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Published on Friday, July 31, 2015

State budget wrap up

The long 2015 legislative session included efforts to retain state-shared revenues and provide new tools to local governments. As these discussions ebbed and flowed throughout the session, we are most appreciative of the city staff and elected officials who helped us work through different legislative proposals and weighed in with legislators when needed.

State-shared revenues

As session began, we feared a repeat of the 2013 session when the state took some revenues shared with cities and counties to make their own numbers work. As budget proposals rolled out this session, we saw different approaches to shared revenues. The House’s proposed budgets fully funded shared revenues. The Senate’s proposed budgets continued the 50% cut to local liquor taxes from last biennium and swept all of the Fire Insurance Premium Tax shared with 44 cities. The adopted state budget did not include cuts to revenues shared with cities. Because last biennium’s cut to liquor taxes was not continued, cities will see an increase in that revenue over the next two years. Estimates of what your city can expect to receive in shared revenues are available in MRSC’s 2016 Budget Suggestions.

Other state budget impacts

Various proposals to increase state revenue or change exemptions were considered throughout session. Many of these proposals would have impacted city revenue as well. What ultimately passed was a modest revenue proposal with few direct impacts for cities. Some cities may see an increase in their sales tax revenue as the state begins to collect sales tax from additional out-of-state companies who sell through Amazon and other online marketplaces. Others may notice a decrease in property tax revenue as the state increased the income threshold for senior and disabled property tax exemptions. More information about specific programs impacted by the state budget can be found in the other sections of this Bulletin and AWC’s state budget comparison chart.

Local government tools & financing

Over the last few years, AWC has led and participated in discussions about what tools are needed to help the bottom lines of cities. One idea frequently rises to the top: lifting the 1% cap on annual increases in property taxes. While there was hope that property tax reform and lifting this 1% limit would come with a solution to the state’s education funding problem, ultimately the issue proved too difficult for this Legislature. In fact, the one bill that would have changed this limit and instead tie it to population growth and inflation was withdrawn by the prime sponsor shortly after introduction.

Another bill related to city finances made it a bit further along in the process. HB 2156, promoting the fiscal sustainability of cities and counties, originally contained nine items for cities and counties including a gradual increase in city and county liquor profit sharing, a new county public utility tax, and the ability to recover the costs of fulfilling commercial public records requests. Four of the nine items made it out of the House, but the Senate did not consider the bill. Instead, the House and Senate passed HB 2263, which has two new local options:

  1. Effective October 9, 2015, a county may create a Cultural Access Program (CAP). With voter approval, all counties except King may levy a .1% sales tax or a property tax equal to a .1% sales tax, to fund CAP. King County may only levy the sales tax. A city may create a CAP with the same funding authority if the county expressly forfeits its own option or does not propose a choice to voters for creating a CAP before June 30, 2017.
  2. Effective October 9, 2015, a county legislative authority may authorize a .1% sales tax to fund affordable housing and related services. Cities outside King County may implement the full tax if the county has not done so within two years and three years for cities inside King County.
  3. BillTracker Bill # Descriptive title Final status
    Yes HB 1550 Simplifying the taxation of amusement, recreation, and physical fitness services Law; Effective 1/1/2016
      HB 2263 Local option funding for affordable housing, mental health, and cultural access Law; Various effective dates
      SB 5186 Modifying property tax exemption for senior citizens and disabled veterans Law; Effective 10/9/2015
      SB 6138 Increasing state revenue through improved compliance methods and eliminating tax preferences Law; Various effective dates
    Yes HB 1008 Authorizing state audits of data storage and management practices Failed
    Yes HB 1133 Authorizing a county utility tax Failed
    Yes HB 1251 Increasing the EMS levy rate Failed
    Yes HB 1517 Restoring city & county liquor revenue Failed
      HB 1678 Improving tax fairness in e-commerce Failed
    Yes HB 2084 Imposing fines and withholding taxes for not filing financial reports Failed
      HB 2111 Creating court of tax appeals Failed
      HB 2148 Allowing audits to be conducted by a private entity and establishing an appeals process for state audits Failed
    Yes HB 2156 Promoting the fiscal sustainability of cities and counties Failed
      HB 2224 Investing in education and essential public services by modifying and improving the fairness of Washington's excise tax system Failed
      HB 2255 Modifying the 1% property tax revenue limit Failed
      HB 2269 Investing in education and essential public services by modifying and improving the fairness of Washington's excise tax system  Failed
      SB 5127 Modifying property tax exemption for veterans with disabilities Failed
      SB 5449 Creating court of tax appeals Failed
    Yes SB 5511 Reducing the frequency of local sales tax changes Failed
      SB 5541 Improving tax fairness in e-commerce Failed
      SB 5677 Allowing county treasurers to keep an administrative fee for collecting property taxes for cities and special districts Failed
      SB 5737 Government performance & accountability  Failed
      SB 5811 Making changes to the property tax exemption for tribally-owned property used for economic development Failed
      SB 5866 Allowing a county to retain all of the public safety sales tax if it begins imposing the tax after July 1, 2015 Failed
    Yes SB 5896 Restoring city & county liquor revenue Failed