Again, fabulous advice for State Legislators from Linda Myrick’s 4th grade class at Somerset Elementary in Bellevue.
Last week’s newsletter on Gov. Inslee’s Carbon Action Pricing Model got a lot of comments – about three times the normal amount. Thanks for reading it! The bill has arrived in the Appropriations committee and we will spend some time looking at it before taking action, so I have time to work through all the details.
Readers of my newsletter and blog brought up a few concerns that I felt I should respond to. Here are my responses to the most common ones.
Why should we act – China, India, etc. are far larger than us and aren’t acting…
There are two ways to respond to this concern. First, I can quote Mahatma Gandhi “You must be the change you wish to see in the world.” This may be unsatisfying to some readers.
Second, I can point to how much of the world’s economy (and carbon emitters) will soon be covered by some kind of carbon pricing scheme, including China. The following graphic from Sightline shows the expansion of carbon pricing strategies, including planned rollouts over the next few years. We would not be acting alone. For more detail read the Sightline article.
Cap and Trade or Carbon Tax? Why one over the other?
Lots of people had very firm opinions about the greater simplicity of a carbon tax instead of a cap and trade system. Many others wondered why I even brought it up.
A cap and trade system decides annually how much carbon is allowed to be produced in the economy and auctions out allowances. It adjusts for “edge effects” like the coal power plant partially owned by PSE in Montana that produces a lot of the electricity in the state by adding charges to the power that’s imported, aiming to get PSE to shift to a lower-carbon source. The price floats as carbon producers try to find the best way to make their product and produce less carbon as a by-product.
There are concerns that the auction system can be rigged, or that there will be undue influence by large players in the system. These are legitimate concerns and can be best addressed by having lots of transparency over the market.
With a carbon tax on the other hand, the state sets the price of carbon, and then the amount of carbon produced by companies in the system adjusts to match the price. It’s simpler – there are no auctions, and the permits can’t be traded. I’ll point you back to my friends at Sightline for a more in-depth explanation of the difference between these two.
In reality, both systems would be implemented with some constraints that would make them act more like each other. If you had perfect information about what the market would do, the two systems would end up identical – you could set the tax rate at exactly the level that would make the amount of carbon you want produced happen or vice-versa. A cap and trade system always has a floor price and a ceiling, making them look somewhat like the tax model.
There has been a lot of research in the Governor’s office on the cap and trade model, and he believes this is the best solution for our state. We’re looking at carbon tax alternatives so we can make an informed decision, but I think either system can work.
The University of Washington is a big producer of carbon. Isn’t this a problem?
The UW has a steam plant that produces a fair amount of carbon, meaning they would have to buy permits. Just like other power producers they should look carefully at alternatives to how they run the plant today – the alternatives may turn out to be less expensive than the current system once all the external costs are taking into consideration.
The UW gets direct general fund subsidies. We can fix any problem the UW has with a direct appropriation. They would then be in the same financial position, but have some upside if they could find a way to reduce their carbon output, and they would be more motivated to do so.
Everyone knows that companies pass costs like this down to the consumer.
Everyone “knows” lots of things that just aren’t true. Some of the costs will most certainly be passed through to consumers, but not all. The reference I give is to a study of gas taxes, which are much more direct than the proposal here.
Since we need to raise revenue to fund the education increases called for by McCleary (or, if you prefer the Republican frame, the non-education expenses pushed out of the budget by the McCleary-driven education increases) it seems to me that we have two options: a tax that applies mostly to Washington taxpayers, or one that to some extent taxes large out-of-state companies. I’d prefer the latter.
As I mentioned, the bill has now arrived in my committee. Because it raises revenue it is exempt from cutoffs that apply to bills that are not “necessary to implement the budget” as we say down here. This gives us a couple of weeks to organize a strong hearing, get feedback from economists, etc. I have some questions to still address, and want to read through the text of the proposal another time before I’m comfortable with it. Thank you for all of your thoughtful feedback on this and other issues I’ve been writing about.
More pearls of wisdom from 4th graders in Linda Myrick’s class at Somerset elementary in Bellevue. not sure if this is a McCleary reference, but it’s probably pretty good advice in general.
Statement from Rep. Ross Hunter (D-Medina) on the passage of HB 1105.
“Today we addressed a critical set of funding decisions for Washington by sending a supplemental budget to the governor. This isn’t a complete supplemental budget, but it fixes a handful of severe problems that came up during the interim, lawsuits that the state lost, and disasters where we can get some money on the ground early this spring to help people now.
“In particular, we fund critical mental health improvements. We fund additional staff in the Children’s Administration to respond to increasing child abuse reports. We fund help to communities devastated by emergencies beyond the ability of local resources to handle like the Oso landslides and Carleton Complex fires. I’m also pleased that we pay off a lawsuit the state lost in April, and to stop paying tens of thousands a day in interest.
“The bill also contains a change for this year in the date the revenue forecast we depend on for writing budgets is delivered. I’m a little mystified about the urgency to make this change as I don’t see it altering the dates we’re able to produce budgets. There are many, many factors that go into writing a biennial budget that need to come together before we can sign a conference report. We need accurate Medicaid forecast numbers. We need to know what bills are passing out of policy and fiscal committees. Agreements need to be made on complex issues like education funding and the unconstitutional use of local levies for basic education. Moving the revenue forecast up a month does nothing to make these other budget factors happen more quickly.
“Overall this is a solid budget, and I thank my colleagues in the House and Senate for taking swift action on behalf of the people of Washington.”
I’ve gotten a lot of email this year about Governor Inslee’s climate proposal, both pro and con. Mostly pro, but a number of questions have come up and I’d like to take the opportunity to address them.
- I have no personal doubt that the globe is warming up, and that human activity contributes to this. If you are confused about this there are lots of excellent pieces that work through the science in great detail, such as the information on NASA’s website: http://climate.nasa.gov/evidence/
- I support the general direction Gov. Inslee proposes: using a market-based solution as the organizing mechanism to drive changes in our behavior to address this over time. People on the left and the right tend to agree that getting the markets to include all the costs of decisions is much more efficient than writing extensive regulations.
- I am open to using either Gov. Inslee’s proposed “cap and trade” mechanism or the simpler but less focused “carbon tax” strategy. Both are economically similar, but have different implementation concerns.
The basic idea is that we impose a tax or fee on activities that produce atmospheric carbon, as close to the source as we can. This fee will result in less of the activity (bringing fossil fuels in to produce power of some kind.) The Sightline Institute has a great summary: http://daily.sightline.org/2014/12/18/why-the-carbon-pollution-accountability-act-is-a-big-awesome-deal/
If you want a primer on how a cap and trade or carbon taxes work I urge you to look at the one Sightline publishes. http://www.sightline.org/wp-content/uploads/downloads/2012/02/Cap-Trade_online.pdf
The questions that have come up are:
Won’t this hurt the economy? In a word (well two) – not likely. I’ve got two arguments for this.
- Reasonable economic studies say it won’t. The Office of Financial Management studied the likely economic impacts of the Governor’s proposal. They found that, “employment, output, income and inflation-adjusted income are essentially unchanged under the carbon charge policy.”
- Other states, provinces, and regions that have implemented similar policies are not only still functioning, in most cases their economies have outperformed everyone else. The Northeastern states have had a cap and trade regime for a long time (RGGI) and they outperform the rest of the country.
California is another example. It too is doing fine.
The final example is British Columbia, our neighbor to the north. Just like us they were hit by the economic downturn, but they are recovering faster than the rest of the country.
There will be lots of arguments about this point. Endless “studies” will come out of think tanks financed by the oil companies that purport to show that the world will come to an end. This just isn’t supported by the evidence.
Will the big companies will just pass the cost on to consumers? The Governor’s office estimates that there are about 130 taxpaying companies who will directly pay carbon pollution fees. Some of the costs will undoubtedly be passed on to consumers, but from the vociferous way the oil companies are objecting to the program you know they will pay a significant fraction. If they absorbed no cost it wouldn’t be worth their while to spend millions lobbying, and tens of millions running campaigns against the proposal in California and British Columbia. Here’s a quote from Sightline on this:
Industry will try to scare us with hyper-inflated cost estimates. Oil and coal have a long history of over-blown cost estimates aimed at scaring decision-makers away from making oil and coal take responsibility for their pollution. Experience—with the Clean Air Acts of 1970 and 1977, the 1990 amendments, and now with California’s carbon cap—show that industry cost estimates are often way off-base.
Will there be a lot of exemptions available to those with political pull? A cap and trade mechanism auctions off the “right to pollute” in discrete chunks equivalent to a certain tonnage of CO2. Some plans make a percentage of the “allowances” available in non-auction ways. Gov. Inslee’s proposal auctions 100% of allowances, avoiding the most obvious entryway to this problem. I tend to agree with the concerns that too much of the program is up to the Dept. of Ecology and not set in law. This is a tactical concern, and one we can fix during the legislative process.
Won’t we end up with no revenue if this works? Over time we will reduce the number of allowances available, reducing the revenue we get from them. Of course, the price to pollute will go up at the same time, increasing revenue. If it turns out that there is no revenue from the program because we eliminate carbon pollution I’m ok with that and will find another solution to our budget issues. Think about this like cigarette taxes. High prices are the single thing we can do to discourage youth smoking, but it hasn’t eliminated revenue, unfortunately. It is significantly reducing the number of people who smoke – a reasonable analogy.
There are some economic benefits to this plan that I feel really good about:
It actually works. In the RGGI chart above you can see the carbon pollution from the RGGI states declining much more rapidly than other states. This is true in British Columbia as well, though I don’t have as nice a chart.
It’s not just another tax on the middle class. Carbon allowances generate revenue in a less regressive way than most other options available to us. This presupposes that you believe we need to raise revenue to comply with McCleary and maintain other core state services. If we didn’t we could implement a cap and trade mechanism in a revenue-neutral way. However we do need to raise revenue now. Our current tax structure was created in the 1930’s and it’s time for new tax options that work for the 21st century. Since much of the cost will accrue to out of state mega-corporations it won’t hit low-income folks as directly as some of the options we have like the sales tax.
It creates economic opportunity. I’m not a big fan of economic proposals that spread money here and there in little tax breaks or corporate giveaways to “generate growth.” I am in favor of changing the fundamental economics of the world to create opportunities. We want to be in the forefront of this and have a lot of the intellectual and manufacturing work around green power generation done here, not in other states. According to this report, renewable energy is much more labor-intensive than getting energy from fossil fuels, hence providing more well-paid jobs. One of the great things about systems that use market forces, such as the Governor’s proposal, is that they trigger shifts in investments by making low-carbon alternatives more worthwhile investments than oil. Growth in a sector that’s already so critical to our state’s economy gives us a competitive edge over others, and if it creates more jobs per megawatt hour than those nasty alternatives, the opposition’s suggestion that we’re choosing between jobs and the environment is false.
It keeps more money in-state. Because Washington doesn’t have any of its own fossil fuels, anything we spend on oil, gas, and coal power is money leaving the state. Sightline has this blog post showing that we spend twice as much on oil as we do on education. Imagine if the money we spent on fossil fuels stayed here instead? I’d rather pay for Washington wind turbine technicians than coal miners in West Virginia.
It’s working in California. This Bloomberg article shows that California’s bill is stimulating more growth in the renewable energy sector than any other state currently sees overall. Admittedly, California’s system sets aside some of the revenue generated through the sale of allowances for R&D in this sector, and our bill doesn’t do that. However, because our economy is already less dependent on fossil fuels than theirs was, one could argue that Washington State’s renewables sector could see similar growth patterns once the catalyst (i.e. the cap) is in place.
What’s good for the planet is cheaper for people. Generally, the consumption of carbon-intensive goods and services is expensive. Think about the cost of a year’s worth of ORCA cards (less than $1100) vs. owning a car (AAA estimates it costs over $9000 per year on average). What would you do with the $8K difference? I’d wager that most of us would put it back into the economy.
In summary, I think it’s a reasonable proposal and that’s why I was the #2 signatory on the bill. I believe (as I do with the first draft of most major legislation) that there are changes we’ll need to make in the Legislature. I expect the bill to pass out of the environment committee next week and move to Appropriations where we can do some of the work that needs to happen. I’m not sure what the votes look like overall, but I think it’s a rational proposal that we should look at seriously.
Week three of the series “Advice for Legislators from 4th Graders” created by Linda Myrick’s class at Somerset Elementary in Bellevue.
Low quality childcare is actually bad for children. Not “less good.” On the other hand, high quality opportunities can improve school readiness in low-income children by two years and make significant improvements in all kinds of non-academic indicators like incarceration rates, family income, etc.
There is a ton of research in this area, and it all points to the conclusion that only high quality programs move the school readiness needle in the right direction. A good, readable summary of the research can be found here.
Why does our state fund childcare for about 60,000 low-income children every year? Almost 20 years ago President Bill Clinton and Speaker of the House Newt Gingrich struck a deal on welfare reform. They required single parents (mostly moms) to hold down jobs, and in return the government committed to subsidize childcare for those families. This prevented a disastrous scenario for low-income kids. Today the state provides vouchers for very low-income parents to get childcare so that they can go to work. However, this system is wildly inadequate – in the quality of care it affords and the quantity of families it covers.
In the intervening 20 years a tremendous amount of research has gone into trying to discover what does and does not work in early education. We’re no longer in doubt about what matters and how to measure it. (I wish we could do this in K-12, but we’re a ways off here.) The physical environment matters, particularly the quality of materials offered. Even more crucial is the quality of the interaction between the adults and children.
The premise of the Early Start Act is pretty simple. Since the state is paying for childcare, we should only purchase high-quality care. If we do this right we can have huge impact on outcomes for at-risk kids, such as:
- Higher academic achievement
- Increased graduation rates
- Significant improvement in non-academic metrics like incarceration rate, family income, etc.
This is, of course, more complex to implement than it is to mandate. Most of our existing providers are themselves low-income people, and growing the quality of a program requires some financial investment. We intend to offer resources to caregivers who need a hand improving their services and we’ll increase the reimbursement rate for providers who are already achieving a high standard. Doing this with just the stick of a quality mandate won’t work – we need the carrots of programs like financial assistance, improved contract stability, and subsidized professional development.
The great thing about this act is that at a time when we can’t get two-thirds of the House to agree on when to break for lunch, a bipartisan efforthas been launched to move this plan forward. Spearheaded by Representative Ruth Kagi, the Early Start Act, or HB 1491, is an exciting opportunity to put a wrench in the cycle of poverty in our state. I hope we can make significant progress this year on this project.
Week 2 of excellent advice from fourth graders in Linda Myrick’s class at Somerset Elementary in Bellevue. Again, I’ve fuzzed out the name of the student so I don’t violate federal privacy rules. (This is too bad, as it’s truly excellent advice and they should get credit, but…)
This particular concept is a good one – organizing your thoughts prior to speaking, either in public or in small group conversations shows respect for your audience and doesn’t subject them to random wandering. I often try to do this in writing on a 3×5 card or some other small piece of paper.
The Committee to End Homelessness rents a gong every year and has people volunteer for stints ringing it once for every unhoused person found in King County during the annual count on January 23rd. I stopped by for a few minutes and was able to take a few whacks.
As you can see from the sign held up in the background there were 3,772 “unsheltered” people in King County in the one-night count done earlier in the month. This is a subset of the “homeless,” as many of the larger group can find a shelter spot on any particular night. Unemployment in Bellevue has recently dropped into the “full-employment” range, but the count found 134 unsheltered people on the Eastside, amidst our cornucopia of plenty.
I chose to hit the gong 19 times to commemorate the 191 children in the Bellevue School District who were homeless in 2012-13 school year. Lake Washington had 247 the same year. It’s hard to imagine these kids making much progress in school while worried about where they are going to sleep that night.
Statement from Rep. Ross Hunter (D-Medina) on the passage of HB 1105 – Making 2015 supplemental operating appropriations.
Sen. Andy Hill and I made a commitment to Governor Inslee last summer that we would take swift action to address problems in the mental health system. Adopting this budget will settle the state’s legal obligation in the single bed certification lawsuit. The House made good on that commitment in a strong, bipartisan fashion today. It is my hope that the Senate sends this bill to the Governor soon so that we can address immediate and urgent problems within the state’s mental health structure.
1611 116th Ave NE,
Bellevue, WA 98004
PO Box 40600
I’m proud to represent Bellevue, Redmond, Kirkland, Medina, Clyde Hill, Hunts Point, Yarrow Point and a little bit of Issaquah in the Washington State House of Representatives.
I am chairman of the Appropriations Committee, responsible for crafting biennial budgets. I also chair the Washington State Economic and Revenue Forecast Council.