Senate Passes Compensation Legislation

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Today, the Senate concurred on House amendments to Senate Bill 6503, the compensation reduction bill, with a vote of 26-14.

In other words, the Senate passed the House’s revised version of SB 6503 and now the bill heads to the Governor for her signature.

Senate Bill 6503 focuses on state savings through the reduction of compensation-related changes for state employees.  The bill is referred to by many as the “furlough bill”.

The final bill headed to the Governor directs that savings will be generated at state agencies and institutions of higher education through either 10 temporary agency closure days or alternate-approved compensation reduction plans. In addition, the legislation directs that in addition to the closure or alternate compensation reduction plan savings, Washington Management Services and exempt employee compensation will be reduced by $10 million General Fund-State. Finally, the bill provides a list of agencies, or portions of agencies, exempt from the closures.
Specifically Senate Bill 6503:

  • Directs state agencies to achieve a reduction in employee compensation costs through mandatory and voluntary furloughs, leave without pay, reduced work hours, voluntary retirements and separations, layoffs and other methods. The amount of the savings will be specified in the omnibus appropriations act.
  • At least $10 million in savings will be from management positions exempt from civil service.
  • Agencies that fail to submit an approved compensation reduction plan will be subject to ten specified agency closure dates beginning in July 2010.
  • The alternate reduction plans for institutions of higher education may include reductions to operations, as well as to compensation.
  • Agencies are encouraged to preserve family wage jobs.
  • Exceptions to the agency closure dates include: state corrections and social service institutions; child protective services; law enforcement; military operations; state hospitals; emergency management; state parks, highways, and ferries; revenue collection by the Department of Revenue; higher education classroom instruction and student employees; state liquor stores; state lottery; unemployment insurance and reemployment services; workers compensation and workplace safety programs; agricultural commodity commissions and food inspection programs; employees necessary to protect state assets and public safety; functions of the Attorney General’s Office directly related to civil, criminal, or administrative actions; the operations of the Office of the Insurance Commissioner that are funded by industry regulatory fees; state legislative agencies, the Governor, the Office of Financial Management and Lieutenant Governor during legislative sessions; and the Labor Relations Office of OFM through November 1, 2010.
  • State agency closures will result in the temporary layoff (furlough) and reduction of compensation of affected state employees. These temporary layoffs and reduction in compensation do not affect employee seniority, vacation and sick leave accrual, or retirement benefits.
  • Agencies that do not adopt an approved compensation reduction plan will be subject to ten closure dates specified in the bill. Employees earning less than $30,000 per year are allowed to use annual leave or shared leave in lieu of temporary layoffs during agency closures.

House Moves Public Works Bill Forward

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Today the House took floor action on a handful of bills, including House Bill 1690 regarding alternative public works contracting.

HB 1690 was left behind in the House Committee on Rules upon adjournment of the 2010 regular session. Today the House moved the bill from House Rules to the floor and unanimously voted to move HB 1690 to the Senate.

The bill passed by the House was passed with language that changed requirements established in the original bill.

Both the original bill and the bill passed by the House today emphasize the intent of the Legislature to clarify that, unless otherwise specifically provided for in law, public bodies that want to use an alternative public works contracting procedure may use only those procedures specifically authorized in chapter 39.10 RCW.

The original bill also directed the Capital Projects Advisory Review Board (CPARB) to recommend to the appropriate committees of the Legislature other alternative contracting procedures.

However the bill language adopted in the final version passed by the House this afternoon removes the direction given to the University of Washington Board of Regents to receive approval from CPARB prior to adopting new alternative public works contracting methods and the authority of CPARB to approve demonstration projects, and submit reports.

House Bill 1690 now moves to the Senate for further consideration.

Revenue Conference Report $7 million Less than Proposed Revenue Package Earlier this Week

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The revenue conference report signed by the House and Senate this afternoon will provide less revenue than was previously proposed earlier this week.

The revenue conference report provides $794.1 million in new revenue ($667.7 million +$126.4 million cigarette tax). This is over $7 million less than the $801.3 million proposed in the revenue agreement discussed this past week.

So what is different?

  • Minimum Nexus Standards ($84.7 million). Incorporates all changes from Senate and House. In addition, includes a B&O deduction for interest and fees on loans secured by commercial aircraft. Effective June 1, 2010.
  • Tax Avoidance Transactions ($8.5 million). Provides the Washington Department of Revenue authority to disregard three specific types of tax avoidance transactions. Creates legislative oversight committee. Effective May 1, 2010.
  • Homestreet Fix (modifying first mortgage deduction) ($3.6 million). Servicing of loans by the originator of the loans qualifies for the deduction; other types of fees and charges are not deductible. Effective June 1, 2010.
  • Livestock nutrients (sales tax exemption for livestock nutrient equipment and facilities) ($1.3 million). Changes effective date to July 1, 2010 from April 1, 2010.
  • Corporate Directors B&O (B&O tax on corporate directors) ($2.1 million). Changes effective date to July 1, 2010 from April 1, 2010.
  • Sales and use tax applied to bottled water ($35.3 million). From June 1, 2010 to June 30, 2010 bottled water is subject to sales and use tax. The exemptions for prescribed water and for persons without potable water are made in the form of a refund except for bulk deliveries.
  • Sales tax applied to candy and gum ($30.5 million). Candy and gum are subject to sales tax, as of June 1, 2010. Provides a job credit of $1,000 per position for the next two years for candy manufacturers. Washington Department of Revenue will publish a list of taxable candy, if not on the list, retailers must check with Revenue.
  • PUD privilege tax clarification ($1.2 million). Changes effective date to May 1, 2010 from June 1 in the Senate and April 1 in the House.
  • Temporary B&O tax surcharge on service businesses ($241.9 million). Temporary B&O surcharge of 0.3% from May 1, 2010 to June 30, 2013. Permanently doubles the small business tax credit for service businesses. Excludes public and private hospitals as well as certain R&D activities.
  • Property management B&O (limits the B&O exemption for property management salaries) ($6.9 million). The exemption is not repealed but rather is limited to nonprofit property management companies and property management companies that contract with a housing authority. Effective June 1, 2010.
  • Temporary Beer Tax increase ($59. million). From June 1, 2010 to June 30, 2013 increases the Beer Tax by 50 cents per gallon (28 cent increase for six packs). The temporary increase does not apply to the first 60,000 barrels produced by small breweries
  • Temporary soda/pop tax increase ($33.5 million). Beginning July 1, 2010 to June 30, 2013 increases the tax on carbonated beverages (pop/soda) by 2 cents per 12 oz bottle. The first $10 million in sales is exempt from the tax increase.

Here is what did not change.

  • DOT Foods (direct seller B&O exemption) ($155 million).  Effective  May 1, 2010. 
  • Agrilink (B&O tax on manufacturing of certain agricultural products) ($4.1 million).  Effective May 1, 2010.
  • Tax debts corp (tax debts – corporate officer liability)($1.1 million)
  • Bad debt (limits the bad debt deductions) ($1.7 million)

And finally, here is what was not included in the conference report.

  • Changing the definition of “qualifying business”, regarding data centers, so that a lessee of a least 20,000 sq. ft. of space within an eligible computer data center can qualify for the exemption. Amends the job provisions to provide associated definitions regarding the requirement to increase employment by 35 family wage jobs.
  • Limiting the foreclosure exemption from the Real Estate Excise Tax (REET).
  • Repealing the B&O tax job credit for international service activities.
  • Changing the rural county tax incentive to allow for claims for incentives for computer programming only when it is used to create a new item for sale.
  • Limiting the B&O deduction for dues and initiation fees.
  • Repealing the sales tax exemption for coal used at a coal-fired thermal electric generation facility.
  • Changing the exemption for machinery used to create electricity and wind to require a producer to either be a local utility or someone contracting with a local utility for the sale of power.
  • Establishing the temporary 0.2% slaes and use tax and Working Families Tax Credit.
  • Repealing the nonresident sales tax exemption
  • Establishing an aircraft excise tax.
  • Capping the first mortgage interest deduction at $120 million.
  • Extending sales tax to custom software
  • Eliminating the credit against the sales tax for the Convention Center.

Revenue Conference Report Signed but Still Counting Votes

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Early this afternoon members of the conference committee for Senate Bill 6143 (the revenue bill) met and signed the revenue conference report – $794.1 million in revenue.

Senators Murray and Prentice and Representatives Hunter and Hasegawa received a summary of the conference report from staff prior to signing the report.  Democrats took the opportunity offered by the conference report signing to underline the importance of new revenue to protect public services.

Both chambers also shared that vote counting on the revenue package is continuing.  When asked by the media if there are votes in the House and Senate to approve this compromise, Senator Murray, Democratic Caucus Chair, said “We’re confident but we’re counting votes.”  Similar thoughts were echoed by House Finance Chair, Representative Ross Hunter, “I think we’re very close. I think we’re closer than we were yesterday.”

At the same time the House and Senate continue to count revenue votes, negotiations on the operating and capital budgets continue. As shared by Senator Margarita Prentice, Chair of the Senate Ways & Means Committee,  “We’re still working,” when asked about negotiations on the actual budget.

The revenue conference report would provide the state with $794.1 million in new revenue.

Conference Revenue Report
($794.1 million)

  • Temporary Services B&O surcharge to 1.8% without hospitals and narrow exemption for R&D. Small business credit doubled (credit permanent). Effective May 1, 2010 and expires June 30, 2013 ($241.9 million).
  • Temporary Beer Tax increase of 50 cents per gallon. Twenty-eight cent increase per six pack. Microbreweries exempt. Effective June 1, 2010 and expires June 30, 2013 ($59 million).
  • Temporary soda/pop tax increase of 2 cents per 12 oz bottle. Bottlers under $10 million in volume exempt. Effective July 1, 2010 and expires June 30, 2013 ($33.5 million).
  • Dot Foods ($155 million).
  • Cigarettes and other tobacco products (House Bill 2493) ($101.4 million).
  • Nexus ($84.7 million).
  • Sales and use tax applied to bottled water. Exemption for prescription water and unavailable potable water ($32.6 million).
  • Sales tax applied to candy and gum. B&O credit for jobs ($30.5 million).
  • Lottery Marketing (Senate Bill 6409) ($15 million).
  • Convention Center (Senate Bill 6889– Delivered to the Governor) ($10 million).
  • Tax avoidance ($8.5 million).
  • Property management. B&O ($6.9 million).
  • Agrilink ($4.1 million).
  • Homestreet fix ($3.6 million).
  • Corp. Dir. B& O ($2.1 million).
  • Bad debt ($1.7 million).
  • Livestock nutrients ($1.3 million).
  • PUD clarification ($1.1 million).
  • Tax debts corp ($1.2 million).

The conference report must sit on the bar of both the House and Senate for a full day before it can be voted upon. The report can only be voted up or down without amendment. The House will take up the package first, likely tomorrow.

No Declared Agreement. Floor Sessions Scheduled for Saturday

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No official announcement has been released at this time regarding a final agreement on revenue by the Legislature. The new revenue package released earlier this week is still being considered by both Chambers and votes are being counted.

Though no progress has been made to seal the deal with regard to revenue since the last blog posting, there is some hope that tomorrow’s scheduled floor action at 2:00 p.m. for both Chambers will be the necessary first step to a successful sine die of special session.

Next week, Tuesday, April 13, will mark the end of the first special session of 2010, final revenue package and budgets or not.

Much of New Revenue Proposed is Temporary

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According to a news article by the Washington State Budget & Policy Center and echoed by blogs at the Seattle Times and the Everett Herald, 43% of the $801 million proposed in new revenue is temporary in nature.

The short-term fixes include:

– A B & O Tax surcharge to service-based industries that would increase the tax rate from 1.5% to 1.8% and expire June 30, 2013. This surcharge would generate an estimated $246 million in revenue per year.

– A $0.50 increase per gallon of beer, with an exemption for microbreweries generating less than 60,000 barrels of beer annually. The tax increase would expire June 30, 2010 as well and raise around $58 million per year.

– A new tax on soda of $0.02 per 12 ounces would expire on the same date and potentially raise $38 million per year.

The rest of the $801 million will be raised by permanent tax increases and business reforms, the largest of which would raise $155 million by clarifying and eliminating a State Supreme Court ruling that originally expanded a B&O tax exemption intended to apply only to businesses like Avon or Mary Kay that sell products solely through door-to-door sales.

Also proposed are sales tax expansions that would capture $64 million in revenue by creating a tax on bottled water and eliminating an exemption on candy and gum.

No Agreement Yet…But Here is What All the Buzz is About

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This week the House and Senate have been busy exchanging revenue proposals and counter-proposals.  Though no agreement has been reached between the two chambers, details of the single revenue package that is being shared among members of both the House and Senate have been revealed.

The current revenue package being discussed by all on The Hill does not include a sales tax or a a tax on software. In addition the package would continue exemptions on first mortgage interest income and out-of-state shoppers.

Further examination shows that three of the proposed provisions are temporary and expire in 2013. These include the B&O surcharge on most service businesses, the beer tax increase, and the soda/pop tax increase. To protect small service businesses, the B&O surcharge includes a doubling of the small business tax credit. Small businesses with gross sales up to about $56K will be exempt and those making up to about $80K will pay less. None of Washington’s breweries should be impacted by the beer tax increase since microbreweries will continue paying the same tax. Finally, a B&O tax credit for jobs at Washington’s candy manufacturers will likely buffer them from any negative impact of the candy sales tax.

Current Revenue Proposal
($801.3 million)

  • Temporary Services B&O surcharge to 1.8% without hospitals. Small business credit doubled. Effective May 1, 2010 and expires June 30, 2013 ($245.9 million)
  • Temporary Beer Tax increase of 50 cents per gallon. Microbreweries exempt. Effective June 1, 2010 and expires June 30, 2013 ($57.8 million)
  • Temporary soda/pop tax increase of 2 cents per 12 oz. Bottlers under $10 million in volume exempt. Effective July 1, 2010 and expires June 30, 2013 ($38.1 million)
  • Dot Foods ($154.7 million)
  • Cigarettes and other tobacco products (House Bill 2493) ($101.4 million)
  • Nexus ($82.4 million)
  • Sales and use tax applied to bottled water ($35.3 million)
  • Sales tax applied to candy and gum. B&O credit for jobs ($29 million)
  • Lottery Marketing (Senate Bill 6409) ($15 million)
  • Convention Center (Senate Bill 6889– Delivered to the Governor) ($10 million)
  • Tax avoidance ($8.2 million)
  • Property management. B&O ($6.9 million)
  • Agrilink ($4.1 million)
  • Homestreet fix ($3.9 million)
  • Corp. Dir. B& O ($2.1 million)
  • Bad debt ($1.7 million)
  • Livestock nutrients ($1.5 million)
  • PUD clarification ($1.2 million)
  • Tax debts corp ($1.1 million)
  • B&O dues ($1 million)

Both chambers hope to announce an agreement or disagreement sometime today with regard to the current proposed revenue package.

Over the weekend and through Tuesday, the Senate and House will need to pass a revenue package and operating and capital budgets, as well as, take action on various bills necessary to implement revenue and/or the budget, including the cigarette tax (HB 2493) which has passed the House and is now in the Senate; the lottery bill (SB 6409) which has passed the Senate and awaits action by the House; and finally perhaps take action on Senate Bill 6503 which would require state agencies to take a portion of their cuts in compensation related actions.

A Flurry of Action Over Revenue…Counting Votes

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Though no final revenue agreement has been reached, a flurry of activity between the House and Senate leadership has taken place in efforts to find common ground.

The Senate and House both held Pro Forma sessions today and are expected to hold Pro Forma sessions tomorrow. Though most of the members are away from Olympia,  Senate and House leadership have met multiple times over the last few days to review and exchange offers on a revenue package. In addition, leadership from both chambers have met together with the Governor.

The details of the negotiations over revenue are being held close to the vest as the 30-day deadline for the first special session nears. However, one critical piece of information that has been confirmed is that the Senate has officially removed a plan to temporarily increase the sales tax from current negotiations.

At this time, each chamber is meeting with their respective members regarding the latest proposal in negotiations. If sufficient votes can be counted in favor of a negotiated package, it is possible that the Legislature will be able to conclude the first special session by Tuesday, April 13 the official deadline.

House Tweaks Revenue Proposal…Members and Senate Review

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Earlier this week, the Senate released a new revenue package. Yesterday, Finance Chair Ross Hunter announced the House has a slightly-tweaked counter-proposal.

The changes that the House is proposing have not been shared. Representative Hunter did note that the House tweaked version of the Senate’s revenue proposal was presented to House members last night.  In addition, House and Senate leadership were also scheduled to talk last night regarding revenue.

At the time of this post,  the Senate has yet to voice any support or concern on the changes proposed by the House.

The revised package proposed by the Senate further reduces the sales tax increase from two-tenths of 1 percent to one-tenth of one percent and retains the Working Family Tax Rebate. In addition, the new proposal increases the existing tax on beer to 50 cents per gallon; beer with micro-brews exempted, and extends the sales tax to candy and gum with in-state producers getting a jobs tax credit. Finally, the new proposal includes the House’s proposal to raise taxes on all tobacco products, not just cigarettes.

The Senate and House are scheduled for Pro Forma sessions today and tomorrow, Thursday, April 8.  Both chambers are scheduled for floor action and caucus on Friday, April 9.

Nine School Districts Statewide to Receive Federal Grants for Improvement

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Nine Washington school districts – Seattle, Tacoma, Marysville, Yakima, Wellpinit, Sunnyside, Highline, Grandview and Longview – met federal criteria to receive grants meant to improve student performance. The grants, valued at an average of $17 million each, are given to “consistently lowest achieving,” or Tier III schools.

The schools receiving funding will work with the Office of Superintendent for Public Instruction to determine how the funds will be best utilized. Those districts receiving funding were required to apply for assistance.