Dear Friends and Neighbors,
It is great to be back home after spending five months in Olympia in both a 103-day regular legislative session and a 30-day special session. The Legislature finally concluded its business on May 25 after coming to an agreement on the operating and capital budgets and workers’ compensation reform. Although we avoided tax increases, the majority party still approved 84 new or increased fees amounting to $316 million.
I was disappointed the Legislature did not finish its work within the allotted time for the regular legislative session. Because majority Democrats procrastinated in writing a budget, we were forced into overtime at a cost to taxpayers of $320,000. That’s not good use of taxpayer money, especially at a time when we are facing budget challenges.
Below are updates on some of the important issues that were resolved.
Also, I want to thank those of you who participated in my tax incentives survey. You’ll find the results of that survey below.
2011-13 operating budget
Before adjourning, the Legislature passed a $32.2 billion budget for the next two years to pay for the general expenses of the state, including operations of K-12 schools, colleges and universities, corrections, social services, and other areas of state government. The 2011-13 operating budget spends $1.8 billion more than the previous 2009-11 budget. House Bill 1087 passed the House on a vote of 54-42. I voted against the spending plan for several reasons, including:
- It makes deep cuts to education – our state’s paramount duty. In fact, 41 percent of the reductions in this budget come from education totaling $1.7 billion;
- It shifts a $128 million payment to K-12 schools from June 30, 2011 (current biennium) to July 1, 2011 (the new biennium) – a budget gimmick known as the “25th month” that will increase costs for the 2011-13 biennium and breaks trust with schools because the state hasn’t paid this bill on time;
- It relies on 84 new or increased fees amounting to $316 million;
- It puts public safety at risk. There will be 1,931 fewer offenders on active supervision;
- It makes deep cuts to long-term care facilities, including the closure of a residential rehabilitation center which serves people with autism; and
- It leaves only $723 million in the state’s savings account.
I felt we should have prioritized spending in the budget to protect education, public safety and the state’s most vulnerable citizens. With an additional $4 billion of revenue expected over the previous biennial budget, I’m disappointed this budget failed to make these the top priorities of spending.
Reforming the state’s workers’ compensation system
Since 2001, workers’ compensation rates have increased for employers nine times, including a 12 percent increase in January. The state auditor has said there is a 95 percent chance our system will become insolvent in the next five years. That means only two options: much higher rate hikes against employers to support a failing system – or comprehensive reform of the system.
The Senate passed a bipartisan workers’ compensation reform measure, Senate Bill 5566, which would have included a voluntary lump-sum settlement option. A similar measure, House Bill 2109, was introduced in the House. State labor officials did not like the lump-sum option, fearing that all the cash would be spent up front and the worker would not have any money left over for later. That concern was shared by House Speaker Frank Chopp, who would not allow the bills to move. The extended impasse was broken in the final days of the special session when it was suggested that in lieu of a lump-sum payment, a voluntary claim resolution structured settlement option be offered. Under House Bill 2123 workers who accept the structured settlement option would get at least 25 percent and no more than 150 percent of the state’s average annual wage per month, or between $982 and $5,976, until the settlement is paid in full. The option is available initially to injured workers 55 years and older, then it decreases to age 53 in 2015, and finally to age 50 in 2016. The measure also includes a stay-at-work wage subsidy program.
It’s my hope these reforms will prevent double-digit increases of workers’ compensation premiums, which will help employers. The voluntary settlement option and the work incentive program will also provide for injured workers and protect their jobs if they are able to return to work.
- North Cascades Highway reopened
While we were wrapping up the legislative session in Olympia on May 25, the Washington State Department of Transportation (WSDOT) was also busy that day opening up the North Cascades Highway to traffic. It was the second latest opening of the highway since it first opened in 1972. It was mostly due to the tremendous snowfall this year. Kudos to WSDOT for getting Highway 20 opened before Memorial Day weekend. This will be helpful to our local communities that rely on the tourism dollars from motorists using this highway.
- Speed limit drops on northbound I-5 north of Burlington
WSDOT is temporarily reducing the speed limit from 70 mph to 60 mph starting Tuesday, June 14, when lanes are closed and crews are working to repave the freeway. The lower speed limit will improve safety for motorists and highway workers. Crews will flip hinged signs to lower the speed limit to 60 mph when they are working and they will return the speed limit to 70 mph when they stop work for the day. Crews will continue with nightly lane closures on I-5 from 8 p.m. to 10 a.m. for paving work between Burlington and Bellingham.
- Lane closures on SR 20 between Lyman and Hamilton continue
Crews getting ready to build a new bridge over Red Cabin Creek will take a lane and use flaggers this week to direct traffic. Expect to see crews working Tuesday through Thursday from 7 a.m. to 4 p.m.
Tax Incentives Survey Results
During the special session, majority party Democrats introduced a lengthy list of bills that would increase revenue (taxes) by removing certain tax exemptions – many of which provide incentives for jobs. Thankfully, none of those bills were passed. However, I wanted to know your thoughts on these proposals. That’s why I offered a survey on tax incentives. Many thanks to those of you who completed that survey. Here are the results.
1. The state’s Economic and Revenue Forecast Council is predicting incoming revenues to be nearly $4 billion more than for the last two-year budget cycle (a 14 percent increase). Do you think $4 billion is enough of an increase in revenue for the 2011-13 state operating budget?
85% – Yes, $4 billion is enough of an increase. The Legislature should adopt an operating budget within existing revenues.
7.5 % – No, the state needs more revenue by repealing tax incentives (increasing taxes) and raising fees.
7.5% – Not sure. Need more information.
2. Do you feel Washington has “tax incentives” that were deliberately enacted for the specific purpose of creating jobs, or are these tax incentives in fact “tax loopholes” that are unnecessary and allow people to escape paying their fair share of taxes?
64.6% – Washington has job-creating tax incentives that should be preserved.
25.3% – Washington’s tax incentives are tax loopholes that should be closed/repealed.
10.1% – No opinion.
3. House Bill 2102 would impose sales taxes on debt collection services. Supporters say the money would be used to support in-home care services. Opponents say it is a job-killing bill that would make the cost of doing business in Washington too high and would force smaller collection agencies to close their doors and/or relocate to other states. Do you support this legislation?
11.3% – Yes, I support extending sales taxes on debt collection services.
83.8 % – No, I do not support this tax increase.
5% – Not sure.
4. House Bill 2078 would cap the business and occupation tax deduction for interest on first mortgages and deeds of trust on residential properties to $100 million per year per taxpayer. It would also eliminate the non-resident sales tax exemption. Proponents say this measure would increase revenue by $143 million which could then be used for kindergarten through third grade class-size reduction. Opponents say the bill would increase the cost of mortgages for first-time home buyers, making homes more expensive and further hurting the home construction industry. They also say that elimination of the non-resident sales tax exemption will hurt businesses in border counties that receive more than 15 percent of their sales from Oregon residents. Do you support House Bill 2078?
11.3% – Yes, I support this legislation to increase revenue for K-3 class-size reductions.
81.3% – No, I do not support this $143 million tax increase, which could hurt first-time home buyers and businesses along the Washington-Oregon border.
7.5% – No opinion.
5. House Bill 2087 would repeal the non-resident sales tax exemption (See Question 4 for more details about this exemption) with the proceeds to go for mental health services. Opponents say that elimination of the non-resident sales tax exemption will hurt businesses in border counties that receive more than 15 percent of their sales from Oregon residents. Do you support this legislation?
28.2% – Yes, I support removing this tax exemption.
71.8% – No, I do not support this tax proposal.
6. House Bill 2022 would extend the sales and use taxes to elective cosmetic services to provide additional funds for Medicare. Supporters say it would be largely limited to wealthy women, who could easily foot the bill for the additional tax. However, opponents point to New Jersey, the only state in the nation with this tax, which found 86 percent of the patients are working women. Since a 6 percent tax was passed there in 2004, the New Jersey Department of Taxation has generated 59 percent less money in taxes than projected. Do you support this extension of the sales and use taxes?
21.3% – Yes, I support extending the sales and use tax to elective cosmetic services.
76.3% – No, I do not support this tax increase.
2.5% – No opinion.
7. Public employee unions have led the charge toward “closing tax loopholes&quo
t; (i.e. eliminating tax exemptions). However, those same public employee unions pay no business and occupation (B&O) taxes on the dues they receive. Do you feel unions should be subject to the same B&O taxes that businesses are required to pay?
82.3% – Yes, unions should be required to pay B&O taxes.
10.1% – No, unions should remain exempt from paying B&O taxes.
7.6% – No opinion.
8. In general, do you feel the tax increases listed in the previous questions are targeted at a small and wealthy sector of Washington’s population? Or could these tax increases affect the middle class and lower income populations?
11.3% – The proposed tax increases are aimed at making the wealthy pay more of their share.
87.5% – The proposed tax increases will affect all segments of Washington’s population, including the middle class and those with lower incomes.
1.3% – No opinion. Need more information.
9. Did you know that people who feel they need to “pay their fair share” can contribute directly to the Washington state operating budget? A check can be written payable to: Washington State Treasurer, P.O. Box 40200 Olympia, WA 98504-0200 (Indicate on the check: “For the state general fund.”)
58.2% – Yes, I was aware citizens can directly contribute.
41.8 % – No, I was not aware.
0% – I will be sending in a check.
In your service,