The Governor enters budget negotiations while the Legislature hits another cutoff deadline

There are three weeks left to go in this year’s legislative session, and lawmakers are currently in the fiscal committees hearing, debating, and voting on bills, with a little floor time off to the side passing largely uncontroversial measures. This past Wednesday was the opposite-house policy committee cutoff, and this coming Tuesday is the fiscal committee cutoff. From there, opposite-house measures not necessary to implement a budget must pass out of the chamber by April 16^th. Bills amended in the other chamber have to return to their house of origin for concurrence or dispute on the changes. After Tuesday, most of the action through sine die on April 27^th will be on the House and Senate floor, while budget negotiators meet to forge compromise budgets. Governor Ferguson threw a curveball into the budget debates on Tuesday, declaring in a press conference that he does not support either of the operating budgets passed by the House and Senate as they rely too heavily on tax increases – admonishing legislators to go back to the drawing board.  

Top updates and issues from the twelfth week, and coming activity, include:

Budget & Taxes
The Senate and House passed their budget plans (SB 5167) off the floor last Saturday and Monday respectively, prompting Governor Ferguson to hold a press conference on Tuesday stating he does not support either plan, because they rely too heavily on tax increases -- in particular, the wealth tax, which he criticized as untested, unreliable, and difficult to implement. On Thursday, the Senate refused to concur in the House budget, a formality leading to the appointment of a conference committee to hammer out a deal in the remaining three weeks. At issue will be defining the overall spending level – both chambers are presently at approximately $78 billion for the biennium – and the revenue pieces necessary to balance the budget. Both chambers’ fiscal committees heard public testimony on their announced tax packages, Monday in the Senate Ways & Means Committee and Thursday in the House Finance Committee. As a reminder, the Senate tax package is comprised of  the wealth tax, SB 5797,  property tax lid lift, SB 5798, payroll tax on higher-compensated employees of large volume businesses, SB 5796, repeal of multiple preferential B&O tax rates, SB 5794, and 0.5 percent sales tax reduction, SB 5795, while the House package is comprised of a one percent B&O tax surcharge on $250 million+ businesses, HB 2045, its version of the wealth tax, HB 2046, and its version of the property tax lid lift, HB 2049. On Thursday, nearly 70 prominent business leaders sent a letter to the “five corners” warning against the economic fallout of the spending and taxation plans on the table. The Seattle Times editorial page weighed in against the taxes, echoing concerns raised by Puget Sound-area mayors about the tax hikes, and building upon the paper’s earlier criticism of the budgets’ spending growth. The considerable opposition to the tax proposals is causing legislative leaders to look elsewhere for revenue, floating a menu of other tax concepts that range from tweaking the capital gains tax to increasing taxes on nicotine products, storage units, the “advanced computing surcharge” on large tech companies, short term rentals and rental cars, a sales tax on services, and more.     

Transportation
On Wednesday, the House passed its version of a $15.2 billion biennial transportation budget on a 66-30 vote, setting up negotiations with the Senate, who had passed their similar plan the prior week. On the House side, the vote was more partisan, as minority Republicans objected to reliance on an uncapped increase in the gas tax, among other new revenue supports. House Transportation Chair Jake Fey, D-Tacoma, has pivoted away from the previously announced per-mile Road Usage Charge (RUC) and has instead announced a Highway Usage Fee, a flat annual fee paid at registration renewal that is based on a vehicle’s fuel efficiency, to support the budget. On the Senate side, the transportation budget has had a somewhat more bipartisan frame, as evidenced by a joint op-ed in the Seattle Times Thursday by Transportation Chair Marko Liias, D-Edmonds, and ranking Republican Curtis King, R-Yakima, explaining their collaboration on the budget plan. The Senate budget is more modest than the House, at $9 billion for the biennium, and relies on a different mix of revenue, including a gas tax increase, luxury vehicles tax, e-bike surcharge, and “large event transportation assessment” of $1 per attendee at concerts and sporting events at venues holding over 20,000 attendees. Liias and King have also proposed SB 5802 to shift 0.3 percent of the state sale tax from the general fund to the transportation budget. Also factoring in is SB 5804, addressing the state’s obligations around fish habitat and passage arising from ongoing litigation, authorizing issuance of up to $5 billion in bonds for fish passage projects, offset by new and increased taxes on light and power utilities. That bill was heard Tuesday in the Ways & Means Committee and is scheduled for a committee vote this Tuesday.

Capital Budget & Construction
On Saturday, the Senate unanimously passed its $7.2 billion biennial capital budget, and supporting bonds, earmarking $1 billion for early learning and K-12 projects, $1.2 billion for higher education, $770 million for housing among its bigger ticket plans. The House heard its roughly commensurate proposal, spending $7.63 billion, in the Capital Budget Committee on Tuesday and voted it out of committee on Friday. It is expected to pass off the floor this coming week setting the stage for the two chambers to come to agreement.  In bill action, HB 1970, streamlining contracting options for the Department of Transportation, was heard in the Senate Transportation Committee on Tuesday and is scheduled for a committee vote this Tuesday. SB 5061, the prevailing wage escalator bill, was referred to the House Capital Budget Committee on Tuesday, but is not scheduled for a hearing. HB 1183 on building code and development regulation reform, was heard in the Senate Ways & Means Committee on Thursday and is set for a committee vote on Monday.  SB 5360 on environmental crimes, was voted out of the House Energy & Environment Committee on Monday and was heard in the House Appropriations Committee on Saturday. HB 1217, imposing rent control on residential units, continues to draw controversy as it was heard in the Senate Ways & Means Committee on Friday, and is scheduled for a committee vote on Monday.

Labor & Employment
SB 5041, providing up to12 weeks of unemployment insurance benefits to workers on strike, was heard in the House Appropriations Committee on Friday and is scheduled for a vote on Tuesday in committee. The business community, while opposing the bill entirely, is also pursuing an amendment to limit the number of benefit weeks to four. SB 5463, creating new obligations and penalties on private employers who self-insure for workers’ compensation, was heard Thursday in the Appropriations Committee and voted out of committee on Saturday with a bi-partisan amendment limiting the “three strikes decertification” penalty. SB 5525, requiring employers with 50 or more employees to provide 60 days’ notice of business closure or large layoffs, is in the House Rules Committee awaiting a pull to the floor. HB 1213, substantially expanding coverage and access to the state’s paid family and medical leave insurance program for workers of smaller employers, was heard in the Senate Ways & Means Committee on Saturday and is scheduled for a committee vote on Wednesday. HB 1308, giving workers a private right of action to enforce rights to request and review personnel records was pulled from the Senate Rules Committee on Friday and is eligible for a floor vote. SB 5501, prohibiting employers from posting job solicitations that require applicants to have a valid drivers’ license, continues to sit in the House Rules Committee. 

Insurance
In property and casualty, HB 1006, expanding options for the financial backing of service contracts, passed unanimously off the Senate floor on Saturday and now heads to the Governor for signature. SB 5331, providing authority for the Commissioner to order restitution and levy $10,000 per violation fines on insurers, failed to advance from the House Consumer Protection & Business Committee Wednesday after an amendment was adopted providing an aggregate cap on the proposed per-violation penalties. After the amendment as adopted, the measure was brought up for a vote and failed, as two Democrats opposed to the capping amendment joined Republicans opposed to the bill in general, sealing its fate.  SB 5589, ordering a study of the use of credit history and credit-based insurance scores and other rating factors in underwriting personal lines, is no longer moving in bill form but continues to live as a budget proviso in both the Senate and House operating budgets as they head into conference committee negotiations. SB 5721, requiring an auto repair appraisal policy term and creating an appraisal process for disputes over repair and total loss appraisals, passed out of the House committee on Wednesday, after an agreed-to amendment was struck between the repair shops, plaintiffs’ lawyers, and insurers to allow the appraisal clause mandate but without controversial “loser pays” fee-shifting provisions. Other insurance bills moving include HB 1539, creating a wildfire mitigation working group, passed the Senate unanimously on Wednesday, and heads to the Governor while HB 1516, creating a study of insurance options for affordable housing units, continues to sit in the Senate Rules Committee awaiting a pull to the floor.

In life and disability, SB 5141, excusing disability income insurance carriers from single case filings for experience-rated groups, passed the House unanimously on Monday, and heads to the Governor for signature this coming week. SB 5351, addressing dental insurance benefits, was heard in the House Appropriations Committee on Thursday and voted out of committee on Saturday, heading to the House Rules Committee.  

Financial Services
HB 1285, requiring financial literacy education in high school graduation standards, officially died at cutoff in the Senate Early Learning & K-12 Education Committee, failing to receive a hearing. This signals an ongoing difference of opinion on the requirement between House and Senate education leaders. SB 5328, creating a regulatory framework for companies to provide Earned Wage Access services, appeared on a hearing schedule in the House Consumer Protection & Business Committee but was never brought up. It too failed to make cutoff. Newer bills in this space include HB 2025, which creates a new B&O tax rate for credit card payment processors, and allows a deduction for processing companies on the fees they pass through. It was heard in the House Appropriations Committee on Saturday and is scheduled for a vote on Wednesday. Banks and lenders are on alert to budget and tax discussions in the final weeks of session, as a common target of lawmakers cobbling together revenue packages. In that regard, HB 1506 remains in the mix, extending the B&O tax to credit unions that merge with a commercial bank.  

Civil Justice & Liability
HB 1403, providing new warranty options and liability protections for condominium builders and developers to promote affordable housing units was pulled from the Senate Rules Committee to the floor on Wednesday. It appears well-positioned for passage in an upcoming floor session. SB 5408, originally providing notice and a right to cure allegedly defective job postings prior to an employer being sued, is in the House Rules Committee, albeit with a poison pill amendment added by the House Labor & Workplace Standards Committee, stripping the notice of alleged violation and opportunity to correct a posting. Advocates for the original bill in the employer community are continuing work to revive an acceptable version of the bill on the floor before the April 16^th cutoff.  
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