State Legislature Adjourns, $1 Billion More for K-12, B&O Rate Back to 1.5%

Today, July 1 is the start of the new fiscal biennium for which the state now has an operating and capital budget.

The legislature finished its business Saturday evening, June 29 when it passed a capital budget and the bonds to fund capital projects.  The day prior the legislature passed the $33.6 billion  two year operating budget, which was negotiated and finalized with less than 3 days left in the fiscal year.

The late special session negotiating had state employee and others dependent on the state for their livelihoods on pins and needles as layoff notices went out last Monday, June 24.

The state House and Senate had very divergent viewpoints on how to balance the state budget.  The House, led by majority Democrats, initially laid out a plan to raise taxes by over $1 billion by keeping the B&O tax at 1.8% instead of allowing it to go back to 1.5% as planned.  The House Democrats also proposed job killing tax legislation that would have repealed the tax incentives for R&D, which would have led to many jobs being lost and/or moved to other areas.

Thankfully, the Senate Majority Coalition Caucus (2 Senate Democrats + 23 Senate Republicans) held the line on taxes and protected the business climate by saying no to the tax increases from the House.  The Senate Majority Coalition also stopped legislation that would have added costs and regulatory burdens to all types of businesses.

The Senate also insisted on prioritizing K-12 and higher education and pushed hard for both reforms and increased funding in those areas.  The House’s budget for both K-12 and higher education also put money in the right places, including expansion of STEM related programs at both the K-12 and college/university levels.

The House and Senate did agree on two measures to raise tax revenue.  The state estate tax was amended to react to a state Supreme Court case that would have reduced estate tax revenue.  This will bring in over $150 million over the next two years.  Another court case threw a monkey wrench into the state’s method for assessing sales tax on telecommunications.  Had this case not been addressed by legislation, hundreds of millions of dollars in sales taxes would have had to be refunded by state and local government.  HB 1971, http://apps.leg.wa.gov/documents/billdocs/2013-14/Pdf/Bill%20Reports/House/1971-S2.E2%20HBR%20PL%2013%20E2.pdf, was passed that will now raise a significant sum for the state, while addressing the key issues in the court case that led to the problem.  This change will yield about $110 million for the next two years.

These two measures, combined with a recovering economy that is generating more tax revenue and less use of state services, allowed the House and Senate to come together with plenty of revenue to write an “education first” budget.

This summary from the Senate Ways and Means Committee provides a good overview of the budget and tax situation:  http://www.leg.wa.gov/Senate/Committees/WM/Documents/June%2027%202ESSB%205034%20Striker%20Highlights.pdf

You can see the balance sheet, projected revenues, spending by category and specific additions to the state budget by major category.

Overall, the tech industry fared well in this session.  Despite the constant attacks by those seeking to repeal valuable R&D tax incentives, WTIA hung in there and advocated for the tech industry, reminding lawmakers of the substantial impact the tech industry has on Washington state in terms of job growth, average salary and benefits, multiplier effect and taxes paid.

The formation of the IT Coalition helped us advocate via op-eds, social media and a visit to Olympia during the legislative session.  Here is a link to the IT Coalition’s webpage: http://www.washingtontechnology.org/advocacy/coalition.aspx

Two other beneficial items that came out of this year’s three legislative sessions (regular 105 day and two special) is that the B&O tax rate for service businesses goes back to 1.5% today and there will be no higher education tuition increases for the next year. 

If you have any questions, comments or need legislative information, contact WTIA’s VP of Government Affairs, Lewis McMurran at lmcmurran@washingtontechology.org.

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