By Jim Cline
Recent economic news has been characterized as tepid at best, but the most recent Washington State Department of Revenue report offers one of our clearest recent indicators that a solid economic recovery may be underway, at least in Washington State. The recently released Department of Revenue First Quarter Sales tax numbers show a statewide jump from the preceding 12 months (Quarter 1, 2012) of 8 percent. The City sales tax numbers can be found here. The County numbers can be found here.
What is noteworthy about these numbers is that the rebound was not localized around the Seattle area, but occurred throughout the state. Previous economic reports had suggested that the State recovery was primarily driven by the robust improvement in the Seattle jobs situation, but these numbers indicate a broader recovery.
While not all cities and counties saw a significant increase, this certainly is good news for those entering contract negotiations. Much of this resurgence in revenues was not projected by budget officers and this unanticipated revenue should place many cities and counties in a better position to consider wage increase proposals.
Still, it is important not to overstate the impact of this report. To a large extent, the first quarter data brings many cities and counties just to or slightly ahead of their sales tax revenue steam in 2008. Following the outset of the recession, most jurisdictions faced plummeting retail sales tax activities and we are only now starting to see a return to those levels. Also, some cities and counties are still digging themselves out of a fiscal hole created by depleted reserves.
On the other hand, we are seeing most cities and counties with reserves rising to pre-recession levels, often above the minimum reserve level recommendations adopted by the GFOA (Government Finance Officer Association).
These developments point to the need for bargaining teams to acquire expert assistance in seeking out and interpreting employer budget information. We have repeatedly encountered employer claiming poverty even when in the presence of ample (and even at times extraordinary reserves) and have developed a systematic approach to ferreting out those poverty claims.
In one extreme example we found a County claiming poverty even after laying off 15% of the county workforce but when we undertook a forensic analysis of their books (which was greatly resisted) we learned that they held reserves approaching 50%, nearly 4 times the 10-15% levels recommended by the GFOA!
This only reinforces some messages we have been sending for the past several years: Preparation Matters and Knowledge is Power. Do not expect that your employer will broadcast their fattened coffers to you. You are going to need to do your homework to figure that out.
As we recently mentioned in our report on the CPI, although the Seattle CPI came in at 1.2 (All-Cities at 1.8%), we are anticipating 2014 settlements to approach 2% or more, above that CPI level. The signs of a rebounding economy, the surge in unanticipated tax revenues and the improving job market, all point to improved bargaining leverage for bargaining units who have had little leverage over the past few years.
