching column appears each Tuesday. Click here for more information on his background. E-mail your questions and comments to terry@corbellmanagement.com, or call him at (253) 952-3840. You can also visit his Web site at: www.corbellmanagement.com.