Tag Archives: revenue

Local Legislator Introduces Proposal to Restructure Revenue in Washington and Invest in Higher Education

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This week Representative Chris Reykdal and Senator David Frockt released the Higher Opportunity Promise for Education (HOPE) Act.

The Act fundamentally restructures Washington’s tax code and dedicates funds in the process for higher education. Reykdal and Frockt frame the need for such a proposal by focusing both on the need for more Washington students to attend and complete higher education and the need to restructure the state’s tax structure.

The intention is that by addressing the need for greater participation in higher education and changes in the tax structure the state would be able to dedicate funding to universal access to higher education and fully fund current financail aid obligations, free up funds in existing state resources for other purposes, and restructure the state’s tax code as follows:

  • Completely eliminate the State B&O Tax
  • Reduce the sales and use tax from 6.5% to 5%
  • Broaden the new 5% sales tax and use tax to all personnel and professional services
  • Create the Higehr Opportunity Promise for Education Income Tax at 1% on adjusted gross income and corporate gross profit.

New Revenue Emerges

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Yesterday the Legislature received a gift. Washington’s three-month tax amnesty for businesses delivered $321 million in back taxes.

Under the proposal businesses were provided with a short amnesty period for penalties and interest on back taxes owed. From February to April the Washington Department of Revenue worked with more than 10,000 businesses to collect taxes.

The tax amnesty generated nearly $182 million more than was expected. While most of the $321 million will go to the state general fund ($263 million), some of it will be used to assist local governments ($57 local taxes).

While it is expected that these dollars will be key in reaching a solution for both the current fiscal year shortfall and the 2011-13 biennial budget shortfall, what the impact will be remains unclear.
The House Democrats had tentatively counted on getting $300 million from privatizing the system. But now they say they’ve moved away from that idea. So the new revenue may be helpful in bridging this gap.
However, policymakers in both chambers are also interested in using some of the funds to take back some of the budget cuts initially proposed.
While the Governor has suggested the funds be used to shrink the $240 million owed to public schools by June 30 that otherwise would be delayed to July 1 under House and Senate budget proposals.

Revenue staffers estimated there were 428 taxpayers flying off the taxman’s radar that now are on the state’s registry, where they can be monitored for compliance. Those non-payers averaged $50,342 in back taxes totaling $21.5 million for state and local governments.

State Revenue Declines

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State revenues fell again for the second month in a row.

The latest revenue collections released earlier this week showed revenue collections were $124.5 million less than was predicted in June.

Additional details regarding revenue will emerge over the next month. In September the Economic and Revenue F’orecast Council is expected to release an economic report (Sept. 3), a follow-up on tax collections (Sept. 10), and the quarterly revenue forecast (Sept. 16).

State budget deficit for 2011-13 Biennium -$3 billion

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The Washington Office of Financial Managment (OFM) expects that the gap between state revenues and “basic spending pressures” will be approximately $3 billion next biennium.

In a report that provides state agencies, including higher education, with operating budget instructions for the next biennial budget, OFM suggests to provide funding to move current state programs forward, state funds will need to replace nearly $2 billion in federal funds that were made available to Washington during the recession. Part of these funds were used to offset cuts to higher education during the 2009-11 biennium.

In addition, funding requirements for pending funding obligations, statutory requirements to support important reforms in basic education, and restoration of voter approved commitments to reduce class size (I-728) and provide cost of living adjusts for teachers (I-732) add another $2 billion in spending pressures.

Though this adds up to a shortfall of $4 billion, OFM project that new revenues will provide $1 billion to close the gap, leaving $3 billion to be settled by the state.

So one may ask is there any good news.

In the report issued by OFM, indications show that Washington is experiencing much stronger revenue growth of 8.8% for FY 2011. Though this growth is relative to a new, much lower revenue base, it is definitely a positive note when compared to the drop in revenue in the last two years.

As Washington nears the 2011 legislative session more details will come into focus to provide a much clearer picture of the state budget.  The next big step in the process will be in mid-June when both the state caseload forecast and economic and revenue forecast are released.

Governor Gregoire Signs Revenue Legislation Into Law

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On Friday, Governor Gregoire signed the two-bill revenue package passed by the Legislature earlier this month without veto.

Both bills are expected to generate $757 million in revenue through 2013. Senate Bill 6143 modified excise tax laws to preserve funding for public schools, colleges and universities, as well as other public systems essential for the safety, health, and security of Washington.

House Bill 2493 increased taxes on cigarettes and other tobacco products.

Proposed State Initiative Would Implement an Income Tax in Washington

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Yesterday, Bill Gates Sr., alongside other advocates, announced efforts to move forward an income tax proposal for the November ballot.

Initiative 1077 would be limited to the top 3 percent of earners in the state. The Initiative would allow the earnings above $400,000 for couples at 5% and above $ 1million at 9% to be taxed.  The thresholds would be half of those for individuals.

In addition, the Initiative would reduce the state’s share of property tax by 20% and create large tax credits for small businesses, minimizing the number of businesses that would pay any B&O tax. 

Income-tax initiative
I-1077

  • Individuals would pay 5 percent income tax on earnings over $200,000 a year and 9 percent on earnings over $500,000. For couples, those tax rates would kick in at $400,000 and $1 million, respectively.
  • The state portion of property tax would be reduced by 20 percent, or slightly more than $160 on the typical $371,800 King County home, according to figures from the assessor’s office.
  • The credit on state business and occupation taxes would rise from $420 to $4,800 a year, eliminating that state tax altogether for 80 percent of businesses and reducing it for another 10 percent, proponents say.
  • Income-tax revenues would offset reductions in property and B&O taxes and would funnel an estimated $700 million into an education trust account for class-size reduction and other purposes, and $300 million to the Basic Health Plan and long-term care.

Initiative 1077 is expected to generate $1 billion a year in new money for education and health programs given these parameters.

The I-1077 campaign will need to collect more than 241,153 valid voter signatures by July 2 to qualify for the November 2 ballot.

House Concurred on Cigarette Tax Legislation, Bill Heads to Governor

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Late this evening the House concurred on the Senate amended version of House Bill 2493 – the tax increase on cigarettes and other tobacco products. The House concurred with a vote of 54-43.

House Bill 2493 raises state cigarette taxes by $1 per pack and increases taxes on other tobacco products.

House Bill 2493 now goes to the Governor for her signature.

Senate Passes Revenue Legislation

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A little past 8:30 pm this evening the Senate adopted the revenue conference report and voted to pass half of the two-bill revenue package. The Senate passed Senate Bill 6143 with a vote of 25-21.

Senate Bill 6143 modifies excise tax laws to preserve funding for public schools, colleges, and universities, as well as other public systems essential for the safety, health, and security of all Washingtonians.

Senate Bill 6143 raises $667.7 million in new revenue. Combined with the revenue expected to be generated by an increase in the cigarette tax and taxes on other tobacco products,and revenue generated from lottery revenues and the Convention and Trade Center Account the total revenue generated is expected to be $794.1 million.

Senate Bill 6143 now goes to the Governor for her signature.

Legislature Releases Operating and Capital Budgets: Overview

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Late this morning the Washington Legislature released the 2010 supplemental operating (SB 6444) and capital budgets (HB 2836).

The release of the budgets was followed by a press conference with leadership from both chambers. Legislators discussed a balanced approach to remedying the $2.8 billion state budget gap, including reductions to state programs and services, one-time transfers of dollars, federal funding, and new revenue.

Legislators acknowledged that Washington has a structural problem with regard to taxes, citing the state’s regressive tax system and the narrowing limits placed on new revenue through various initiatives passed over the years. Legislators plan to continue discussions on reforms and solutions through the interim in preparation for the 2011 legislative session.

An overview of the budgets released today echoes the implementation of this multi-pronged approach to remedying the $2.8 billion state budget shortfall this biennium.

The Legislature reduced funding for state programs and services by $755 million. Among the multitude of reductions, some of the major reductions included:

  • The elimination of the remaining $79 million in Initiative 728 per student allocations to school districts;
  • Reductions in funding of $73 million to institutions of higher education near the minimum level required for the receipt of federal stimulus funds;
  • Savings of $67 million from the implementation of an additional assessment on hospitals and leveraging federal match;
  • Reductions of $49 million to all areas of state government through the requirement of temporary layoffs or salary savings;
  • Reductions of $46 million from correctional facility capacity;
  • Reductions of $30 million to reduce the grade 4 class size enhancement;
  • Savings of $30 million from information technology;
  • Reform of the Security Lifeline programs (formerly GA-U), $ 28 million
  • Savings of $15 million through the elimination of the learning improvement day for teachers.

The Legislature incorporated approximately $618 million of approved/anticipated additional federal relief to Washington State. The supplemental operating budget anticipates $480 million in additional resources based on the Federal Medical Assistance Percentage (FMAP) enhancement being extended by an additional six months through June  2011.  Congress is considering legislation that would extend the enhancements beyond the current end date, December 2010.

In addition, based on a recent U.S. Department of Health and Human Services reversal of the decision to disallow state savings from Medicare Part D “clawback” payments for prescription drugs, the state expects to receive $87 million in additional federal resources beyond the current level assumed in the state budget.

Finally, the Legislative budget offsets $39. 5 million in the Security Lifeline and Basic Health programs based on receiving a waiver allowing a portion of these state costs to be supported with federal funds; and the budget assumes additional federal resources of approximately $12 million from two smaller sources of federal aid.

The supplemental operating budget, in addition to reductions and federal funds, makes $461 million in additional transfers from various funds to increase General Fund-State resources.

Some of the larger transfers include:

  • $141 million from the Public Works Account
  • $101 million from the Education Savings Account
  • $21 million from the Job Development Account
  • $18 million from the Education Construction Account
  • $16 million from the Life Science Discovery Fund
  • $16  million from State and Local Toxics Account
  • $15 million from the Performance Audit Fund
  • $15 million from the Public Service Revolving Account
  • $12 million from the Treasury  Service Account
  • $10 million from the Savings Incentive Account
  • $10 million from the Streamlined Sales Tax Account

Finally, the Legislature plans to pass legislation that would raise $794 million with a net increase of $757 million after $12 million in legislation that decreased revenue is acknowledged. This includes:

  • $7.4 million in tax loopholes
  • $241.9 million B&O tax on service businesses
  • $59 million beer tax increase
  • $33.5 million soda/pop tax increase
  • $32.6 million bottled water tax increase
  • $101.4 million cigarette and other tobacco product tax increase
  • $10 million convention center
  • $15 million lottery marketing

The House is expected to take up the operating budget first today, followed by the Senate.

Senate Passes Cigarette Tax

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This morning the Senate passed House Bill 2493 – the tax increase on cigarettes and other tobacco products. The House passed HB 2493 the first week of special session.

House Bill 2493 raises state cigarette taxes by $1 per pack and increases taxes on other tobacco products.

The Senate did amend the bill to change the effective date. The effective date for the changes to all tobacco products, except for moist snuff, was changed from April 1, 2010, to May 1, 2010. The changes made to the taxation of moist snuff remain effective October 1, 2010.

House Bill 2493 now goes back to the House for concurrence on the amendment to change the effective date.