I-1033 expected to reduce city general fund revenues by $2.1 billion within first six years

On August 11, 2009 the Office of Financial Management (OFM) released its economic impact statement on Initiative 1033. The estimated cumulative hit to state, county and city general fund revenues would be $8.7 billion through 2015.

I-1033, co-sponsored by Tim Eyman, intends to limit the growth in state revenues deposited in funds subject to the state expenditure limit, and limit growth in county and city revenues deposited into the county and city current expense funds. The cap on revenues would fluctuate annually based on any change in population and inflation. Any additional revenues collected above the cap would be placed in a "Lower Property Taxes Account" and used to reduce the jurisdiction’s property tax levy.

OFM’s impact statement estimated the fiscal impacts from 2010 through 2015 on:

• The state
• Urban counties
• Rural counties
• Cities in urban counties (109 cities/towns)
• Cities in rural counties (172 cities/towns)

For rural and urban cities, OFM estimated that I-1033 would reduce general fund revenues by an aggregate $2.1 billion by 2015. State impacts are estimated to be $5.9 billion during the same timeframe and county impacts are estimated at $694 million.

The initiative establishes calendar year 2009 revenues as the base year. The revenue limit for 2010 will be calculated based on 2009 revenues, plus any change in population and inflation. The initiative defines inflation as the implicit price deflator for the US.

Assumptions OFM made in calculating the initiative’s fiscal impact include:

• Calendar year 2010 general fund revenues that exceed the CY 2010 revenue limit will be transferred into the "Lower Property Tax Accounts" in CY 2011.
• Funds in the "Lower Property Tax Account" will reduce the levy approved in 2011 for collection in CY 2012.
• The CY 2010 revenue limit is calculated as follows: CY 2009 general fund revenues X (1 + 2009 % Change in Population) X (1 + 2009 % Change in Inflation)
• The initiative defines city/county general fund revenues as the aggregate of revenue from taxes, fees and other governmental charges. Therefore, the impact statement excludes the following general fund revenue sources:
  • Federal and state direct and indirect grants
  • State shared taxes or revenues
  • Charges for contracted services performed by counties or cities
  • Charges for enterprise activities or charges that are not governmental in nature
  • Inter-fund and inter-department charges
  • Interest and investment earnings

Impacts by jurisdiction

OFM was not able to estimate the impacts to individual jurisdictions due to data limitations. The variability of economic conditions affecting jurisdictional revenues and population growth (or decline) in each city is so great that city-specific forecasts were not possible.

Based on OFM’s assumptions, AWC will provide managers/administrators and finance directors with additional information so local jurisdictions can calculate their own projections. Look for this information soon.

AWC’s role

AWC will continue to provide its members educational materials. Please check our website for additional information about I-1033 at www.awcnet.org/initiatives. This website includes:

• OFM’s fiscal impact statement
• A summary of I-1033
• The full initiative text
• News articles about city official responses to I-1033
• Links to the sponsors’ website and the Vote No on I-1033 website
• Resources from the Public Disclosure Commission and Attorney General’s Office about elected and appointed officials ballot measure campaign activities and use of public funds

The Association of Washington Cities provides information for educational purposes only. This is not intended to be an expression for or against a ballot measure. AWC will continue to provide information about the fiscal impacts of this initiative on cities. City officials may want to consult legal advice for specific impacts on your city.

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