Municipal finance

State budget

On February 23, Senate and House leadership unveiled their 2010 supplemental operating budgets. They approached filling the $2.8 B budget shortfall differently, as depicted in the chart below.

Budget and associated revenue discussions will dominate the last two weeks of this legislative session. As we move forward, specifics on the tax increases and budget cuts will change frequently as the two legislative bodies and the Governor try to reach a consensus.

More details on the House, Senate and Governor’s revenue proposals can be found here.

Both the House and Senate budgets are actually very good to cities in terms of direct allocations including current state-shared revenues. However, even with new revenue, there will still be significant indirect negative impacts given the cuts to many human services programs. Law enforcement officials and many others have noted these cuts will produce a greater burden on the local public safety systems and that many individuals will be seeking additional assistance from their city.

Please see our budget comparison matrix for more specifics. We will be updating this matrix frequently as more information becomes available and as the various budgets move through the legislative process. Also watch our video which explains details of the state budget.

In addition, ESSB 6130, amending Initiative 960, was signed by the Governor on February 24. ESSB 6130 will suspend some provisions of I-960 until July 1, 2011.

The bill suspends the following:

• Requirement of two-thirds majority vote in the Legislature to raise taxes.
• Requirement for a tax advisory vote by voters for any tax increase not referred to voters.

The bill includes an emergency clause and takes effect immediately. And with that, the House and Senate are now able to proceed with floor votes on bills that would raise taxes, close tax loopholes and authorize certain fund shifts.

If you have questions on the state budget, please contact Jim Justin or Sheri Sawyer

Fiscal flexibility (ESHB 3179 and ESSB 6424) – AWC priority

ESSB 6424 is scheduled for executive session in the House Finance Committee on Monday, March 1 and would:

• Remove the non supplant language on the 0.3% public safety sales tax.
• Remove the non supplant language on the 0.1% criminal justice sales tax.
• Expand the use of gambling revenues for general public safety programs until January 1, 2014.

ESHB 3179 would:

• Allow cities to impose, with voter approval, the public safety sales and use tax at a rate of 0.1% if county voters do not impose by January 1, 2011.
• Eliminate the non-supplant language in the public safety sales and use tax.
• Allow Tacoma to impose the mental health/chemical dependency sales and use tax if Pierce County has not imposed it by January 1, 2011.
• Eliminate the non-supplant language in the criminal justice sales and use tax.
• Impose the brokered natural gas use tax at the location where the gas is consumed or stored by the customer – addressing a recent court case negatively impacting nearly 50 cities.
• Expand the use of gambling revenues for general public safety programs.

AWC staff is working with legislators to schedule ESHB 3179 for public hearing prior to the upcoming cut-off. A comparison of these two proposals can be found here.

Increasing state revenues (SB 6873)

The intent of SB 6873 is to increase state revenues by preventing tax avoidance transactions, narrowing or eliminating certain tax preferences, and providing equitable tax treatment. Included in this proposal is a "fix" to the brokered natural gas use tax issue – an AWC priority.

Part XVIII of the bill would address the recent court of appeals decision that impacts approximately 50 cities that impose the tax, which represents approximately $14 million in 2008 revenues. The proposal would clarify the imposition of the tax by noting first use occurs when the gas is burned or stored.

The bill had a public hearing in the Senate Ways & Means Committee on February 24. AWC testified in support of Part XVIII.

Making unfunded mandates optional on local governments (HB 3182)

This bill permits political subdivisions (cities, counties, ports, school districts and special purpose districts) to choose whether or not to comply with a requirement imposed by the state if state funding is insufficient to pay the costs of its implementation.

If this bill is to advance we expect it will be amended and narrowed significantly. There is some discussion to simply focus the bill on reporting requirements required of local governments and have larger issues addressed in the future. The bill received a hearing on February 22 in the House Ways and Means Committee. Please watch for updates in future Bulletins.

Regarding fiscal note instructions (SSB 6374)

This bill would require the Department of Revenue (DOR) and the Office of Financial Management (OFM) to perform economic modeling of three economic development bills enacted in 2010. DOR and OFM would then compare the actual results over 5 years with the anticipated impacts in regards to the fiscal impacts of the proposals. This is a much more in depth analysis than currently takes place in preparing fiscal notes. SSB 6374 had a hearing in the House Ways & Means Committee on February 22. AWC supports this legislation given the potential to further explain to the Legislature the positive impacts of various economic development proposals, many of which are advanced or supported by cities.

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