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Dear Friends and Neighbors,
Last Thursday the Legislature concluded the longest legislative session in history – 195 days. It ended without an agreement on possibly the most important issue of the legislative session — a fix for the state Supreme Court Hirst decision. In this update you will find an overview of what happened with Hirst, an overview of the operating budget, education funding and other significant legislation we passed in the last month.
Operating budget and education funding plan
The last few days of June were a whirlwind as we worked to get a budget passed before the June 30 deadline. While we were able to avert a government shutdown and pass an operating budget and an education funding plan, I have some concerns with both spending plans.
We passed a $43.7 billion two-year state operating budget, Senate Bill 5883, by a vote of 70-23 in the House, and 39-10 in the Senate.
I want to acknowledge the hard work of the budget and education funding negotiators. They had a tough task trying to reach agreement on an education funding plan that would be deemed balanced and fair across the state.
While I commend them for their work, in the end I felt I could not support the operating budget or education funding plan. The new budget increases spending by about $11.3 billion — nearly a 30 percent increase over four years — that's just too much. I question the sustainability of such a large increase in the budget.
We had $3 billion in additional tax revenue coming in to the state this biennium, but this budget adds another $2.2 billion in tax increases. It also sweeps several important dedicated resources, such as the state's Public Works Assistance Account, which makes loans to local municipalities for important water and sewer infrastructure.
As for the education plan, House Bill 2242, I could not support the bill as it was presented. It is far more equitable than what we had. However, there is more work to do. I expect there will be some fine-tuning needed in the future.
Paid family leave
During the final days of June, the budget and education funding were not the only big issues passed by the Legislature. A paid family leave program was passed and has already been signed by the governor. While paid family and medical leave sounds like a great idea in principle, I am afraid it is another hit to our small employers in Washington state. The laws and regulations continue to stack up against them. They must contend with one of the highest minimum wages in the country, paid sick leave, and taxes on gross receipts – thanks to our unique B&O tax. Some will also see an increase in property taxes with the recent education plan passed by the Legislature, and employers continue to see health care costs go up. All those add up to being a lethal combination.
I find it ironic how many politicians talk about protecting the little guy, yet this combination of higher costs plays right into the hands of big corporations. Home Depot, Safeway, Costco and many others can spread or absorb this cost, but not our small business owners.
Some have been selling the program as voluntary. That is not the case. Employers may opt out if they can show they have a voluntary plan that meets certain standards – and is comparable to the state program. The Employment Security Department does require a $250 fee for reviewing each voluntary plan.
All employees will be in the paid family leave program, whether they want to be or not. This could lead to some unhappy workers who may not choose to utilize the program, yet will have deductions in their paychecks. They will also pay 100 percent of the premiums for family leave and 55 percent for disability leave if they work for a business with 50 or fewer employees. For larger employers, the share of the total premiums will be about 37 percent with the employee's share around 63 percent.
Projections call for the state to hire 175 full-time equivalent employees (FTE's) and $80 million to get the program up and running. The cost of administration is far too excessive for a program this size.
Governor vetoes B&O tax reduction on manufacturing companies
The negotiated operating budget agreement included tax incentives for a variety of businesses, including manufacturing companies. This would give manufacturing companies the same preferential tax rate as Boeing. We had hoped the legislation would draw companies to some of our rural and coastal areas that are not seeing the same job and economic growth as the Puget Sound region
We have seen proof that targeted tax policy works. When the Legislature passed legislation giving server farms a tax break, we were able to put hundreds of people to work in Grant and Douglas counties constructing these facilities and boosting budgets of the local governments.
Unfortunately, the governor vetoed the manufacturing incentive July 7. Not only does this go back on the agreement budget negotiators from both parties reached, but it will make negotiations that much more difficult in the future.
It should be pointed out, 23 Democrat legislators urged the governor to veto the manufacturing section of the bill, despite 15 of them voting for the bill.
The reduction of the tax rate would have been about $60 million less for the budget, but we just increased spending by about $5 billion. That's a small fraction of spending in the grand scheme of the operating budget.
Hirst decision and capital budget
In a court case last October, the state Supreme Court ruled Whatcom County had failed to protect and preserve water resources under the Growth Management Act. The decision has prevented people across the state from utilizing wells on their private property – threatening property values, and creating uncertainty for families, developers and local governments who do not have the resources to handle the workload. Prior to the court's ruling, counties had relied on a Department of Ecology rule that allows the drilling of small, domestic wells so long as fewer than 5,000 gallons are drawn per day.
We view this as a huge property-rights issue. The Senate passed a Hirst fix four times, but the House was never allowed to vote on the bill. I truly believe there was bipartisan support for the bill and it would have passed if the House would have voted on it.
Because of the critical impact of this issue, we felt it was worth not passing a capital budget if the other side was going to play politics with such a critical issue. There are some important projects in the capital budget, but not passing a Hirst fix is unacceptable. Passing a capital budget without a Hirst fix, is basically telling taxpayers we will use their hard-earned dollars for projects around the state, but they will not be allowed to drill a well to help develop their own property. Remember, taxpayer dollars go toward funding the capital budget. Families shouldn't have their dream homes, investments and retirement plans ruined because of the Hirst court ruling. We needed to pass legislation to address the court ruling. We are talking about far less than 1 percent of water resources.
At this time there are no plans for a fourth special session. That could change if an agreement on Hirst and the capital budget are reached in the near future. In the meantime, do not hesitate to contact me if you have any questions or concerns about the legislative session.
Please remember I am available to speak or meet with groups, organizations and associations. If you have a legislative issue or an idea, contact my office to set up a meeting.
It is an honor to represent the 12th District.
425B Legislative Building | P.O. Box 40600 | Olympia, WA 98504-0600
(360) 786-7954 | Toll-free: (800) 562-6000