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Published on Wednesday, December 19, 2012

Governor releases her final state budget proposal

Yesterday Governor Gregoire released her final biennial budget for Washington State. It is unclear whether her budget will carry any weight with Governor-elect Jay Inslee or the Legislature, but it is the first formal proposal for the state’s FY 2013-2015 budget. The Senate will have the next opportunity to draft a budget, which may or may not include significant portions of this proposal.

As the sitting Governor, Gregoire was required to propose a budget that relied only on existing revenue. She emphasized that as she worked with her staff to develop such a budget, they found it had “unacceptable consequences” with deep cuts to basic and higher education. It also included $117 million in cuts to local governments, including the elimination of all local liquor revenue sharing.

Instead of focusing on an all-cuts budget, Governor Gregoire instead released a second budget, which includes new revenue, spending cuts, and budget transfers. Her proposal contains a number of direct impacts to cities.

State-shared revenues

The most significant proposed cut to state-shared revenues is in liquor revenue. While the proposal retains the $49.4 million annual liquor profit distributions to cities and counties required under Initiative 1183, it eliminates the local share of liquor taxes – approximately $25 million annually – and redirects them to the state general fund.

The budget also includes 3.4% reductions to Streamlined Sales Tax Mitigation (funded at $48.8 million), the Municipal Criminal Justice Account (funded at $29.4 million), and the City-County Assistance Account (funded at $16.2 million).

The Annexation Sales Tax Credit appears to have been left intact.

Capital budget

The Governor’s budget proposal funds the Public Works Trust Fund at $387 million, which includes $350 million in local government loans, $22 million for pre-construction loans, and $5 million each to emergency needs, energy and water efficiency projects, and water system acquisition. While the Governor’s budget appears to only redirect $100 million from this account to the state general fund, it revises the Public Works Trust Fund board-approved list by removing about $350 million in funding for the 2014 construction loan list. If this is adopted, it would remove a number of projects from the list and lower the maximum loan amount to something less than $13 million.

In addition, $21 million from the Local Toxics Control Account, which is used primarily for grants to local governments for stormwater projects and toxic cleanups, is transferred to the state general fund.

More revenue for cities?

Gregoire’s proposal also includes new revenue, including a wholesale excise fuel tax and sales tax on gum, candy, and soda. If imposed, local government would get a share of these taxes.

Just the start of the budget process

While these cuts to cities are very concerning, it is just the first step in what is expected to be a long budget process. The Governor’s budget proposal illustrates the types of cuts cities could face and reminds us of what is at stake if similar cuts become reality.

For AWC’s summary of impacts to cities, click here. Links to the Governor’s budget materials can be found here.

Categories: State budget
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