Final Legislative Agenda Report

As a seven hour 3^rd Special Session ended, the legislative budget and reform policy stalemate received considerable bipartisan process made by all sides.

The legislature adjourned at 7:00AM on Wednesday morning, April 11, culminating a marathon day of negotiations on budget and major policy reform items – the latter as needed to satisfy the Senate Republicans and the three moderate Democrats who sided with them earlier in the special session to gain control of the Senate floor AND the overall negotiations on the budget and the “5 Corner” negotiations.

Late Tuesday, it had seemed as if a more extended 3^rd special session was eminent as a sufficient number of votes on several bills. Progress having been made during the day, Governor Gregoire called the legislature directly back at 12:01AM into the third special session.

Legislative rules were suspended to keep all the necessary policy and budget bills alive and in their current form and status. One by one, each agreed to bill was adopted by the House and Senate as sun up approached – 22 straight hours on the floor!

In the end, it all came together as one big agreed to package of compromise pieces of legislation, with each piece’s passage being needed to pass the others. The legislature ultimately passed both a supplemental operating and capital budgets ($1 Billion in construction) with strong bi-partisan votes. The legislature also passed several policy reform bills. Those bills include the following:

Ø  Public employee pension reform – changes the early retirement incentives for post May 2013 hires. 2ESB 6378.

Ø  Jobs now package - $1+ billion (50% new GO bonds for construction on: statewide economic development projects, higher education, water and sewer, and environment rehab projects). SB 5127 (jobs now act) and SB 6074 (capital budget).

Ø  4-Year budgeting requirement. Constitutional amendment coming to the November ballot. SSB 6636.

Ø  K-12 school employee health care benefits payment and structure reform. ESSB 5940.

Ø  Reduce K-12 class sizes - Repeal of I-728. HB 2824.

Governor Gregoire has 20 days (excluding Sundays) to take action on bills.

2011 – 2013 SUPPLEMENTAL OPERATING BUDGET PASSED – 3ESHB 2127

The supplemental 2011-2013 supplemental operating budget (3ESHB 2127) was passed closing an approximately $500 million deficit. Passed the House, 64-34 and passed the Senate, 44-2. The final budget cuts approximately $300 million from the social services sector and does not cut K-12 education from its current position and maintains the current apportionment scheme (but does establish a working group to address the issue) and does not cut the disability lifeline General Assistance - Unemployeable (GAU) program. The budget is just balanced - $31.12 billion in spending and $31.17 billion in revenue. Resources are:

Ø  $30.7 billion in general fund revenue

Ø  $238 million – delay local government distributions

Ø  $73.7 million – reduce local government liquor revenue

Ø  $70 million – reduce local government solid waste tax (divert from public works trust fund)

Ø  $28 million – dedicated fund transfers

A small reserve of $319 million is maintained. The 2012 June and November revenue and caseload forecasts will have a direct impact on whether this is sufficient to not to get the state through the remainder of the biennium.

JOBS NOW ACT (ESB 5127) AND THE SUPPLEMENTAL CAPITAL BUDGET ( ESB 6074)

The legislature passed a $1.078 billion capital construction budget with the passage of ESB’s 5127 and 6074.

Pierce County Jobs Now Act Projects (ESB 5127):

Pierce County – Supplemental Capital Budget Projects (ESB 6074):

REFORM POLICY LEGISLATION THAT PASSED

2ESB 6378 (Sen. Zarelli) State Pension Plans – This is the bill that kept them there for the entire month of March. Heavy opposition by Washington Education Association (WEA) and the Public School Employees Association (PSEA) and they will seek the governor’s veto. The savings on this bill is estimated to be as much as $2 billion over 25 years or about $80 million a year. 6378 would eliminate the early retirement factors granted in 2007 pursuant to collective bargaining for new employees.

ESJR 8221 (Sen. Parlette) State Debt – Will be voted upon by the state’s voters in November of 2012. 8221 would amend Article 8, Section 1 of the state constitution. It reduces the state debt limit (currently 8.5% of three year average of state revenue) to 8.5 percent effective July 2014 to 2016, 8.25 percent from July 2016 to 2034 and to 8.0 percent in perpetuity after 2034. It also includes the state property tax levy (constitutionally prescribed for the support of basic education) in the calculation of the state debt limit when it previously had not.

SSB 6636 (Sen. Kastama) Balanced State Budget -- Beginning with the 2013-2015 fiscal biennium, the Legislature must enact a budget bill that leaves a positive ending fund balance in the state General Fund and related funds. In addition, beginning with the 2013-2015 fiscal biennium, the projected maintenance level for the budget in the ensuing biennium may not exceed available fiscal resources. Available fiscal resources are the greater of (1) the official revenue forecast for the ensuing biennium, or (2) an assumed revenue increase of 4.5 percent for each year of the ensuing biennium.

ESSB 5940 School Employee Benefits (Sen. Hobbs) -- School districts must modify their benefits for employees to require every employee to pay a minimum premium for the medical benefit coverage, subject to collective bargaining, and ensure that employees selecting a richer benefit plan pay a higher premium. School districts offering medical, vision, and dental benefits must (1) offer a high deductible health plan option; (2) make progress toward employee premiums for full family coverage; and (3) offer employees at least one comprehensive health benefit plan in which the employee share of the premium for a full-time employee does not exceed the share of premiums paid by state employees (approximately 15 percent).

REVENUE LEGISLATION PASSED THE LEGISLATURE AS NECESSARY TO IMPLEMENT THE BUDGET

ESB 6635 Tax Preferences (Sen. Murray) – 6635 contained several tax measures that were part of the final budget agreement. The tax changes include:

Ø    Eliminating the first mortgage B&O tax deduction for out-of-state banks;

Ø    Extending the B&O tax exemptions for manufacturing of fruits or vegetables, dairy, and seafood to July 1, 2015, and are then replaced by a preferential B&O tax rate.

Ø    Extending the timeline for eligible data centers and qualifying tenants of data centers to qualify for the sales and use tax exemption on server equipment and power infrastructure, to those that commenced construction between April 1, 2012, and July 1, 2015.

Ø    Exempting craft distilleries from the license issuance fee of 17 percent of all spirits sales revenues under such a license.

Ø    Codifies that leasehold interests do not include the preferential use of publicly owned cargo cranes and docks and associated areas used in loading and discharging of cargo at a port district marine facility.

Ø    The definition of a newspaper is amended to include the Internet version of printed newspapers and newspaper supplements.

HB 2822 (Rep. Hunter) Local Sales and Use Tax Account – HB 2822 requires the local share of retail sales and use taxes be transferred from the State General Fund into the Local Sales and Use Tax Account on a monthly basis rather than on a daily basis. This is called the Working Capital Reserve and will not result in a decrease of revenue distributions to local governments but allows the state to book the money in the general fund and push the liability into the next biennium. This will be a permanent change in policy. 

3E2SHB 2651 (Rep. Kirby) – Roll-your own cigarette machines. 3E2SHB 2651 requires retailers providing roll-your-own cigarette machines to collect the state cigarette tax.

ESHB 2823 (Rep. Hunter) – Existing revenues put into the state general fund from other sources, aka transfers. ESHB 2823 redirects existing revenues from the Education Construction Fund, the Public Works Assistance Account, the Liquor Revolving Fund, and the Liquor Excise Tax Fund into the State General Fund.

Now legislators can return to their districts and begin campaigning.

For detailed information on these bills click here.