Log in
updated 2:54 PM CDT, Jul 28, 2018

FlynnsHarp logo 042016

How new state cancer-research fund came about in the 2015 Legislature

 

The tale of how Sen. Andy Hill, a near-miraculous survivor of lung cancer and the powerful Republican overseer of writing the Senate's budget, helped guide funding to create a new state cancer-research fund might have been the story of a legislator's personal cause and vision brought to reality.

Instead, what has begun to emerge is a tale of more typical legislative ineptitude, because most observers aren't really sure what the Hill-guided budget inclusion of a Cancer Research Endowment Fund brought about or why it was carried out with the intrigue and confrontational politics that occurred.

One certainty is that Hill was a key architect of a Republican conviction that funding needed to end for the decade-old Life Science Discovery Fund, which provided grants to an array of emerging life science and biopharma companies and some viewed as a logical administrator of a new cancer-research fund.

So in the end the Legislature's 2015 final budget compromise killed funding for LSDF but did not put the organization itself out of business.

Meanwhile, the legislation creating the new cancer fund, referred to as CARE, was approved with a $5 million matching grant this year and a $10 million matching grant next fiscal year and thereafter to fund cancer research in this state. Maybe.

But before any of the grants can be made, there must first be "proof of non-state match," meaning there is no certainty that any of those state dollars will actually be spent without the emergence of entities seeking to match the grants.

For reasons many outside of the political arena couldn't quite understand, Republicans, with Hill as a leader of the viewpoint, didn't like the concept of funding startups while Democrats were strong supporters of LSDF and the potential jobs grant-recipient companies might create.

But Hill apparently, on more than one occasion, suggested that the administrative structure and staff of LSDF, including its well-regarded Executive Director John DesRosier, could become the overseeing entity for the new cancer-research fund. So perhaps Hill will explore that possibility.

Someone might have explained to Hill, a former Microsoft manager, that cancer research is a life science discovery activity and that rather than forcing the elimination of LSDF's funding in a bitter and controversial battle with Democrats who supported LSDF, he could have forced cancer research to be its new focus.

In fact, a proposed initiative, backed by organizations like the Fred Hutchinson Cancer Research Center, that failed to gain enough signatures to make the ballot last year would have created a large pool of dollars, funded by tobacco-tax increases, a fund that would have been administrated by LSDF as an added responsibility.

And Rep. Ross Hunter, the Democrat who chairs the House Ways and Means Committee and also a cancer survivor, had led an effort in the 2015 session on behalf of a bill with a similar goal of establishing a cancer-research fund with dollars from an increase in the tobacco tax, but the bill never got through the committee challenges.

Hill's 2009 conquest of stage 3 lung cancer, including a pronouncement at one point that it was terminal before his treatment with a new targeted therapy left him cancer free in a matter of weeks, is a remarkable story that would have made his support for a meaningful step to fund cancer research laudable and a cause for broad support.

Hill made it clear that one of the reasons he ran for office in the fall of 2010 was to "advocate for continued scientific research and development of life saving and life altering therapies."

In the end the relatively small amount that the CARE fund provides isn't in the same ball game that commitments like the $200 million lawmakers in neighboring Oregon approved to support a $1 billion public-private effort to bring the nation's top cancer researchers to Oregon.

And Oregon is only one of the states that have made such major commitments to cancer research.

One of my friends long involved in watching legislative machinations offered an analysis of what occurred: "You kill LSDF which uses OPM (other people's money, i.e., the tobacco settlement), and then appropriate precious few taxpayer dollars and create a new entity to do close to the same thing LSDF does, or did. 

"Why not have kept LSDF and directed that $5 million or $10 million of its existing funds be focused on cancer research specifically?" 

The kind of money the Legislature approved is a relative pin prick being thrown at cancer research at random, to be run by an entity that doesn't even exist yet, but will require some overhead to become operational.

What the Legislature created may have been the only potential state expenditure that could have gotten through a group of lawmakers whose Republican members were adamant about not spending anything that would mean new taxes, and that would presumably include funding cancer research.

Thus what Hill was able to get support for winds up as a pale shadow of the potential $1 billion that Initiative 1356, which failed to gain the signatures needed to make the 2014 ballot, would have raised for cancer research through a dramatic increase in the tax on cigarettes and other tobacco products, as well as marijuana.

If what really is only a gesture toward cancer research by the state at this point proves successful by any measure, it's possible that future legislative sessions may find the courage to step up to greater commitment in legislative support for the world-class cancer research and care that has developed in this state.
Continue reading
  1464 Hits
  0 Comments
1464 Hits
0 Comments

State's Business & Occupation tax could get a look from Legislature as new-revenue source

The fact that it will take a two-thirds vote to get any new-tax measure through the state Senate this year could prompt lawmakers to take their first serious look in years at potential new dollars from the business and occupation (B&O) tax, the state's primary source of revenue from business.  

And if that happens, not only might some lawmakers be surprised at the disparity scattered among the nearly 30 categories of the B&O Tax -- Washington's unusual tax on gross receipts -- but it would also emphasize how out of sync the imposition of that tax is with the current-session's legislative mantra of "fairness."

After all, we have House Democratic Leader Ross Hunter, D-Medina, on the record with "when we are done, our tax system should move toward fairness." So lawmakers could decide there's some logical opportunity for new revenue from some of these categories while getting credit for looking to create fairness

Seeking revenue-producing changes in the B&O could be an attraction because

apparently the GOP Senate rule on two-thirds for any new tax allowed continuation of a simple majority for tinkering with existing taxes. 

 

This column's focus on the B&O tax is a topic that came to mind for me as a consultant who, with attorneys and accountants, pays a B&O tax under the "services" category, of .015 percent, basically $15,000 on $1 million of gross revenue, while our clients pay a tax of maybe $2,500, as the manufacturers' .00275 percent rate would impose. As publisher of Puget Sound Business Journal, I paid $3,500 for each $1 million of revenue.

An honest look at a tax structure where an attorney, accountant or consultant could pay a rate two or three times as high as a client they are advising might well provide additional tax revenue as part of creating tax fairness for all businesses.

But across the state tax spectrum, the fairness issue should also be weighed against the reality of why some tax breaks legitimately came about. Thus lawmakers need to evaluate, and perhaps restore at least some of the 20-year-old high-tech B&O tax credit, a tax break for five categories of tech business that expired as of January 1 this year.

It would be a mistake for the lawmakers to succumb to the temptation to merely pocket the nearly $50 million in revenue that the tax break cost the state, rather than seek to evaluate the changing value of the tax break to some of the five tech sectors to which it applied.

The challenge for legislators in evaluating either the B&O tax disparity or the tax break for high tech is in being able to understand the difference between tax breaks important to the economy and tax breaks that are merely the result of good lobbying.

And the manner in which the tax credit came about for high-tech research and development for advanced computing, advanced materials, biotechnology, electronic device technology, and environmental technology is an example of what was once viewed as an important-to-the-economy tax break.

The tax breaks for high-tech companies, both B&O and sales tax credits, were created by a Democratic legislature responding to the goal of creating jobs that came from a Democratic governor, Mike Lowry.

 

 "We were coming out of what was, at that time, the state's worst recession and we needed to attract industries that would produce good-paying jobs," Lowry recalled of the proposal he came up with and pressed through the 1994 Legislature as a way to lure new business to Washington.

 

And for Democratic lawmakers who have since sometimes come to refer to such tax breaks as "tax loopholes," Lowry still responds with his view that they are "incentives" that have permitted high-tech companies to avoid paying state sales tax on new facilities, including equipment.

 

"We were absolutely correct to come up with policies to lure companies to the state that would create high-paying jobs that were basically the jobs of the future," Lowry said.

 

And among those "jobs of the future" that still deserve nurturing is the biotech category, an industry that by all rights should be a third-leg of this state's economic stalwarts but that has lagged for several reasons. Removing the tax incentives on new facilities and equipment would be one more reason.

 

So back to the B&O tax, which actually came into existence in 1933 after the state Supreme Court threw out the income tax that lawmakers had passed in an effort to find new sources of revenue for a financially struggling state. The '33 Legislature adopted the gross receipts tax as a temporary, stop-gap move to balance the state budget.  

But the temporary, as in most legislative "temporary" moves, became permanent, though the rationale for creating B&O special treatment for one industry over another is lost in the antiquity of legislative deal making. But once that bridge was crossed, crafted from some handshake deal between one or more lawmakers and a lobbyist or two, the following special deals were somewhat like kisses: once the first one is bestowed in a relationship, the rest come much more easily.

Now, in a sense, some lawmakers are toying with what would likely be considered a form of tax on income with Democrats expressing an interest in taxing capital gains, saying it would make the state's tax system less regressive, and more fair (that word again).

Sen. Andy Hill, the Republican who chairs the Senate Ways and Means Committee as is thus the upper chamber's chief budget writer, has put down the capital gains idea, branding the phrase "regressive tax code" as a code-word for getting an income tax.

 

Voters have consistently rejected the idea of a state income tax, but it doesn't take too clever a legislative mind to realize that, even though any tax increase would almost certainly be sent to the voters, there might be a significantly different view of state residents about taxing capital gains than for taxing their own income.

 

And savvy lawmakers have a sense that a far more liberal State Supreme Court faced today with the question of whether a state income tax was unconstitutional or not, might well have a different answer than the one 82 years ago.

Continue reading
  1249 Hits
  0 Comments
1249 Hits
0 Comments

52°F

Seattle

Mostly Cloudy

Humidity: 63%

Wind: 14 mph

  • 24 Mar 2016 52°F 42°F
  • 25 Mar 2016 54°F 40°F
Banner 468 x 60 px