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Special Session Update the Legislature Is Now Well Over Halfway Through the First Special Session

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Special Session Update the Legislature Is Now Well Over Halfway Through the First Special Session Special Session Update The Legislature is now well over halfway through the first special session. By law, each special session lasts up to 30 days, and legislators will roll into a second special session if they fail to come to agreement on the 2015-17 budget by May 28. Members are currently very locked in their opposite positions: with the House continuing to consider significant tax increases, and the Senate saying no new revenue is needed. Currently, the entire House chamber is expected to be brought back into town on 5/20, with some expectations that the return will be for a vote on bills necessary to implement the budget. Revenue Forecast up over $400M In an agreement between Democrats and Republicans, a new quarterly revenue forecast was released yesterday, 5/18, one month ahead of the scheduled June date. The state’s chief economist announced that the revenue forecast was being adjusted upward again; increasing the General Fund by $106 million for the 2013-15 biennium, and $309 million for the 2015-17 biennium. The adjustment was largely due to real estate excise and sales taxes coming in stronger than anticipated. Additionally, the forecast included $39 million in anticipated from the passage of a bill regulating the sales of medical cannibis. Near General Fund + (general fund–state, the education legacy trust account and the Washington opportunity pathways account) which is used for the operating budget has increased by $79.2 million to $34,280.4 million in 2013-15 Biennium, while the Near General Fund + forecast for the 2015–17 biennium increased by $326.7 million to $37,451.1 million. Whether or not that is enough good news to break a budget impasse between Senate Republicans and House Democrats remains to be seen. Available Resources Up by $1.1 B since session began Yesterday the Senate noted that available resources for the budget have increased by $1.1 billion since the Governor proposed his budget in December. This Near General Fund + resource increases are summarized below: February Revenue Forecast = $274 m May Revenue Forecast = $405.9 m Federal Funds for CHIP = $115 m Caseload decreases = $201 m Passage of Medical Marijuana Market (SB 5052) = $107 m* Cap and Trade Last Thursday, the House Appropriations Committee heard a proposed striker to HB 1314, the Governor’s cap and trade bill. The proposed striker contained language that was likely meant to incentivize certain industries in order to gain support through specific rebates and appropriations. However, the hearing was largely opposed by many of those industries. It remains unclear if the House has enough votes to pass this new measure. Capital Gains The House Finance Committee also held a hearing last week on a proposed capital gains tax, which also remains in play. The newest proposal would impose a 5% capital gains rate with a complete exemption for principal residences. This revenue proposal also received a significant amount of opposition from the business community and small businesses. Mary Dye selected to fill 9th Legislative District Seat After an unexpected resignation by Rep. Susan Fagan after allegations of false travel expense reports, Mary Dye of Pomeroy was selected to fill the 9th legislative district. She was selected by 13 of 17 county commissioners from the six southeastern Washington counties who voted on May 8, and sworn in afterwards. There will be a special election later this year for the remainder of the term. Teri Hickel files for 30th Legislative District Seat As anticipated, Republican Teri Hickel is running in this year’s special election for the 30th legislative district seat. Hickel will challenge Carol Gregory (D), who was appointed to fill the seat of Rep. Roger Freeman, who passed away shortly after winning his seat in 2014. The race is expected to bring a lot of campaign money, largely due to the narrow margins in the House, which currently has a split of 51 Democrats to 47 Republicans. Bill Bryant launches campaign for Governor Also last week, Seattle Port Commissioner Bill Bryant launched his campaign for Governor, becoming the first Republican challenger to run against incumbent Governor Jay Inslee (D). Legislative Special Session Update: Week 1 After the Legislature was unable to come to agreement on many significant issues during the 105-day regular session, the Legislature has been called back for a 30-day special session beginning on 4/29. As a reminder, once a regular session ends, all bills that did not pass both chambers are returned to the furthest point in their chamber of origin. Last week, a handful of bills were acted upon in the House and Senate to move some of those bills back to the opposite chamber, then members were dismissed until they get called back in, which could be in a week or two. This is generally called a “rolling recess” special session, which means budget writers continue to meet in Olympia, while the entire legislative body returns to their districts. Members will not likely return to Olympia until the budget has been largely negotiated, and the Legislature is at a point to take significant action. From this point forward, we will update you as the action/news occurs (versus a weekly basis) because schedules become highly unpredictable and, depending on budget negotiations, it may be quiet for some time. Session time frames Currently, the biggest immediate hurdle is getting the budget negotiators to the table to hammer out the differences between the Senate & House budget proposals. Recently, there has been a total impasse because the Senate leadership has refused to negotiate with the House until it passes a revenue package which the Operating budget is based; meanwhile the House argues it should not have to pass the revenue component first if the Senate is unwilling to even consider passage. If members are unable to come to agreement and finalize business for the 2015-17 biennium by 5/28, the governor could call the Legislature back for another thirty days. However, the end of the fiscal year is 6/30, and the state may not appropriate general fund dollars passed this point until the 2015-17 budget is signed into law. Taxes are still on the table While the Senate Republicans have pushed for no new significant tax increases, the House and Governor continue to demand several major tax increases. Here is a summary of the major tax proposals currently being considered by the House: House: . The House’s Operating budget assumes HB 2224, which raises approximately $1.5B in new revenue; the revenue package has not been passed out of the House, but includes, among other items, a capital gains proposal: . Capital Gains Proposal: A piece of the House’s tax proposal would impose a 5% on the profits realized on the sale of non- inventory assets, such as stocks, bonds, and real estate. The proposal would provide a $10,000 deduction for taxpayers filing joint federal returns, or $5,000 for taxpayers filing other returns. Primary residences are exempted from capital gains. o The capital gains proposal would raise an estimated $571M in revenue. Governor’s Cap & Trade Proposal: The House is also considering a proposal put forward by Governor Inslee (HB 1314). The proposal would establish a market-based greenhouse gas emissions program, which would limit statewide emissions levels. The program would then distribute allowance auction proceeds to various expenditures, including transportation projects, education, housing assistance programs, a sales tax rebate to low-income personal, and B&O credit for energy-intensive industries, and rural economic assistance programs. o The proposal would raise an estimated $800M in revenue. House’s alternative Cap & Trade Proposal: In the last week of session, legislators began circulating a new Cap & Trade proposal. A primary difference in the proposal was to give rebates back to certain industries (such as utilities and timber) in return for compliance and/or specific restrictions. o This new proposal would generate roughly $500M in general fund revenues. B&O Surcharge: Once again, the Legislature is considering an additional surcharge on the B&O services rate. The House proposes a .3% surcharge (on top of the current 1.5% rate on gross receipts). o This proposal would generate roughly $500M in general fund revenues. House holds work session to consider property tax levy swap proposals The House Appropriations Committee held a work session on 4/30 to learn about the various proposals to adjust how local school property taxes are levied. Currently, there are four separate proposals: 1. SB 6103—proposed by Senators Ranker and Hargrove, would reduce the local property tax levies (which would be funded through a SB 6104, which establishes a new capital gains tax). 2. SB 6104—proposed by Senator Rolfes, the proposal creates a new capital gains tax, and would phase in a revised statewide salary allocation schedule, and modify I-1351 to phase in the obligations. 3. SB 6109—proposed by Senator Dammeier, the proposal would establish a swap between local and state property taxes, and would also require collective bargaining agreements to comply with a regional salary, and a consolidation of school district health benefits. 4. A proposal by Rep. Hunter—on 4/28, the chair of the Appropriations Committee released a proposal that would reduce the local levy amount and increase the state’s property tax levy, tying the growth for the state level to the Seattle Consumer Price Index instead of 1%. Additionally, the proposal would eliminate the levy limitation system, and replace it with a per-pupil levy lid of $2,500 (unless districts have fewer than 40 students, in which case the limit is $100,000).
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