Recent Stories with tag crisis

Governor Gregoire

CNBC asked Governor Gregoire to respond to analyst Meredith Whitney's comparison of states to banks, pre-financial crisis. Here's what Whitney said in late September:

The similarities between the states and the banks are extreme to the extent that states have been spending dramatically and are leveraged dramatically. Municipal debt has doubled since 2000, spending has grown way faster than revenues.

Whitney said what reminded her most strongly of the banks' situation was the absence of "reliable data on state spending and debt."

Governor Gregoire chose to play off the phrasing, saying that, "We're in crisis mode. We the states are not in pre-crisis at all." That's no doubt true, but it evades Whitney's point that state spending and debt now represent a separate economic danger from the banks' credit meltdown, and that transparency is hard to come by. In fairness, Washington's credit rating is quite good, but with the caveats that a) if credit ratings were infallible, we wouldn't be in the crisis we're in, and b) things can change very quickly.

Gregoire noted that Washington has trade to rely on; unusually, we don't have a trade deficit with China. And state economists see mainly good news in that relationship for the future. Yet the state has to figure out how to avoid a $3 billion deficit over the next two years, and cuts have approached the bone. CNBC says:

In August, Gregoire announced plans for four- to- seven percent budget cuts across the board, as well as a phase-in of $51 million in cuts to state welfare aid. The cuts will disqualify nearly 2,500 families from child-care subsidies in October, and an additional 5,500 families from cash welfare benefits in February.... (more)

Unless the legislature takes action in the last few days of the special session, King County arts and heritage organizations are likely looking at a nasty funding problem in 2011. A couple weeks ago, I wrote about the problems facing 4Culture, the agency that disperses part of the hotel and lodging tax in King County to cultural projects. This week, I've heard from 4Culture that uncertainty over future funding sources may well lead them to cut dispersal of funds by up to half in 2011, a year before their tax funding actually expires. In 2010, they're dispensing over $4 million; that means that next year, King County could be losing up to $2 million in already scarce funds.

Two bills--HB 2912 and SB 6051--are currently both still in the rules committees of their relative houses, and could make it to the floor for a vote any day. Advocate4Culture, a citizen's group supporting efforts to preserve 4Culture's funding, is calling on people to contact their legislators and encourage them to act soon. Information on how to do so can be found here.

For six years now, supporters in the legislature have tried--and failed--to pass legislation that would extend the county's 2 percent credit against the state's 6.5 percent hotel and lodging tax, which is set to expire in 2012 when the Kingdome debt, for which the credit was originally designed, is paid off. Politically, the issue should be no-brainer. For one thing, this has nothing to do with the collection of the tax; it's about whether or not counties get to keep part of it (today, nearly every county in the state keeps its 2 percent to support tourism, culture, and youth sports). Extending the credit is a win for every legislator, since it ensures part of the state taxes collected in their district stay there.

The issue also has very little to do with the state's current bottom line problems, since the credit doesn't expire until 2012, when, theoretically, that 2 percent would revert back to going to the state's coffers. In fact, most observers tend to think legislators are just being slow to act, assuming that there won't be any negative impacts if they wait until the last minute--the 2011 general session--to pass the extension, and that funding won't be interrupted.

Unfortunately, that's not the case. Due to the economic downturn, hotel and lodging taxes were down 18 percent in 2009 versus 2008, according to a statement from 4Culture. That left them with only $3 million to disperse in competitive programs for 2010, in contrast to $4.5 million in 2009. So the board made the decision to borrow $1.1 million from the agency's rainy day fund--the interest it earns off its  $40 million endowment, which was created to fund its activities after 2012--in order to maintain arts and heritage funding during the downturn, when alternative sources like corporate giving were likewise down.... (more)

Norman Bell in "Subprime!" at the Voxbox Theatre.

"The Boiler Room? Have you seen that movie?" Norman Bell asked over the phone, the sound of Seattle rush-hour traffic buzzing in the background as he was driven up to the Voxbox Theatre on Capitol Hill. "Yeah, it was kind of like that. They brought us in each morning to a big conference room, and this guy, the phone room supervisor, would burst into the room each morning and he'd give us this big rah-rah speech. He'd be throwing chairs down, and saying, 'Who's a crusher? Who's a crusher?,' and get us all psyched up. He was bringing in star loan officers who were making over a hundred grand a year, and saying, 'This could be you some day.'"

This was Bell's life back in 2005, when he worked at the Kirkland-based Merit Financial as a junior loan officer. Founded in 2001 by former Huskies cornerback Scott Greenlaw, Merit Financial rode high on the subprime wave and then crashed hard. Greenlaw had only two years' experience in mortgage lending prior to founding the... (more)