State budget update

The democrats in the House and Senate remain locked in a tug of war on how to raise $800M in revenue. The Senate’s package includes a 0.2 % temporary increase in the sales tax (a change from their initial 0.3% proposal) and the House includes ending a number of tax exemptions for large banks, out-of-state residents and buyers of custom-made software programs as well as raising several targeted taxes.

In total, the current House package would raise approximately $790 M and the Senate package raises approximately $810 M. The following provides more details on the two revenue proposals:

	House	Senate
B&O tax surcharge on business services	$201 M	$160 M
Direct sellers exemption ("DOT Foods" court case)	$155 M	$155 M
Increasing taxes on cigarettes and tobacco products	$109 M	$92 M
Adopting "economic nexus"	$84 M	$72 M
Extending sales tax to bottled water	$38 M	$35M
Eliminating, restricting, or altering various business tax preferences	$28 M	$36 M
Temporary (3-year) 0.2% sales tax increase		$224 M
Repealing the sales tax exemption on custom software	$77 M
Limiting the "first mortgage deduction"	$51 M
Repealing the nonresident sales tax exemption	$42 M
Restricting abusive tax avoidance transactions		$12 M
Modify and increasing Aircraft Excise Tax	$4 M
Repealing or limiting various tax exemptions		$28 M

To cover the rest of the deficit, the Governor and the Legislature generally agree on using reserves, transfers from the lottery and other funds, and roughly $800 million in cuts.

The cuts would double if the Governor must close the rest of the hole without new revenue. The Governor does not have authority to raise taxes on her own and would have to uniformly cut spending. Governor Gregoire has stated that she will not bring the Legislature back if they can't agree on a budget in the allotted 30 days of this special session. Instead, she has stated she will proceed with deep cuts in spending throughout state government to close the $2.8 B deficit.

Stormwater funding update, implications for all cities (2SHB 3181/SSB 6851)

Yes, it’s still "alive and kicking"! Even though it would directly help only 100 of the 281 cities (because only those cities are required to meet federal and state NPDES permit obligations), this bill is one of few ever seriously considered that that would provide cities with substantial financial assistance to meet unfunded federal and state mandates.

Cities of all sizes and locations around Washington State have felt the impacts of unfunded mandates. For years, AWC has been asked to express our concerns over such mandates to governors, legislators and state agencies. In 2007, when 98 cities joined Seattle and Tacoma as those subject to NPDES municipal stormwater permits, AWC began to make our case that meeting the goals and requirements of the permits was achievable, but only if local residents and businesses were not asked to pay for the huge costs all by themselves.

That message is getting through. Our supporters know that meeting Phase I or II NPDES requirements is expensive and have come to appreciate that our 100 cities already raise and spend over $250 million per year from local ratepayers to meet the challenge. As has been previously reported, opponents of this year’s solution – raising the 22-year-old, never-before-been-raised Hazardous Substances Tax, have not argued with the point that the problem is big and expensive to address. Instead, they argue that an increase in the tax on hazardous substances that pollute stormwater is not fair (some argue it’s not legal). It is not the fault of the products, but those who use them they argue.

In what can best be characterized as a lobbying duel or the equivalent of hand-to-hand combat, proponents (AWC, counties, environmental and labor organizations) and opponents (primarily the oil industry, refinery workers and a number of other business and farm interests) are jockeying for the votes and attention of legislators, most of whom are now back home.

Conventional wisdom points to a bill first being voted on in the House. 2SHB 3181 has been re-crafted in the form of a "striking amendment" that would:

Raise the current Hazardous Substances Tax from a rate of 0.7% to 1.55% on the wholesale value of some 8000 products. The 0.85% increase would yield approximately $100 million per year and would be deposited in a new Clean Water Legacy Account.
Funds from the account would be appropriated annually. At least $75,000 would be granted to each of the 100 NPDES Phase I or II cities to help run their programs. Most of the rest ($70 million or so) would be available for competitive grants to help fund local stormwater projects and programs. Some of the grants would require a local match (locally raised stormwater utility rates could be used) and some would not.
A number of tax credits have been added to the bill, including one that would apply to gasoline refined in state but shipped out of state.

The 100 cities that would directly benefit from passage of this bill have been asked to contact their legislators to ask for their support to pass it now! The obligations to meet federal and state requirements are not going away. Funds are needed now.

We are again asking you to contact your legislators on this bill. Even if your city does not directly benefit from this particular bill, you might consider asking your legislators to support it because it helps cites meet an expensive mandate. Your turn could be next!

For more information, please contact Dave Williams.

Governor signs GMA timelines extension bill (SSB 6611)

It’s official! All GMA planning cities have three extra years to complete local comprehensive plan and development regulation reviews and updates. Thanks to everyone for your support and the House and Senate members who voted for it near unanimously! A final thanks to the Governor for proposing the bill and signing it!

Other bills still in play

E-911 funding (HB 3216/SB 6846)

These bills would provide much needed funding for 911 upgrades. Please contact your legislators and express support for modernizing our 911 system.

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