On this week’s edition of The Impact: The drop in the state’s jobless rate is actually bad news for the long-term unemployed. Plus, an examination of the Senate Republican budget coup – what did it accomplish?
The state’s unemployment rate held steady at 8.3 percent in March, the same rate as the previous month. But employers added 3,300 jobs — marking positive job growth for 18 out of the last 19 months.
March’s unemployment rate matches February’s revised rate of 8.3 percent, according to the Employment Security Department. Most of the jobs added in March were in the government sector, specifically K-12 schools and higher education.
The state’s job picture is rapidly improving, Employment Security Commissioner Paul Trause said at a meeting Wednesday morning. Trause said the state has lost 200,000 jobs from “peak to trough” of the recession, starting in March 2008.
Since then, Washington has added back 91,000 jobs.
“We appear to be recovering at an accelerating pace from the recession,” Trause said at the Government Management Accountability and Performance meeting (video).
Kitsap Co. has suffered the biggest number of job losses from the recession, Trause said. The southwest and northeast corners of the state have also been hit hard with some of the highest unemployment figures in Washington, he said.
In honor of tax day, I thought it would be worthwhile to take a look a few tax changes the Legislature adopted this year. Gov. Chris Gregoire floated the idea of a temporary half-cent sales tax as a solution to the budget shortfall last year. That idea failed to gain support, as did another proposal she suggested which would have streamlined B&O taxes, or business and occupation taxes.
Here’s a look at some tax changes that did pass:
Local sales tax collections
This was the $238 million solution that helped break the logjam over the budget. It’s been widely called an “accounting maneuver,” but it basically works like this: The state collects sales tax revenue, which lands in the general fund. A share of that money belongs to local cities, counties and other agencies. Currently, their share is transferred to a separate account every day and then redistributed at the end of the month.
Under the new legislation, the money allotted for local governments will stay in the general fund about a month longer. They will still get their distributions at the usual time, but it gives the state a boost in its monthly cash flow. During floor debate on the issue, lead Democratic budget writer Rep. Ross Hunter said it is a way to “modernize” the way the state manages its money. It easily passed the House and Senate, and is awaiting the Governor’s signature.
Roll-your-own cigarettes
Washington state has the fifth highest cigarette tax in the nation, at $3.025 per pack. That means smokers in the state can expect to pay as much as $9 for a pack of cigarettes at the store, but some have found a way around that by using roll-your-own cigarette machines. Customers buy the tobacco and papers, then put it in a roll-your-own cigarette machine found in 65 stores statewide. In about 10 to 20 minutes, they’ve got rolled cigarettes for half the price.
New legislation expands the definition of cigarettes to include roll-your-own, and they will be taxed at the same rate as prepackaged cigarettes starting July 1st. The bill drew heavily debate in the Legislature, but ultimately passed. Opponents said it would put stores out of business and devastate small business owners, who paid about $30,000 apiece for the roll-your-own machines. Supporters say it will deter smoking, which improves public health while also bringing in an estimated $12 million in new revenue – a number that could change depending on how consumers react.
Eliminate tax deduction for big banks
Washington state doesn’t charge taxes on the interest that banks earn on loans for first mortgages. The Legislature voted to end that tax deduction starting July 1st for big banks that operate in more than 10 states. The change is expected to bring in about $15 million a year.
New tax breaks
While banks lost a tax deduction, other businesses got new or extended tax breaks. In an effort to attract more film and TV production companies to the state, the Legislature revived the Motion Picture Competitiveness Program, which expired last July. It gives filmmakers a 30 percent rebate off the money they spend in the state on hiring local crews and other expenses.
Also, craft distilleries that make and bottle their own spirits will get an exemption from paying a retail license fee of 17 percent on bottles they sell in tasting rooms. Businesses that operate processing facilities for fruits, vegetables, dairy and seafood will get an extension of a B&O tax exemption until 2015.
Tags: taxes
Check out our hourlong special edition of Legislative Review. It recaps the year in legislative news, covering everything from the budget to same-sex marriage to marijuana.
As the Legislative special session spilled into 7-and-a-half hours of overtime over the last 31 days, Gov. Chris Gregoire said she was as “angry” as she’s ever been in her tenure as governor.
“Temperatures were high, emotions were high,” as lawmakers attempted to break a stalemate over the budget, Gregoire said. “It was my most difficult legislative session,” she said.
But in the end, Gregoire said they accomplished something notable: A budget with broad bipartisan support.
In the state Senate, the budget passed with a 44-2 vote; Republican Senators Mike Padden and Cheryl Pflug both voted no. The vote was 64-34 in the House, with eight Republicans joining the Democratic majority to vote yes.
“I don’t recall having a budget passed out of the Washington state Senate with only two no votes,” Gregoire said today at a press conference. “The end product for people of the state of Washington is significantly bipartisan.”
Democrats did not want to cut education or social safety net programs like Disability Lifeline, while Republicans wanted reforms that would make the budget more sustainable long-term, Gregoire said. The budget that the Legislature passed in the early morning hours Wednesday encompasses both demands.
The budget makes no cuts to education and leaves the social safety net largely in tact. It incorporates a handful of reforms, including a constitutional debt limit, changes to the health insurance system for K-12 public school employees, ending some early retirement benefits for state workers and a four-year balanced budget requirement. It uses an accounting maneuver that holds onto the sales tax revenue collected from local governments about a month longer, which boots the state’s cash flow to the tune of about $238 million.
Gregoire said she regrets the state was unable to put more money into funding K-12 education, and she would have also liked to see a larger transportation investment.
Watch video of the full press conference below.
Tags: Budget
Miss the late night action during special session? We cover all the highlights on this 15-minute special session edition of Legislative Review.
Tags: Budget, health care, pension
The state Legislature passed a supplemental budget and adjourned at 7:30 a.m. this morning after pulling an all-nighter. The Senate passed the budget on a 44-2 vote, while the House voted 64-34. Read more in the AP story here.
Gov. Gregoire released a statement this morning praising lawmakers for their work, saying they came together to balance the budget and on reforms. Gregoire called for an additional one-day special session at midnight Tuesday after the clock ran out on the 30-day special session before lawmakers had come to an agreement.
We’ll have all the highlights of the night’s legislative activities tonight at 6:30 p.m. on a special session edition of Legislative Review.
Tags: Budget
Gov. Chris Gregoire intends to keep lawmakers working through the night after they did not reach a budget deal by midnight on the last day of the 30-day special session. The additional special session starts immediately, and Gregoire said she wants them done in one day.
“If I let them go home, the air will be out of the balloon again,” Gregoire said. “They know they have to keep working. They are on deadline.”
Lawmakers passed a number of bills in the hours leading up to the end of special session, including two measures that have been key to budget negotiations: a pension reform bill, and a four-year balanced budget requirement.
But Gregoire said that they had not yet been able to forge a deal on the last reform, a bill that makes changes to health insurance for K-12 employees.
Lawmakers working toward a midnight deadline cleared another hurdle when the House voted to pass a four-year balanced budget measure with a 79-19 vote.
The bill changed in negotiations from the version that the Senate passed on Monday, which would have required the budget to be in line with the four-year revenue forecast prepared by the Economic and Revenue Forecast Council.
Instead of relying on the revenue forecast — which critics said was too unpredictable — the bill assumes 4.5 percent revenue growth each year. That’s a figure that has remained fairly steady since the ’80s, said Rep. Ross Hunter, D-Medina.
“This will enable us to do solid regular planning and not get whip-lashed by large changes in the forecast,” Hunter said.
Rep. Mark Miloscia, D-Federal Way, said he hopes the bill will end the Legislature’s habit of going into multiple special sessions by forcing lawmakers to “look four years into the future for long-term solutions.”
UPDATE: The Senate passed the balanced budget bill with 38-9 vote following remarks by bill sponsor Sen. Jim Kastama, who said it was a good compromise.
Meanwhile, the Senate passed a bill that repeals Initiative 728. Voters approved the initiative in 2000 as a way to reduce classroom sizes, but without a way to fund it. The Legislature has regularly suspended the measure during economic downturns. It also establishes a task force focused on funding basic education.
The state Senate returned to the floor Tuesday evening to pass one of the key measures responsible for the budget stalemate — a pension reform bill that eliminates some pension benefits for state employees who retire early. It would apply only to new state workers hired after May 2013.
Republican Sen. Joe Zarelli said during the debate that the bill is a compromise that will save the state money, while still providing a “decent benefit” for retiring state workers. Employees who retire before the age of 65 will lose a percentage of their pension benefits for each year that they retire early.
But Sen. Karen Fraser, D-Olympia, said the bill will keep state workers on the payroll longer than they should — particularly teachers, or those with physically demanding jobs. “Public service should be a higher calling and I think this bill undermines that,” Fraser said.
The measure is expected to save the state $1.3 billion over the next 25 years.
UPDATE: The House voted to pass the bill around 11 p.m. with a vote of 56-42. The chamber had taken up the issue earlier in the evening, then deferred it.
Republican Rep. Gary Alexander said it was one of the “trifecta of reform bills” that will put the state on sound financial footing. Rep. Ross Hunter, D-Medina, urged members to vote for it as a way to move forward on the budget.
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