2006 Legislative Session: "Turning the Corner"

This session was markedly different from those of the recent past. For the first time in 4 years, the Legislature had "money in the bank," and could pass a supplemental budget without having to cut elsewhere or find new revenues. It was also a session during which the Governor demonstrated strong leadership in guiding a number of her initiatives through the legislative process. Unfortunately, it was also a session during which election year politics played a role.

The 2006 Legislature had a number of "must do" issues needing to be addressed, including adoption of a 2006 supplemental budget; sexual predator housing; and getting a "handle" on unfunded pension liabilities. For a short session, the Legislature responded to a number of key issues and moved many to closure.

From the standpoint of the Association, the 2006 session was characterized by both wins and losses. On the positive side, the Legislature exercised substantial restraint by derailing most legislation adverse to city interests. The Legislature also approved a number of positive city issues, including:

• A measure to establish an incentive for the annexation of large revenue deficient areas in King, Pierce, and Snohomish counties;
• Legislation delaying the required Growth Management Act updates for smaller and slower growing cities; and
• A measure establishing pilot projects using a modified tax increment financing tool to assist cities in their economic development efforts.

As alluded to earlier, it was also a session in which a number of AWC priorities failed to pass. Our greatest disappointment was the unwillingness of the House leadership to advance SSB 6594, the streamlined sales tax bill. This legislation, the source of substantial controversy within the city "family" for several years, was introduced with strong city, county, and gubernatorial support. It was the final element required to bring Washington into conformance with a national sales tax model developed to encourage the Congress to require collection of state and local sales taxes on remote commerce (catalog and Internet sales). The Governor had agreed to fund 100% mitigation for those jurisdictions that would be adversely impacted by the legislation, and the Senate passed the measure without a dissenting vote.

As expressed to AWC lobbyists, the reason this measure did not pass the House was solely due to election year politics. A number of members of the majority leadership were concerned that since the legislation was intended to provide for the collection of sales taxes on remote commerce, the measure might be interpreted as a "bad tax vote" and jeopardize reelection efforts. While we recognize the political concerns, the Association is nonetheless disappointed that this measure was not approved. We have been assured that the measure will receive favorable treatment in 2007.

Additional priorities that failed to pass this session included proposed modifications to a number of taxation provisions designed to add flexibility; legislation clarifying the authority of cities to contract with each other for court services; measures reducing municipal liability exposure; and legislation further responding to the need for greater city transportation funding options. Recognizing the nature of the shorter, even year sessions, these issues will undoubtedly be before the Legislature in 2007 and future years.

Gubernatorial Leadership

As expressed by many long time legislative observers, the 2006 session was one during which the Governor demonstrated strong leadership skills. Now in her second year in office, Governor Gregoire convinced most observers that she’s a no nonsense Governor, and that the state’s business needs to be addressed. She submitted a budget calling for a $950 million reserve for the 2007-09 budget period, and convinced the Legislature not to spend the full $1.5 billion surplus. She brought the trial lawyers and the medical profession interests and helped broker modest legislation addressing several issues relating to health care tort reform. The Governor also was engaged throughout the session in encouraging key legislators to advance a number of Executive Request measures. Regardless of one’s political persuasion, the Governor deserves praise for demonstrating more political leadership then we’ve seen in many years.

Economic/Fiscal Turnaround

For the first time in four years, the 2006 session was characterized by positive fiscal conditions. Whereas throughout the previous four years the Legislature was forced to cut spending by more then a billion dollars a year, the 2006 revenue forecast indicated a surplus of over $1.5 billion for the remainder of the 2005-7 biennium. Much of the additional revenues arose from an overheated housing market and general growth in the economy. In addition to housing, much of the revenue growth is associated with increased consumer optimism, the turnaround in the aircraft industry, and continued expansion in the technology sector.

While the economic turnaround is a positive sign for the state, revenue forecasters have counseled the Governor and the Legislature to be cautious. Expectations are that the housing bubble may burst, resulting in declining real estate excise tax yields, and that consumers may become more cautious as pent-up demands are satisfied. The Governor’s insistance that the Legislature retains a $900 million plus savings account for the next biennium clearly reflects concerns that revenue growth in the next biennium may fall short of the level needed to sustain existing services. Given the experiences of the past two biennia, both the Legislature and the Governor acted prudently in leaving $940 million on the table for next biennium, and avoided responding to the many special interest calls for new programs.

In Closing

The 2006 session of the Legislature was a positive one for the cities and towns of Washington, and for its citizens. While the session was characterized by some political posturing, most of the key issues were addressed and the Legislature completed its deliberations on time! As mentioned previously, while we not only succeeded in securing passage of a number of helpful measures, we were also able to "kill" most of the harmful measures. In general the Legislature was sensitive to the needs of cities and towns, and tried to be responsive to our concerns.

As in the past, many of our successes are attributable to the hundreds of city officials who went the extra mile to regularly communicate with their legislators, to make those vital calls in response to our Action Alerts, and who’ve endeavored to convince their legislators of the need for a vibrant state/local partnership. Those "messages from home" have proven to be our most effective lobbying tool, and we appreciate those of you who’ve provided that messaging.

As we look to the future, the state has turned the fiscal corner, but many of our communities are still feeling the impacts of the loss of sales tax equalization, and the inability to secure sufficient resources to sustain basic services. Many cities have overcome their fiscal limitations through inter-local agreements, by establishing partnerships, by encouraging increased levels of volunteerism, and by simply finding those strategies essential to providing city services. Future challenges will be daunting. However, legislators need to be reminded that we must have a strong state/local partnership if we’re to grow our economy, provide a high quality of life for our citizens, and collectively address the needs of our citizens.

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