Washington Legislative Advocacy – April 18, 2023

Washington Legislators enter the home stretch as last full week of session arrives

Washington’s 2023 legislative session is now down to its last full week, with adjournment set by midnight on Sunday, April 23rd. The House and Senate have taken the weekend off, and will resume floor action on Monday, continuing debate to concur or dispute amendments to their bills made by the opposite chamber. Final negotiation and adoption of the state’s budgets, primarily the operating budget, are underway, with announcement of an operating budget deal between the chambers expected by Saturday. In addition, any big-ticket policies considered “go-home” priorities by the majority may also appear on the docket this week.

Top updates and issues from the second-to-last week of session include:

  • Budgets. Final compromises on the state’s operating, capital, and transportation budgets are expected later in the week, with the final operating budget set for release no later than Saturday. As passed by their respective chambers, the House and Senate are approximately $700 million apart on the operating budget, with the House proposing more spending. While neither budget has to date relied on new or increased taxes to balance, the business community will spend an anxious week on guard against the sudden proposal of any new or increased tax measures tied to a budget deal.  
  • Taxes. Although a variety of tax proposals have surfaced this session, from the margin tax to various forms of wealth or excess compensation taxes, the two proposals gaining the most steam at the end of session involve an increase in the Real Estate Excise Tax (REET), and a three-fold increase in the growth limit factor for local property taxes, from 0.1 to 0.3. The REET bill, HB 1628, was voted out of the House Finance Committee on Friday. As amended, it proposes to increase the existing maximum state tax from 3 percent to 3.5 percent on transactions above $3.025 million. It also allows local governments to charge an additional .25 percent tax on all transactions regardless of value. The intended target of expanded REET collection is about $200 million per year in additional funding for affordable housing. The property tax bill, SB 5770, would overturn a voter-approved 1 percent cap on annual growth for state and local property tax levies and change the basis for inflation to the Consumer Price Index. The bill’s intended aim is to increase public school funding, particularly for special education programs. It has not yet received action in the Senate Ways & Means Committee.                  
  • Transportation. As negotiations continue toward a compromise transportation budget, the state’s Office of Financial Management, which reports to Governor Inslee, weighed in this week with a letter to both the House and Senate Transportation Committee Chairs criticizing project lists and budget assumptions in both chambers’ proposals, calling them “unrealistic” and “aspirational.” Meanwhile, SB 5765, a proposal to allow for tolling on the I-5 bridge between Washington and Oregon continued to move, with a hearing Thursday and a vote Friday out of the House Transportation Committee. The bill anticipates a variable-rate toll of somewhere between $1.50 and $3.55 per trip, set to go into effect as early as 2026 and anticipated to generate $1.2 billion of the approximately $6 billion needed to replace the aging structure.   
  • Housing. The session’s central bill to expand housing availability, HB 1110, passed the Senate with strong bi-partisan support as amended on Tuesday, and heads back to the House for concurrence. This “middle housing” proposal requires authorization of multifamily dwelling units in residential zoning areas previously limited to single family housing. The Senate also took action Tuesday on HB 1046, increasing the area median income limits on public-financed, low-income housing developments to 80 percent, expanding housing resources to lower-income households. It is headed to the Governor’s office for signature. On Wednesday, the House passed SB 5412 on a 95-2 vote, requiring objective standards for external design review of housing projects and categorically exempting residential housing or middle housing development from project review under the State Environmental Policy Act (SEPA). The House amended the bill to narrow its effect, and the Senate on Friday refused to concur in the House amendments, setting the bill up for negotiation in the coming week. With one week to go, it would not appear that the Governor’s plan to ask voters to authorize $4 billion in bonds to fund housing projects is likely to move, despite a broad coalition of organizations representing consumers, designers, builders, and community groups advocating in favor of the proposal.        
  • Public Safety. SB 5352, lowering the standard for law enforcement vehicle pursuits, was voted out of the House on a mostly party-line vote on Monday, with an amendment requiring the bill to return to the Senate for concurrence. The bill does allow for police pursuit of suspects upon reasonable suspicion, rather than probable cause, that certain crimes have been committed although critics of the bill contend that it is still too restrictive on law enforcement. SB 5536, the so-called “Blake bill,” named for the Washington Supreme Court decision that largely decriminalized simple drug possession, passed the House late Tuesday night on a 54-41 vote, albeit with amendments that critics argue are too lenient. Whereas the Senate would have made drug possession a gross misdemeanor, the House lowered the offence to a misdemeanor. The bill also has an underlying disagreement over mandatory sentencing for individuals who refuse or abandon substance abuse disorder treatment. The bill is back before the Senate but given the breadth of differences between the chambers, may not come together before adjournment.        
  • Data PrivacyHB 1155, the consumer health data privacy bill, awaits further action in the House, where it is expected the body will accept the Senate roll-back of its earlier amendments, including the limitation on the private right of action. Upon anticipated concurrence, the bill will head to the Governor for signature. For financial services, a data-level exemption for information covered under the federal Gramm Leach Bliley Act (GLBA) or the state Office of Insurance Commissioner privacy rules, was secured early in session and has remained in the final product.
  • Labor & Employment Law. Of the remaining labor & employment bills, the Senate on Friday refused to concur with House amendments to SB 5123, regulating employers’ pre-employment screening for cannabis. The House placed the enforcement mechanism for violations within the Office of Attorney General, which objected on cost grounds. The House is likely to recede from that amendment. SB 5110, creating a private right of action to enforce violations for various prohibited employment actions, failed to advance past Wednesday’s opposite-house cutoff. HB 1762, setting labor standards regulations for retail distribution warehouses, passed the Senate on Tuesday on a 29-20 vote with a series of narrowing amendments adopted, which the House on Thursday refused to accept. The bill is back before the Senate for next steps on reconciling the differences.  
  • Paid Family & Medical Leave. SB 5286, establishing rates for the paid family & medical leave insurance program as a recommendation of the legislative task force established to provide financial stability to the program, is in line for signing by the Governor, while SB 5586, providing employers access to specified PFML claim information held by the Employment Security Department, is awaiting Senate concurrence in changes made by the House.
  • Insurance. Of the remaining insurance industry bills, HB 1120, establishing the “best interests” standard for annuity transactions, was signed by the Governor on Thursday and goes into effect 90 days after the adjournment of session. SB 5720, allowing commercial property insurers to provide risk mitigation goods and services to policyholders, is awaiting Senate concurrence in a couple amendments made by the House prior to passage. SB 5326, providing for a system of online verification of drivers’ liability insurance, is considered “necessary to implement the budget” and thus still alive for consideration, but appears unlikely to move in part over a dispute related to car dealer access to the system at the point of vehicle registration. SB 5652, recognizing a claim against available coverage for registered tow truck operators to recoup costs for towing, recovery, impound, or storage fees when called to clear a public roadway, died at Wednesday’s opposite-house cutoff.
  • Banking & Financial Services. With most bills in this area exempt from session cutoffs due to their fiscal nature, the financial services industry is monitoring bills that haven’t moved this session for any signs of activity, including SB 5733, creating a B&O tax deduction for credit card interchanges, SB 5493, eliminating the B&O tax deduction for interest on first mortgages for certain banks, and SB 5509, creating a Washington State public infrastructure bank. Because the financial services industry has occasionally been a target for end-of-session tax increases necessary to balance a budget proposal, industry advocates are remaining on alert this week for any proposals that may surface in this regard.     

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