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Tuesday, June 18, 2013

Special session update & the next dozen days

Good government is conducted for the people in good faith.  The legislature must produce a budget, but instead of leadership, Governor Inslee's played the blame-game.

The first 30-day special session has ended and the Legislature still has not passed an operating budget. The governor called a second 30-day special session last Wednesday. By law, he can only call 30-day special sessions. However, we need an operating budget by the end of June, when the state’s fiscal year ends.

How we got here:

How we arrived in a second special session without a budget is rather simple. The Democrats want to implement or increase taxes, and the bipartisan Senate Majority Coalition Caucus wants some reform bills if new tax revenue is going to be on the table. This budget could have been passed long ago. If you have read my e-mail updates or listened me on the radio, you have heard me say the state has $2 billion more in tax revenue for this budget than the last. We should have been able to pass a balanced budget with a 6.6 percent increase in tax collections in the regular session…and not be wasting taxpayer money on special sessions. Since I have been serving in Olympia, we have had much more difficult budget situations. This should not be one of them.

The budget proposals:
House Democrats did offer a new budget proposal at the end of the first special session. It passed the House by a vote of 53-35. All Republicans and one Democrat voted against House Bill 1057.

Their latest proposed budget does make some concessions, particularly backing off on the permanent extension of the Business and Occupation (B&O) surtax on service businesses. However, they are still leaving it in place for some industries. Their latest proposal also removes the sales tax exemption for non-residents (this will have a huge impact on our border counties), and it removes the sales tax exemption on bottled water – a tax voters turned down in 2010. These taxes may not seem significant to most, but I still believe now is now the time to be raising taxes. There are still more than 57,000 people out of work since the start of the recession five years ago. It also goes back to our tax collections, they are up almost 7 percent. Why are we talking about raising taxes?

My other concerns with the House majority budget include:
  • it reduces spending on K-12 education by approximately $500 million;
  • it uses an education apportionment shift that could impact school funding;
  • it sweeps all the funds out of the Public Works Trust Fund (PWTF) from the capital budget (Local governments depend on this fund for critical infrastructure projects); and
  • there are about $600 million in fund shifts throughout the budget.
It is impossible to have a sustainable budget when you are using gimmicks, such as sweeping accounts and one-time money shifts like the education apportionment and taking the PWTF monies. The most telling part of their budget is that it spends less on education than any of the other budget proposals we have seen and still raises taxes. They are clearly putting students, teachers and our education system up against tax increases. House Republicans have been saying since Day One, let’s fund education first, then if taxes are needed to fund other priorities then the majority should bring it up for a discussion. Raising taxes, particularly holding out school funding to do so, should not be an option.

The Senate Majority Coalition Caucus budget, also passed a new version of their budget over the weekend – Senate Bill 5034. It has not changed much from the bipartisan budget they passed in the regular session, the difference is they are asking for reform legislation to be passed as part of a budget agreement.

House Democrats have dropped their original tax increase plan from $1.3 billion to about $525 million. Senate Republicans initially had a list of 33 reform bills they wanted on the table and they are now requesting just three.

What’s next?

Unfortunately, we are now seeing a lot of finger-pointing and threatening terms being thrown around such as “fiscal cliff” and “government shutdown.” The governor is the biggest offender. The Washington State Wire article “Inslee Abandons Mediator Role as He Calls Second Special Session – Blames All Problems on Republicans” provides a good breakdown of what has happened in the last few days.

The “fiscal cliff” and “government shutdown” rhetoric really is unnecessary and has only inflamed the budget debate. We don’t need the Washington D.C. mentality as part of our state government. The federal government took about five years to pass a budget, they have stalled on nearly all major issues and the things we are finding out about how their agencies have been functioning is downright frightening. We do not need to be linking our state to D.C. politics in any way, shape or form and that goes for rhetoric, too.

The governor now seems to have a sense of urgency to resolve the budget debate. Where was the urgency when he waited two weeks before calling the first special session? Why hasn’t his office been more involved in bringing people to the table to work out their differences – something both former governors Gary Locke and Christine Gregoire were very good at. Instead, he is fanning the flames and pointing fingers.

Death tax reappears:

The biggest black eye of the session will be the shameful execution of House Bill 2075, or what is referred to as the Bracken Bill. It reinstates the estate tax on married couples’ assets and does so with a retroactivity clause. That means families, who have deceased family members, will have to pay millions in taxes to the state Department of Revenue.

You will hear a lot of political rhetoric surrounding this issue, but the main and most significant point is this measure changes the rules retroactively so the state does not have to provide refunds to those taxpayers who followed the rules that were upheld by the Washington State Supreme Court. Not only does this set a dangerous precedent, but I believe it is unconstitutional and will be struck down by the same court that upheld the law. That will mean we will still owe the refunds plus interest and court and legal costs. It also means the budget will have to be adjusted to reflect this loss in the future. It is shameful for any legislator to support this measure.

[The estate/death tax' principle effect is to break up family business and hand over the proceeds to big corporations.  Take a family farm for example:  The business owners (mom and dad) pass on, leaving farm equipment and a millions dollars worth of arable land to the children.  The state taxes the million dollar parcel for 1/10th its value.  Who has $100,000 on hand to pay the tax?  So  whether or not the children would be interested in farming, the farm must be sold in order to pay for the tax.]

How does it end?

It is important to not buy into the hype. It is possible to live within our means, fulfill our obligation to fully fund education and not raise taxes. I am hopeful we will get there in the next couple weeks. We are not going over a fiscal cliff. The tax revenue is there. The negotiators need to meet in the middle. That means some reforms will need to be considered by House Democrats if they expect the Senate to agree to some new revenue. Or, maybe all the tax revenue bills go away along with the reforms and then an agreement is reached.

There is a revenue forecast update on June 18 that may show the state has a little more money coming in. That could help the negotiations but not enough that it should make a difference in the final budget.

Satellite TV tax update

I received many emails concerning a proposed satellite television tax. When House Democrats released their last operating budget proposal it included about $50 million in additional revenue from a satellite tax within a telecommunications services reform bill House Bill 1971.

We were anticipating an amendment to HB 1971 to include a new tax on satellite service. However, the amendment never appeared. Both HB 1971 and HB 1057 were voted out of the House without the proposed tax. However, while the House Democrats reconfigured their budget to exclude new revenue from a tax on satellite services, as we mentioned we are in a new session so everything will have to be voted on again and is subject to being amended.

--- Cary Condotta

What other people read on this blog

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-- Joseph Stalin