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Published on Friday, May 29, 2015

Dueling budgets v2.0 – good or not for cities?

The first 30-day special session ended on May 28 and the Governor immediately called legislators back to work on May 29. Starting Monday, June 1, he also directed budget negotiators to meet daily in his conference room, until a deal is worked out.

Several of AWC’s priority issues remain unresolved but they will have to be sorted out to reach an agreement on the state’s 2015-17 operating budget. Here’s what we know and what you can do to help ensure positive action on our priorities.

There is more revenue coming into state coffers right now than anticipated at the start of session. Even more is projected to be generated during the 2015-17 biennium. Much of that is a result of current and projected construction activity and real estate transactions in cities. Less certain is what some consider overly optimistic estimates of excise taxes from marijuana sales, most of which also occur in cities.

Acknowledging more revenue will be available, even without adding new sources, Senate and House majorities are recrafting budget proposals (versions 2.0) reflecting these new projections. Senate Republicans unveiled their ideas on the last day of the first special session. Their proposal includes no new sources of revenue. They passed it out of their Ways and Means Committee hours later and without public input. House Democrats announced their v2.0 will be unveiled Monday, June 1, and heard in their Appropriations Committee on June 2. It will acknowledge new revenue projections and will also include some new revenue sources.

Through 135 days of the session so far, AWC has analyzed and provided input on how these budgets affect revenues shared with all cities, as well as specific programs that benefit cities such as the Public Works Trust Fund. Version 1.0 of both the House and Senate majority’s proposals kept most of the critical shared revenues intact. However, the Senate proposal provided half as much in shared liquor taxes and takes nearly $10 million from the Fire Insurance Premium Tax that is distributed to 44 cities with LEOFF 1 obligations. The two houses also differed in their approach to current and future funding for the Public Works Trust Fund. The House does not divert loan repayments or dedicated revenue streams for other purposes while the Senate does. Both fund projects in 2015-17, but from different sources. The House makes low interest loans and the Senate makes grants.

With regards to city priorities, the Senate Republican’s v2.0 is mostly unchanged. It does divert less money from the Public Works Trust Fund and continues to provide funds for 2015-17 projects. It also contains a clear and unambiguous signal that after this upcoming biennium, this program will disappear, and revenue streams and loan repayments will be redirected to the state’s general fund. They propose replacing the program with state-backed loan guarantees that could lead to lower borrowing rates for some cities. Implementing this new program would require passage of a constitutional amendment. Stay tuned as this approach gets more fully vetted, as it contains a number of potential problems.

There has been speculation that the second special session might wrap up by June 12 because the U.S. Open golf tournament starts June 15 in University Place, and hotel rooms for miles (including Olympia) are booked solid, posing challenges for some legislators.

Whatever amount of time is needed to come to agreement, a few things are certain. There needs to be a budget deal by June 30 in order to avoid a state government shut down. Posturing in the media for public consumption will continue until it doesn’t, which will be a signal that negotiations are getting serious. Once a sense of “close to a deal” sinks in, we’ll see action on other important policy items that have been stalled for months. We expect and hope for action on a transportation revenue package, which is a top priority.

Finally, and this is where you come in, we know and appreciate that you’re as tired of this session dragging on as are most in Olympia. We’ve been asking you for months to “make that call or connection” with your legislators. We’re asking you again, and it might not be the last time we ask before the end of June. We know that most of the 98 House members and 49 Senators aren’t involved in the day-to-day negotiations on budgets. They’ll likely be given “the deal” to approve close to the finish line with little opportunity to influence the outcome, since the deal is made amongst a handful of budget negotiators. It’s critical that you call and talk directly with your legislators now before it’s too late and the deal is cut! Ask them to keep shared revenues intact, the Public Works Trust Fund viable now and in the future, and to act on the Transportation Package (or other issues important to your city). When they hear it directly from you, they know it matters. They have to look you straight in the face when they get home.