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Published on Thursday, April 28, 2016

2016 budget process a sign of challenges to come in 2017

2016 was set to be a short 60-day legislative session. The Legislature’s primary goal was to make needed adjustments to the state’s biennial budget passed in 2015 due to increased costs from Medicaid, healthcare, jails, and the worst wildfire season in state history.

Legislators went into session with a looming election season for most major state offices and tight restrictions on fundraising and campaigning. This put pressure on the Legislature to finish on time and leave town. Even with this pressure, they were still unable to reach agreement on a smaller, supplemental budget in the 60 days provided.

As the Governor, House, and Senate each developed their own budget proposals, several items impacting cities became part of the negotiations. These included proposals to eliminate nearly all of MRSC’s funding, end long-standing distributions of the state’s Fire Insurance Premium Tax to 44 cities, increase costs to local governments to send trainees to the Basic Law Enforcement Training Academy, and merge the LEOFF 1 retirement system with the Teachers’ Retirement System 1. AWC, cities, and others opposed all of these items.

The House and Senate finally reached a budget compromise on Monday, March 28, and passed the proposal the next day. Overall, the supplemental budget increased state spending by $200 million for the state’s 2015-17 biennium and relied on fund transfers, tax penalty waivers, and the Budget Stabilization Account to balance the budget.

With one exception, the compromise budget did not include cuts to state-shared revenues with cities, such as liquor taxes, SST mitigation, and municipal criminal justice assistance. However, the budget did contain several direct impacts to cities, including:

  • New requirements that would have decreased or eliminated Fire Insurance Premium Tax distributions to 44 cities and 2 fire districts.
  • A sweep of all new revenues coming in to the Public Works Trust Fund through FY 2019. This would have been the final nail in the coffin of this effective local government infrastructure financing program.

AWC, cities, and others requested a veto of the new requirements for fire insurance tax distributions and expressed disappointment with even further sweeps of the Public Works Trust Fund.

On April 18, Governor Inslee took action on the supplemental budget and vetoed a number of items, including changes to fire insurance distributions and additional Public Works Trust Fund sweeps. In addition, he vetoed a $10 million diversion from the State Auditor's Office Performance Audit funds. A full list of items vetoed is here.

AWC immediately expressed our appreciation to the Governor for his leadership in standing up for cities and local communities with these vetoes.

Now AWC staff turn their attention to preparing for what is expected to be a long and challenging 2017 session. We anticipate all state distributions to cities will be closely scrutinized as the Legislature scours every line item to help them make a multi-billion dollar investment in the state’s K-12 education system per the Washington Supreme Court’s McCleary decision.

Categories: Budget & finance