By Diana Carlen
March 25 marked the 76th day of the 2023 Legislative Session. Policy committees are busy voting on bills passed by the opposite chamber. The regular session is scheduled to end on April 23. Before then, legislators have several key deadlines to meet: they must pass policy bills out of the opposite chamber by March 29 and fiscal bills by April 4. Policy bills then must pass off the floor by April 12, and then the focus is on bills necessary to implement the budget (also known as “NTIB”).
The Economic and Revenue Forecast Council released its new revenue forecast on March 20, which showed a slowing economy. You can view it here. In a nutshell, state revenues increased by $194 million for the current 2021-23 budget cycle, but decreased by $483 million for the upcoming 2023-25 budget cycle. It also decreased by $541 million for 2025-27.
Following the revenue forecast, the Senate released their proposed capital budget and operating budgets. The House will be releasing their proposals this week. Once each chamber has staked out their budget positions, real negotiations begin. The goal is to reach agreement before the regular legislative session is scheduled to end.
Senate Capital Budget Released
Early this week the Senate released their proposed capital budget — a total spending of nearly $7.9 billion. The budget includes significant investments in behavioral health, affordable housing, education and natural resources. The item receiving the most attention perhaps is an investment of $625 million in housing, a total that includes $400 million allocated directly for affordable housing through the Housing Trust Fund. The investment is part of a greater focus on housing the legislature has taken this session. However, the proposal does not include the $4 billion referendum bond for housing and homelessness programs included in the governor’s proposal.
Some proposed spending items of interest include:
- $95 million for the Salmon Recovery Funding Board grant programs
- $15 million 2023-25 VSP Project Funding under the State Conservation Commission
- $60.7 million for the Odessa Groundwater Replacement Project
- $8 million for the WA State Fairs Health and Safety Grants
- Reappropriation of $3 million for the Voluntary Stewardship Program
- $1 million for Skagit County Voluntary Stewardship
The Senate capital budget proposal was heard, voted out of committee, and passed the Senate over the course of the week. A summary of the proposal and project list can be found here and the proposed bill language can be found here.
Senate Operating Budget Released
On Marcg 23, the Senate unveiled their $69.2 billion biennial operating budget proposal. The proposal adds about $5.1 billion in new spending, while leaving $3.8 billion in in reserves. Many of the budget priorities highlighted in the operating budget mirror those of the Senate capital budget including investments in education, behavioral health and affordable housing. The proposal also includes over $679 million in Climate Commitment Act (CCA) dollars. CCA funds are slated to go to carbon sequestration, clean energy projects, energy efficiency in homes and buildings, salmon recovery and funding to support for overburdened communities.
Some proposed spending items of interest include:
- $40 million for salmon riparian restoration grants.
- $3 million of the CCA account to support the outreach, identification, and implementation of salmon riparian habitat restoration projects.
- $2 million of the CCA account to develop and implement an educational communication plan to the general public and landowners regarding the importance of riparian buffers and actions they can take to protect and enhance critical areas.
- $8.48 million to the Conservation Commission for implementation of the Voluntary Stewardship Program.
- $480,000 for the governor to invite federally recognized tribes, local governments, agricultural producers, commercial and recreational fisher organizations, business organizations, salmon recovery organizations, forestry and agricultural organizations, and environmental organizations to participate in a process to develop recommendations on proposed changes in policy and spending priorities to improve riparian habitat.
- $2 million for the Department of Commerce to contract with the national academy of sciences or a similar independent research organization to conduct an analysis of new electricity generation, transmission, ancillary services, efficiency and storage needed to offset what is currently provided by the lower Snake River dams, as well as identifying any impacts to grid reliability, consumer pricing, and carbon pollution that would result from dam removal.
- $500,000 for the Department of Ecology to conduct an analysis of how to continue water use for irrigation during draw-down related to potential lower Snake River dam removal.
- Funding to implement SB 5341 creating a location-based promotion program for Washington food and agricultural products.
- $500,000 for the Department of Ecology to contract with a third-party consultant to gather stakeholder input and make recommendations on the design and implementation of a producer responsibility program for consumer packaging, including paper, plastic, metal, glass and paper products. The report would be due to the legislature by Dec. 1, 2023.
- $95 million to Commerce to implement programs and incentives that promote the purchase of or conversion to alternative fuel vehicles.
- $56.3 million to Commerce to develop a medium and heavy duty decarbonization incentive grant program to transition to zero-emissions medium and heavy-duty vehicles.
- $653,000 for the Office of Financial Management to research and analyze wealth taxes imposed in other countries and wealth tax legislation recently proposed by other states and the U.S.
- $157,000 to UTC to convene a stakeholder group to discuss the sufficiency of energy resources available to address the risk of rolling blackouts and potential inadequacy events.
- Funding to implement SB 5277, extending the expiration date of B&O tax exemptions for dairy, fruit, vegetable, and seafood processors from July 1, 2025, to July 1, 2035.
The Senate operating budget was heard in Committee on March 24 and is scheduled for executive action this week, with floor action anticipated shortly thereafter. The budget summary be found here and proposed bill language can be found here.
Washington Supreme Court Upholds Capital Gains Tax
In a 7-2 ruling March 24, the Washington State Supreme Court reversed a lower court decision and upheld the state’s capital gains tax as constitutional. The capital gains tax passed in 2021 and applies a 7% tax on the sale of financial assets such as stocks and bonds. The tax applies only to profits over $250,000 and does not apply to real estate or retirement accounts. Some agricultural land is exempt from the tax.
Opponents of the tax had challenged the tax by arguing it was a tax on income and violates the state constitution’s requirement that taxes be applied uniformly across the same class of property. The court declined to revisit its prior precedent, which bars a progressive income tax, but instead ruled the capital tax is constitutional because it is an excise tax, which is a tax on a good or service and not a property tax.
The tax became effective on Jan. 1, 2022. First payments are due on or before April 18 of this year. It was projected to bring in $415 million in 2023, the first year the state would see money from the tax.
Senate budget writers built the capital gains tax into their capital and operating budget proposals that were released this past week.
Supporters of the tax were pleased with the court’s decision arguing that it was a victory to make Washington’s tax system more progressive. Opponents of the ruling were disappointed but relieved the court had not overturned their prior precedent to authorize a full-blown income tax.
L&I Files Update to Outdoor Heat Exposure Rules
This week the Department of Labor & Industries (L&I) filed a proposed update to Washington’s permanent heat rules. The proposal follows a number of stakeholder meetings L&I held on potential draft rules this fall. Some of the changes put forward in the proposed rule include:
- Lowering the trigger temperature to 80 degrees (52 degrees if wearing nonbreathable clothing).
- Providing adequate access to shade.
- Providing that the already required water is cool enough to safely drink.
- Requiring close observation of employees during heat waves, new workers, and returning workers.
- Allowing and encouraging workers to take additional paid preventative cool-down rest.
- High-heat procedures requiring close observation of employees and mandatory cool-down rest periods of 10 minutes every 2 hours at 90°F, and 15 minutes every hour at 100°F.
L&I plans to hold five, in-person hearings throughout the state as well as one virtual hearing. Written comments on the rule proposal can also be submitted through May 11, 2023. Proposed rule language can be found here. Additional information regarding rule hearings can be found here.
Bill Aimed at Protecting Warehouse Workers Passes Senate Labor Committee
Legislation aimed at protecting warehouse employees passed out of the House Labor & Commerce Committee this week, but with critical amendments. 2SHB 1762 would require employers to be transparent about their use of quotas with workers and regulators and prohibits quotas from interfering with meal and rest breaks and exposure to health and safety hazards.
Sponsors have stated that the bill is modeled after laws passed in California and New York. However, the bill had a couple key differences from the California and New York laws. Specifically, the bill references NAICS code 493 which covers the entire warehousing and storage sector. Even businesses that do not use quotas were concerned that other performance standards in the legislation would be considered quotas given the language of the bill.
Prior to passing out of the Senate Labor & Commerce committee, an amendment was adopted to exempt farm product warehousing and storage and couriers and express delivery services. This amendment brought the bill in alignment with the California and New York laws.
Other Notable Bill Action Last Week:
- Voluntary Stewardship Program(SSB 5353) would allow additional counties to join the Voluntary Stewardship Program and be eligible for program funding. The bill also requires the Conservation Commission to determine which watersheds in the new participating counties received adequate funding to implement the program every two years and requires county action if adequate funding is not received. On Tuesday, the bill was voted out of the House Local Government Committee.
- Clean Energy Siting (E2SHB 1216) creates an expedited permitting process to make it easier to permit certain types of energy and clean manufacturing projects, helping meet the state’s clean energy goals. Although the House had amended the bill to include certain projects or facility upgrades undertaken by emissions-intensive trade-exposed industries to the definition of clean energy product manufacturing facility, the Senate Environment & Energy Committee unfortunately removed this provision as it was voted out of committee this week.
- Nooksack Adjudication (HB 1792) would allow parties impacted by the Nooksak adjudication to have more time to gather information and for many to find legal representation. Given the number of claimants, the latter could prove challenging. It extends the time those affected by the adjudication would have to file a claim to one year after the order for the adjudication is made by a superior court. On Thursday the bill passed out of the Senate Agriculture, Water, Natural Resources & Parks Committee.
- Personnel Records (E2SHB 1320) was amended and passed out of the Senate Labor & Commerce Committee on Thursday. Amended language requires an employer to provide an employee with a complete copy of their personnel file at no cost within 15 business days of a request. Additionally, an employer would be required to provide a former employee with a signed written statement with the effective date of discharge, whether the employer had a reason for the discharge, and if so, the reasons, within 14 days of the written request. Further amendments to the bill require an employee or former employee to provide 5 days notice of intent to sue.
- Nuclear Reactor Technology (ESHB 1584) would include nuclear reactor technology under consideration for cleaner energy sources in the State Energy Strategy. On Friday, during executive action in the Senate Environment, Energy & Technology Committee on the bill was amended to restore natural gas as a resource to consider under the state energy strategy guiding principle to reduce dependence on fossil fuel energy sources.