Week 10 Legislative Update: Revenues Bounce Back

By: Boswell Consulting and Brooke Davies Consulting Posted: 03/22/2021

Budgets Are Forthcoming; Another Policy Committee Cutoff Looms

Throughout the legislative session, one of the most significant questions has been the how much revenue the state expects to collect over the next several years. On Wednesday, March 17, the Economic and Revenue Forecast Council held a meeting where they released the most recent revenue forecast (full briefing here), which  indicates a stronger revenue collections and a stronger economy than was forecast in November. The council projected total state revenues to be up by $1.34 billion in the 2019-21 biennium, $1.949 billion in the 2021-23 biennium, and $1.899 billion in the 2023-25 biennium. 

The Northwest News Network also noted two other important elements of the state's financial picture: "In addition, Washington is in line to receive $4.2 billion in the next round of federal stimulus funds. There’s also $1.8 billion in the state’s rainy day fund."

The projected revenue increase stems from a couple of reasons. First, the November 2020 forecast assumed that there would be no additional federal pandemic relief funds. Instead, a relief package was passed in December that included extended unemployment benefits, direct checks to individuals, and other aid. As a result, General Fund-State (GF-S) collections from November 11, 2020 through March 10, 2021 came in $764 million above the November forecast. Additionally, there have been strong residential real estate transactions resulting in real estate excise tax (REET) collections $182 million higher than forecasted in November. 

Although the forecast is positive and shows a quicker pandemic recovery than was originally anticipated, the forecast showed that employment growth is slower than expected. Additionally, the hospitality and travel industries continue to suffer, and we are seeing rising oil and gas prices. You can view the full presentation here

Overall, members noted that this forecast puts Washington in a strong position for recovery. Although projections are good it remains to be seen if budget writers will continue to pursue new revenue sources like the controversial capital gains tax. Budget writers are currently digesting the federal stimulus dollars and we expect the House and Senate to release their respective budgets sometime late this week.

Key Dates and Updates 
With week 10 concluded, we now have less than 40 days remaining in this legislative session. Last week, was full of committee hearings which will continue through this week until the policy committee cutoff for the opposite house on Friday, March 26. After that, the next big date will be the opposite house fiscal cutoff on April 2. Then, both chambers will head back to the floor. 

On Thursday, March 18, Gov. Inslee announced that the statewide eviction moratorium will be extended through June 30. He also announced expanded vaccine eligibility. Beginning on March 31, restaurant, manufacturing, and construction workers, as well as Washingtonians 60 and older, will be eligible to get the vaccine. You can read the governor’s full announcement here, and for information on eligibility, visit the Phase Finder tool on the Department of Health’s website.

Economic Recovery and COVID Relief

Washington equitable access to credit act, HB 1015, would direct the Department of Commerce to create a program to award grants to qualified lending institutions to provide access to credit for historically underserved communities. The grants are funded by taxpayers who may receive a B&O tax credit for contributions to the program. A public hearing is scheduled for Tuesday, March 23 in the Senate Committee on Business, Financial Services & Trade. The Chamber supports this legislation and will be signing in pro and urging the Committee to pass the bill ahead of the policy cutoff on Friday.

New Revenue

The capital gains bill, SB 5096, had a public hearing last Monday, March 15 in the House Committee on Finance, but no executive action has been scheduled yet.

Also on Wednesday, March 17, the House held a floor session to pass HB 1477, sponsored by Rep. Tina Orwall, implementing the National Suicide Hotline Designation Act which designated 988 as the new national suicide prevention and mental health crisis hotline number. The bill imposes a tax on radio access lines, voice over Internet protocol service lines, and switched access lines to fund activities related to an enhanced crisis response. 

Housing Affordability

Legislation sponsored by Senator Mona Das, SB 5287, concerning the multi-family tax exemption (MFTE), was heard in the House Finance Committee on Tuesday, March 16. It appeared as if stakeholders have reached an agreement in public testimony with one minor outstanding concern from the tenants. While the Seattle Metro Chamber had concerns with previous versions, we signed in pro at last week’s public hearing. The bill has not yet been scheduled for executive action.

SSB 5160 sponsored by Senator Kuderer was heard in the Housing, Human Services & Veterans Committee on Tuesday, March 16.  This legislation addresses landlord-tenant relations by providing certain tenant protections during and after public health emergencies, providing for legal representation in eviction cases, and authorizing landlord access to state rental assistance programs.  Executive action is scheduled for Tuesday, March 23rd

Legislation sponsored by Rep. Ryu, HB 1070, which would modify allowed uses of local tax revenue for affordable housing and related services to include the acquisition and construction of affordable housing and facilities passed the Senate Housing & Local Government Committee on Thursday, March 17. The Chamber supports this legislation, which would make changes to support King County’s Health through Housing program.  The bill has been pulled from Rules and is now on the floor calendar. 

The Senate Housing & Local Government Committee passed HB 1236 on Thursday, March 18 on a party line vote.  This legislation is sponsored by Representative Macri and is known as the “just cause” bill. The official title of the legislation is an act relating to protecting residential tenants from the beginning to end of their tenancies by penalizing the inclusion of unlawful lease provisions and limiting the reasons for eviction, refusal to continue, and termination. 

Tax Increment Financing

On Thursday, March 18, legislation authorizing local governments to designate tax increment financing areas and to use increased local property tax collections to fund public improvements, HB 1189, was voted out of the Senate Committee on Business, Financial Services & Trade. Some ports including those in Seattle, Tacoma, and Moses Lake have expressed concerns regarding  impacts to their taxing districts. 

Employment and Workplace Legislation

Legislation expanding coverage of Washington’s Paid Family and Medical Leave program, SSB 5097, was heard in the House Labor & Workplace Standards Committee on Tuesday, March 16, and was then voted out of committee on Friday, March 19. This legislation expands the definition of family member, for purposes of the Paid Family and Medical Leave program, to include any individual who regularly resides in the employee's home.

Legislation establishing health emergency labor standards, SB 5115, was heard in the House Labor & Workforce Development Committee on Friday, March 12 and has been scheduled for executive action on Wednesday, March 24. This legislation creates an occupational disease presumption for frontline employees during a public health emergency for the purposes of workers' compensation.

Legislation concerning unemployment insurance claim adjudicators, SB 5193, was voted out of the House Labor & Workplace Standards Committee on Friday, March 19. The bill will now head to the Rules Committee. 

Police Reform

On Tuesday, March 16, the Senate Law & Justice Committee heard HB 1310, which is legislation concerning permissible uses of force by law enforcement and correctional officers, sponsored by Rep. Jesse Johnson. Current law allows police to complete an arrest by any means necessary. HB 1310 sets the expectation that de-escalation should be an officer’s first instinct and that deadly force should only be a truly necessary, last resort. The bill was voted out of committee on Thursday, March 18 with a party line vote.  This proposal will now move to the Senate Ways & Means Committee.

Senator Jamie Pedersen’s SB 5051 modifies the priorities and composition of the Criminal Justice Training Commission (CJTC) and expands the background investigation requirements for persons applying for peace officer, reserve officer, and corrections officer positions. Executive action was taken in the House Committee on Public Safety on Thursday, March 18, where the bill passed out of committee on party lines.  

Legislation concerning an officer's duty to intervene when witnessing a fellow peace officer engaging in the use of excessive force, SB 5066, also saw executive action on Thursday, March 18. The legislation was passed out of committee.

HB 1054 from Representative Jesse Johnson passed out of the Senate Law & Justice Committee on Thursday, March 18 and will now pass to the Senate Rules Committee.  The bill establishes requirements for tactics and equipment used by peace officers, prohibiting chokeholds and neck restraints, use of dogs during arrest, and tear gas and certain types of military equipment.