Sine Die: 2021 Session Comes to a Close

By: Boswell Consulting and Brooke Davies Consulting Posted: 05/03/2021

$59.2B operating budget passes but a comprehensive transportation funding package fails to materialize

The 2021 Legislative Session officially adjourned on time on Sunday, April 25. This 105-day biennial budget-writing session marked the first time in history, the majority of the legislative session was held remotely due to the COVID-19 pandemic. 

The virtual format led to a decrease in the number of bills considered this year. Overall, 1,544 pieces of legislation were introduced this session, and 341 of those have passed the legislature and are on their way to the Governor’s desk to likely be signed into law. All bills that were introduced in the first half of the biennium and did not pass in 2021 are automatically reintroduced in the second half of the biennium, the 2022 legislative session. For a full list of bills that have been signed by the Governor click here.

In the last 24 hours of session the legislature passed the 2021-23 Operating Budget (SB 5092). Following a larger than anticipated revenue forecast for the 2021-23 fiscal years, the legislature proceeded to roll out a $59.2 billion Operating Budget for 2021-23. The largest expenditures in the operating budget included: $1.7 billion in federal funds for school reopening, $1.1 billion in federal funds for vaccine deployment, $800 million in state funds for expenditure into the Teachers Retirement System Plan, and $664 million in state and federal funds to increase rates for certain Medicaid providers. A capital gains tax was passed to fund part of the new budget (ESSB 5096) which is estimated to increase NGFO revenues by $415 million in 2021–23 and by $840 million in 2023–25. The budget also includes new revenues from 2SSB 5315, which will subject captive insurers to the 2% premium tax and E2SHB 1277 would impose a $100 surcharge on recorded documents. The final Operating Budget also assumes a one-time transfer of $1.8 billion from the Budget Stabilization Account to the General Fund in fiscal year 2021 and it also appropriates funding from the American Rescue Plan Act (ARPA).

In addition to the Operating Budget, lawmakers also passed 2021-23 state Capital and Transportation Budgets.

This year, legislative priorities included social equity and police reform, climate, and COVID-19 relief and recovery. As part of the Legislature’s focus on climate this session the legislature passed, SB 5141, commonly known as the HEAL Act,  introduced by Sen. Saldaña. This legislation builds on work done by the Governor’s Environmental Justice Task Force. In addition to HB 1091, the low carbon fuel standard bill, the 2021 legislative session began with two divergent policy proposals to put an economy-wide price on carbon. Gov. Inslee and Sen. Carlyle favored SB 5126 the “Climate Commitment Act,” a cap-and-invest system like the one in place in California, while other House and Senate Democrats favored SB 5373 a direct carbon tax, known as the “Washington Strong” proposal. Both the LCFS (HB 1091) and the Cap and Invest (SB 5126) passed the legislature in the final days of session.

While there was talk of a “grand bargain” that would result in both major clean-energy legislation and a large transportation package, that did not fully come to fruition. While the above clean energy legislation did pass this session, the chambers were not able to reach an agreement on a larger transportation spending package. Both versions of the bills that passed the legislature contain language that states the proposals cannot take effect until the legislature passes a statewide transportation spending package that includes a 5-cent gas tax increase. If a transportation spending package is passed, cap-and-invest would go into effect in 2023.

Transportation budget writers will continue to work on a larger transportation spending package over the interim. If that conversation progresses enough there is a possibility the legislature could convene before 2022 for the purpose of passing that package. 

Also in the final days of session, the Legislature passed SB 5476 which addresses the Washington State Supreme Court’s State v. Blake ruling. In short, the legislation reduced the penalty for drug possession to a simple misdemeanor, and mandated law enforcement to offer referrals to assessment and services in lieu of arrest. The proposal expires in 2023, in anticipation of a future legislation to address a long-term solution. 

Economic Recovery and COVID Relief

Early in the session the legislature took action on bills that would provide immediate COVID­-19 relief including the Governor’s Unemployment Insurance bill (SB 5061), which reduced employer’s Unemployment Insurance liability, and legislation sponsored by Rep. Walen (HB 1095) which ensures businesses don’t have to pay B&O taxes on money received through emergency assistance grants from the state or federal government. The Chamber supported both of these bills.

ESSB 5478 creates a funding program to address the UI trust fund account issues. The bill provides for payments to certain employers for rate class jumps as a result of the pandemic. The bill passed by nearly a unanimous vote in both the House and the Senate and is headed to the Governor’s desk to be signed into law.

Washington equitable access to credit act, HB 1015, which 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 passed the House with near unanimous support.  However, the Senate did not take action on the bill before the opposite house cutoff, so the bill did not move forward this year. The bill will be automatically reintroduced in the 2022 legislative session. The Chamber supported this bill and plans to advocate for the legislation over the interim and in 2022.

New Revenue

ESSB 5096, an act relating to enacting an excise tax on gains from the sale or exchange of certain capital assets passed this session. In the final days of session, the House passed a significant striking amendment on the floor. The biggest point of contention was the addition of the emergency clause language. The Senate refused to concur on House amendments. The Senate asked the House for a conference and a Conference committee was appointed.

 The conference Committee produced the following changes to the Capital gains legislation:

  • There was a change that allowed charitable deductions over $250k capped at $100k.
  • The fund will now be appropriated between the general fund and the capital budget with the first $500m going to the Education Legacy Trust account and the remainder going to the Common School Construction account in the capital budget.
  • The language preventing a referendum continues to be remain in the bill.

Housing Affordability

We saw several bills this year related to housing, including legislation concerning the multi-family tax exemption SB 5287, brought forward by Senator Mona Das. Stakeholders have been working on MFTE for several years without success. The bill will now head to the Governor’s desk to be officially signed into law.

Legislation sponsored by Rep. Ryu, HB 1070, that modifies allowed uses of local tax revenue for affordable housing and related services to include the acquisition and construction of affordable housing and facilities, was signed by the Governor on Wednesday, April 14.  The Chamber supports this legislation, which makes changes to support King County’s Health through Housing program. 

Another housing-related piece of legislation was sponsored by Senator Kuderer, and concerns landlord-tenant relations.  SSB 5160 seeks to codify many of the eviction protections put into place by the Governor due to the pandemic, maintaining those provisions during and immediately after a public health crisis.  These include providing for legal representation in evictions cases and authorizing landlord access to state rental assistance programs. The House added an amendment to the bill that ends the current statewide eviction moratorium June 30. The Senate concurred on the House amendments. Gov. Inslee signed the bill into law last week. This bill will make Washington the first state to ensure that its low-income tenants have access to a lawyer during eviction proceedings.

The “just cause” bill sponsored by Representative Macri, HB 1236, received concurrence from the House on Tuesday, April 13, and has now been delivered to the Governor.  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

Legislation authorizing local governments to designate tax increment financing areas and to use increased local property tax collections to fund public improvements, HB 1189, moved steadily through the legislature, passing the House in early March and the Senate in early April. The bill will now head to the Governor’s desk to be signed into law. The Chamber supports this legislation and joined a coalition in urging Gov. Inslee to sign the bill into law.

Employment and Workplace Legislation

Legislation expanding coverage of Washington’s Paid Family and Medical Leave program, SSB 5097, passed the legislature. The Senate voted to concur with the House amendments. This legislation expands the definition of family member, for purposes of the Paid Family and Medical Leave program.

On Wednesday, April 14, the Senate concurred on the House’s version of SB 5115 (32-16), establishing health emergency labor standards. The bill will now head to the Governor’s desk to be signed into law.

Legislation concerning unemployment insurance claim adjudicators, SB 5193, passed the legislature and is now headed to the Governor’s desk to be signed into law. The bill requires the Employment Security Department (ESD) to create a training program to train people to serve as unemployment insurance claim adjudicators.

Rep. Hansen’s “qui tam” legislation, HB 1076, which allows private attorneys to file whistleblower claims for misclassification passed the House 53-44. The bill failed to advance out of the Senate Ways and Means Committee and did not advance further this session.

Police Reform

Leading up to the 2021 legislative session, the House created a Policing Policy Leadership Team to work with stakeholders on legislation to strengthen police accountability. This session the legislature passed several bills related to police reform including two of the Policing Policy Leadership Teams priority legislation, HB 1054 and HB 1310, sponsored by Rep. Jesse Johnson. HB 1054 bans or limits police tactics such as no-knock warrants, chokeholds, neck restraints, and certain military equipment and HB 1310 amends the use of force statute to encourage peace officers to use de-escalation before using force. 

Legislation sponsored by Senator Jamie Pedersen, 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. The Senate concurred with the House amendments and the bill officially passed the legislature on April 21 and will now head to the Governor’s desk to be signed into law.

Sponsored by Senator Dhingra, SB 5066, concerning an officer’s duty to intervene, passed the Legislature and is headed to the Governor’s desk to be signed into law.  This legislation requires a peace officer to intervene when the officer witnesses a fellow peace officer engaging in the use of excessive force. 

Rep. Entenman’s HB 1267 establishes the Office of Independent Investigations within the Office of the Governor for the purpose of investigating deadly force incidents involving peace officers. The bill passed the legislature and will now head to the Governor’s desk to be signed into law.