April 29, 2019
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Legislature ends on time -- barely -- with 17 percent spending increase

The Legislature adjourned at midnight Sunday after passing a flurry of policy and tax bills. The budget will spend $52.4 billion over the next two years, fueled by a major increase in natural revenue growth plus a range of new and higher taxes on employers, out-of-state shoppers, real estate sales and more. The budget did not include a proposed capital gains tax (which AWB had opposed.) The budget has $1.9 billion in new policy spending. A maintenance level budget would have cost $50.5 billion.

State spending will increase by nearly $8 billion from the previous two-year budget (that $44.6 billion budget was crafted when both parties shared power in the Capitol.) The 17.5% increase in state spending is one of the largest increases in the last 25 years and comes on the heels of double-digit growth in the previous two budgets.

"We’re concerned that lawmakers chose to raise taxes at a time when the state budget was already growing at a remarkable rate. We understand the many competing demands for funding and appreciate investments in K-12 education and higher education. But even without raising taxes, lawmakers had $5.6 billion more to spend, and they failed to fully explore opportunities to reduce costs," said AWB President Kris Johnson.

The overall spending level does not include the impact of House Bill 2158, a B&O surcharge for a dedicated workforce investment account that generates almost $1 billion over four years. Republicans offered amendments to make sure this new revenue and spending program was included in the four-year outlook, basically including it in the budget math, but the majority rejected that approach. Washington Research Council has a write up on that policy choice here.

Some of the taxes on employers in the final bill:

  • Higher taxes on service-sector businesses and large high-tech firms to pay for workforce and higher education;
  • A graduated real-estate excise tax;
  • A higher B&O tax on banks;
  • A higher MTCA tax;
  • A tax on institutional investment services;
  • A tax on vape products;
  • A change in the non-resident sales tax exemption that is of concern to border communities; and
  • A tax on travel agents and tour operators.

The Seattle Times has a list of the new and higher taxes.

The Senate voted for the budget 27-21. The House voted 57-41.

The on-time finish was the first time in a decade that a budget-writing session had concluded within the 105-day scheduled timeframe.

"I could not be more pleased," said Gov. Jay Inslee about the first budget-writing session in which he has had wide Democratic majorities in both chambers, calling it "epic."

The budget included a troublesome raid on dedicated workers' compensation funds. Earlier this month, AWB sent a letter opposing this extraordinary raid of workers' compensation funds, taking away $3.5 million from the dedicated funds to use for apprenticeships, but that diversion was included in the final budget. Another $625,000 was taken from the accident (608) and medical aid (609) funds to pay for clean energy legislation. AWB's Bob Battles will be working to oppose this kind of unprecedented misappropriation in the future and will ask the Department of Labor & Industries to provide accounting of all uses of the funds.

A new tax on large financial institutions will nearly double their business and occupation tax to 2.7%, from the current 1.5%. Senate Republicans tried to block the tax, saying the idea was first introduced only on Friday, and would likely wind up in court over the U.S. Constitution's Commerce Clause.

The tax increase passed 26-23. It is estimated to raise $133 million over two years and $338 million over four years.

Good summaries of the final legislative action include stories by Austin Jenkins with the Northwest News Network, Melissa Santos with Crosscut, Joe O'Sullivan with The Seattle Times, Jerry Cornfield with The Herald and Jim Camden with The Spokesman-Review. Opportunity Washington also has a good wrap-up on the session's finale.

AWB's Government Affairs team will continue to work on these important issues through the interim. Contact them at 360.943.1600 to learn more.

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STEM skills vital to rural students, too

By Kevin Chase, superintendent of ESD 105

In the next five years an estimated 225,465 jobs that earn a family-sustaining wage will require credentials that many of our Washingtonian students are not on track to earn. In south-central Washington, 14,455 high-paying jobs will need a credential in the next five years.

I see the chasm between education attainment and how that translates to employment and jobs. We have to make changes in our education system that allow our families and kids to visualize their path forward and to have local employers be able to recruit and train their workforce in novel ways. Career Connect Washington, a statewide initiative, is bringing together business, labor, government and education leaders so that young people have the education and skills needed to connect with high-demand, family-wage careers across Washington and in the Valley...

Even though we are an agriculture-based region we are not immune from changing workforce demands, as agriculture becomes more and more automated. Our students are ready and willing to step up to the challenge of 21st century work demands. It is up to us to prepare them...

Read the full op-ed in The Yakima Herald-Republic
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