Incriminating e-mails: How WA lawmakers avoided I-601 spending limits

08:00 AM PST on Tuesday, March 21, 2006

By Terry Corbell
King 5 News

Snohomish County, WA - What will happen now that a Snohomish County Superior Court judge has invalidated the Washington State Legislature’s tax increases in 2005?

In agreeing with five advocacy-watchdog groups, Superior Court Judge James Allendoerfer ruled recently that last year’s $250 million budget-shift by Democratic lawmakers illegally bypassed the Initiative 601 spending limits. That also meant the tax increases were illegal without voter approval.

All the challengers indicated they were frustrated because lawmakers were disingenuous in raising taxes and they filed their court challenge to prevent lawmakers from gaming the system. They simply felt lawmakers dishonored the spending limits of I-601 by using a shell game.

Claiming both executive and legislative privilege, the state tried to conceal a series of incriminating emails. But the judge allowed some into evidence and ruled that the e-mails proved budget writers knew they were violating the intent of I-601. The e-mails plotted a scheme to shift funds in order to superficially inflate the spending limit to avoid automatically triggering a public vote on the tax increases.

“It is clear no attempt was made to follow I-601’s provision for voter approval of spending and tax increases in excess of the limit; instead all efforts were made to artificially increase the limit to deny the voters the rights granted by I-601,” said Jason Mercier, senior budget analyst of the Evergreen Freedom Foundation (EFF).

Here are two incriminating e-mail excerpts:

1. “I remain confident that staff will be able to provide members with options to increase the limit pretty significantly – all without amending the expenditure limit statute.”
2. “…since we are over the limit, we suggest the following options: In the 2005 Supplemental, spend some GFS money into the HSA, which will help raise the limit in FY06, then in 2005-07, shift it back to GFS by increasing the HSA fund shift, increasing the limit again . . . you get more bang for the buck with option 1, since you raise the limit twice. With both options, you still have an out of balance with the limit in the first year, so you still have to do some shifting somewhere.”

(To see the full incriminating e-mails that were allowed as evidence, here’s the link made available by EFF: www.effwa.org/pdfs/601emails.pdf).

While the e-mails soared back and forth, legislators shifted $250 million from the general fund – to a health services account – to a violence and drug account – then back to the general fund – in just a matter of days. Then, the lawmakers justified their increases in spending.

The taxes total more than $260 million – $37 million on warranties for consumer products, $50 million on hard liquor, and $175 million on cigarettes.

“We are thrilled with the judge’s decision, which affirms the initiative process,” said Dean Boyer of the Washington Farm Bureau. “The judge sent a clear message to the state Legislature that the people are a coequal branch of government, as spelled out in our state constitution, and that lawmakers must follow the laws adopted by the people through the initiative process.”

Boyer added lawmakers were caught using a shell game. That’s a theme echoed by others.

“The people of the state of Washington approved Initiative 601 because they wanted a strict spending limit to ensure the economy of the state could remain stable even in tough times,” said Dan Hammock of the Washington State Grange. “When the 2005 legislative session played what can only be described as a ‘shell game’ with funds in a deliberate attempt to circumvent the provisions of I-601, the Grange felt compelled to enter into this lawsuit to protect not only the financial future of Washington, but the peoples' right to initiative and a direct line to the legislative process.”

“They shuffled money around to raise up the spending limit and they were caught,” said Gary Chandler, vice president of governmental affairs at the Association of Washington Business. “It puts those taxes in jeopardy, which we agree the state should hold off on collecting.”

So, will Attorney General Rob McKenna spend more taxpayer funds to appeal the verdict in the case his office just lost?

“Once we receive the formal ruling from the judge, the attorney general’s office will thoroughly review the opinion and discuss options with our client, in this case, the Governor,” said Janelle Guthrie, spokesperson for the attorney general’s office.

The response from Governor Gregoire: “The Governor has not yet been fully briefed on the decision and, at this time, has no comment,” said spokesperson Holly Armstrong during the noon hour on Monday.

In addition to EFF, the Washington Farm Bureau and the Washington State Grange, the other winning petitioners are: The Building Industry Association of Washington and the National Federation of Independent Business.

The five groups decided to challenge the shifting of funds after the Washington Supreme Court ruled in a related case that the Legislature was exempt from a two-thirds majority in order to increase taxes. The Washington Farm Bureau initially had tried to file a referendum challenging the Legislature’s use of the emergency clause to raise taxes in several bills.

You might recall the emergency clause was invoked an eyebrow-raising 98 times last year.

That’s one of the reasons why the groups went to court to prove the legislators refused to follow the law by passing nearly $1 billion in new taxes and spending.

But will public officials ever learn that voters mean business?

“The voters of Washington are too politically savvy to let a direct and blatant violation of a law they passed themselves go unnoticed,” added Hammock of the Washington State Grange. “We applaud their vigilance and the decision of Superior Court Judge James Allendoerfer, which sends a message to the legislature: The spending limits are there for a reason, and we expect them to be followed.”

Earlier this month, this column predicted that the Washington Supreme Court would ultimately be asked to rule on this case. It was obvious that one side would be happy with the court’s decision and the losing side would be frowning and would appeal.

Not to be facetious, but my hope is that I was wrong – that the losing side will take adequate time for a break to smell a great cup of coffee, for which Seattle is famous, and then understand why the verdict should stand. Washington has too many unsolved problems hindering economic development and the creation of jobs that need public officials’ attention.

As Abraham Lincoln said, “Public sentiment is everything. With public sentiment, nothing can fail. Without it, nothing can succeed.”

And not to point fingers, but it’s too bad that a lawsuit was even necessary. However, as Lincoln also said: “Things may come to those who wait, but only the things left by those who hustle.”

My sense is business and taxpayers will be better off thanks to the vigilant watchdog groups that hustled to uphold the law.

According to Boyer and www.save601.org , the groups anticipate more wrangling and are requesting contributions to help defray their legal costs. If you want to contribute, the address: Save 601, c/o Washington Farm Bureau, P.O. Box 2009, Olympia, WA 98507.

Added Mercier: “Individuals wishing to support the Evergreen Freedom Foundation's budget research and other watchdog activities of the Legislature can send tax-deductible (we're a 501C-3) contributions to: Evergreen Freedom Foundation, PO Box 552, Olympia, WA 98507 (they can identify which of EFF's programs/centers they would like the contribution to go toward). Or online at: https://secure.lexi.net/effwa/contribution.php.”

From the Coach’s Corner, whatever your feelings on public affairs and tax policy, consider that advocacy groups and associations usually exist for good reason.

If you’re responsible for operating a business or aspire to run one, I’d consider joining an organization that best suits the needs of your company and industry. And, by standing out in your association, that’s also a way of marketing yourself.

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.