Today marks the beginning of the fourth week of the 2015 legislative session. The first important cutoff date for this 105-day session is Feb. 20. Policy bills must be voted of committee by that date to remain alive. One week later is the cutoff for voting bills out of the fiscal committees, and March 11 marks the date bills must passed out of their house of origin. To make it more interesting, a bill can be exempted from these cutoff dates if it is deemed “necessary to implement the budget.”
By law, the Governor must release a budget in December prior to the beginning of session. Some years these budget documents provide the framework for meaningful legislative discussions. Other years the Governor’s proposed budget is deemed “dead on arrival.”
This year the House will take the first shot at writing the next two-year budget. We won’t likely know until after the March 18 revenue forecast whether the House Democrats will embrace the $1.4 billion in new taxes that were part of the Governor’s budget proposal. However, given the slim four-seat Democrat majority in the House, the Governor may not have the votes for a tax increase of that size in the House, much less the Senate.
The House has already passed the supplemental operating budget (HB 1105) over to the Senate. Unlike past years, this supplemental primarily focuses on costs connected to last year’s wildfires.
Regarding tax increases, during the first week of session the Senate’s Majority Caucus Coalition passed an internal rule that requires a two-thirds vote for new taxes. This change would require a supermajority vote to pass the Governor’s tax proposal targeting carbon and capital gains.
Changes to any existing taxes would only require a simple majority, such as the bill to extend the food processors tax incentives (HB 1823 and SB 5698). The simple majority vote is also all that is needed to increase property, sales and use and business taxes since the Supreme Court ruling against the two-thirds initiative last year.
Legislators face another two-year budget challenge
The 2015 legislative session has all the ingredients to make this year’s budget battle the longest and hardest fought in the state’s history.
One of the main causes is the disagreement over how big the state’s operating budget must be to cover all of its expenses in the 2015-17 budget. The current state budget is approximately $34 billion and estimates show the state will bring in an additional $3 billion in tax revenue for the 2015-17 budget. Some would argue that should be enough money to cover the next budget.
However, the state Supreme Court has ruled in its McCleary decision that the state has failed its obligation to “fully fund” K-12 education. One critical budget disagreement is over the exact meaning of “fully fund.” Some argue it means an additional $700 million in K-12 funding over what is already being spent. Others argue it means spending upwards of $1.5 billion or more over the next two years.
In addition to McCleary, the voters passed Initiative 1351 last November that mandates smaller class sizes. One major problem with the initiative is it did not include a funding source to cover the additional $2 billion in costs over the next two years. (A side note: Implementation of I-1351 may cost the state’s local school districts over $1 billion the first two years alone just to meet their obligations created by the initiative).
Additional challenges include the cost-of-living increases for teachers and state workers proposed by the Governor, the court-mandated improvements to the state’s mental health system and changes to foster care.
This all adds up to real money. House Appropriations Chair Ross Hunter believes the state has a $4.4 billion budget gap to fill, but he has stated he doesn’t have the votes for a tax increase of that size. The Governor’s chief budget writer puts the gap at roughly $2.5 billion.
In the other chamber, Senator John Braun has said the Majority Caucus Coalition, which holds the majority in the Senate, is not ready to concede that a tax increase is needed to resolve the budget challenge. He believes funding McCleary at a lower level is justifiable even though the Supreme Court justices won’t like it. Braun believes there are still areas within existing state spending that can be cut.
While Gov. Inslee’s proposed budget relies heavily on a new carbon cap-and-trade program, Braun did not believe it was the answer to all the state’s problems. Hunter added that while some in his caucus remain skeptical over the concept, it would likely stay on the table throughout session. WFB opposes the new carbon tax which (if enacted) would be passed on to Washington consumers through higher food bills, and to Washington farmers and ranchers through higher fuel, fertilizer, transportation, and processing prices.
In addition to his carbon tax, Governor Inslee also proposed a new capital gains on profits from sales of stocks and bonds that would affect 1 percent of the state’s residents. Critics of this proposal caution this is another attempt by Inslee and others to create an income tax in Washington and that passage of this capital gains tax would make it that much easier to expand it to everyone else in subsequent years.
Inslee’s tax increase proposals come just two years after he campaigned he would veto new taxes stating they were the wrong direction for the state.
The Seattle Times reported that the Governor “blamed the Legislature for failing to repeal tax breaks and said more money was needed for schools and other needs.”
The primary objective of the WFB this session will be keeping agriculture whole. Agriculture is a key economic engine in both Eastern and Western Washington. Increasing taxes, fees, or regulations on farmers and ranchers is unnecessary and will lead to a loss in jobs and tax revenue. Our goal is help enable ag remain viable and competitive in the international marketplace.
Securing Voluntary Stewardship Program funding is one of WFB’s primary objectives this session. As part of a broad coalition of agricultural, environmental and local government interests we are asking legislators to support $7.6 M for VSP funding. That funding will allow the remaining 26 VSP counties to employ a voluntary means of providing environmental protection, rather than the failed regulatory approach of the past which generated mountains of litigation and attorneys’ fees, but no economically viable solutions for agriculture.
In the end, the House, Senate and Governor must all reach an agreed-upon position in order to pass a budget and go home. The regular 105-day session will end April 26.
WFB 2015 Legislative Hot List
(1) Keep Agriculture Whole
Agriculture is a key economic engine in Washington, providing 164,000 jobs and driving $49 billion into the state’s economy. Supporting our vital industry is important to the economies of both Eastern and Western Washington. Increasing taxes, fees, or regulations on farmers and ranchers is unnecessary and will make agriculture less competitive, leading to a loss in jobs and tax revenue.
Action Item: Ask legislators to support existing tax preferences that enable ag to remain viable and competitive in an international marketplace.
(2) Extend Tax Incentives for Food Processors
Food processing is a low margin, highly competitive industry. Rural communities risk losing these employers due to incentives offered in other states or regions. Processors must compete with producers in neighboring states as well as other countries like China. Existing food processing tax incentives will expire on July 1, 2015.
Action Item: Ask legislators to support HB 1825 and SB 5698 to renew the food processor tax incentives.
(3) Oppose Governor’s Carbon Cap and Tax Legislation
Carbon taxes will push some agricultural processors, packers and manufacturers (and their rural jobs) to neighboring states, where carbon isn’t taxed, and where the energy sources serving such businesses will likely emit more carbon than Washington hydro. The new carbon costs will be passed on to Washington consumers through higher food bills, and to Washington farmers and ranchers through higher fuel, fertilizer, transportation, and processing prices. As price-takers beholden to global markets, our producers have no way to raise prices to cover new carbon costs. If enacted this ill-considered bill will reduce food security, harm the market position of Washington agriculture, and increase carbon emissions. That’s bad policy.
Action Item: Ask legislators to oppose Governor’s Inslee’s carbon cap and tax bills (HB 1314 and SB 5283).
(4) Provide Funding for Voluntary Stewardship Program
We are part of a broad coalition of agricultural and environmental interests that has requested $7 million for VSP funding. Twenty-eight counties opted into VSP as a better alternative to critical area ordinances under the GMA. Two counties (Chelan and Thurston) have been funded, but the remaining 26 counties need to be funded by July 31, 2015 or revert to the litigious and costly path of the past. Once funded, participating counties can promote both the viability of agricultural and environmental stewardship.
Action Item: Ask legislators to support funding for VSP so the remaining 26 counties can begin planning and employ a voluntary means of providing environmental protection rather than relying on the failed regulatory approach of the past.
(5) Oppose Governor’s Capital Gains Tax Proposal
Governor Inslee also proposed a new capital gains on profits from sales of stocks and bonds that would affect 1 percent of the state’s residents. This proposal is another attempt to open the door for an income tax in Washington.
Action Item: Please ask legislators to oppose Governor’s Inslee’s capital gains tax proposal.
(6) Stop the Puget Sound Nearshore Ecosystem Project
We oppose any state funding of the Puget Sound Nearshore Ecosystem Project. It will result in the loss of thousands of acres of productive private farmland and have a detrimental impact on the affected farm communities. This funding is likely to show up in the WA Department of Fish & Wildlife budget.
Action Item: Ask legislators to oppose funding the Puget Sound Nearshore Ecosystem Project.
(7) Continue Workers’ Compensation Reform
Workers’ comp reforms of 2011 were a good step toward reform, but more reform is necessary. Several Senate bills continue the effort. SB 5509 clarifies the definition of occupational disease. SB 5510 simplifies the way workers’ comp benefits are calculated. SB 5513 expands structured settlement options to all workers, allowing them to voluntarily settle claims. SB 5516 would allow for voluntary settlement agreements, and SB 5420 would allow for private insurance options.
Action Item: Ask legislators to continue workers’ comp reform by passing SB 5509, SB 5510, SB 5513, SB 5516, and SB 5420.
(8) Wage and Leave
Several House bills increase wages, mandate leave benefits, and increase regulations and penalties on employers. HB 1356 requires employers to offer sick and safe leave, HB 1163 mandates paid vacation leave, and HB 1273 implements paid family and medical leave insurance. HB 1355 increases the minimum wage to $12/hour by 2020. HB 1006 increases damages for wage violations, HB 1518 allows wage liens to be imposed on employers, and HB 1354 presumes employers are guilty of claims of retaliation against workers until employers prove their innocence. SB 5514, a Senate alternative, allows employers to use a good-faith defense for alleged wage violations if they can demonstrate that they were following agency advice.
Action Item: Ask legislators to oppose legislation that increases labor costs and regulations(HB 1356, HB 1163, HB 1273, HB 1355, HB 1006, HB 1518, and HB 1354. Ask them to support SB 5514.)
Opportunity for REAP Grants
The USDA Rural Development 2015 Rural Energy for America Program (REAP) application notice is out and ready to help with renewable energy projects in rural areas.
REAP can provide up a 25 percent grant up to $500,000 for renewable energy or energy efficiency projects to agricultural producers or rural small businesses. The first round of applications are due by April 30, 2015 with the second round due by June 30, 2015.
To find out if your project may be eligible, please contact a USDA Renewable Energy Program Specialist for additional information.