This week, the blog’s been slow because I was filling in for Jessica Gao on The Impact. But now, in just about 30 minutes, you can catch up on the week’s news. Enjoy.
Tags: Jim Camden, mary selecky, methamphetamine, Mike Baker, taxes, The Impact
This week’s Q&A is with Sen. Joe Zarelli. I spoke with him about SJR 8206, a Constitutional Amendment that will bolster the Rainy Day Fund by requiring the state to put “extraordinary revenue growth” in the bank.
Q: First, tell me what this would do in your own words.
Zarelli: Well, it builds upon what we put out a couple of years back establishing the Rainy Day Fund. For me, it’s one of those long-term lessons learned from the current revenue scenario we’re in, where we saw revenue grow way outside a typical scenario (earlier in the decade). What this does is this sets up a process in the future where if this ever happens again, we’d be required to capture a percent of extraordinary revenues and move it to the Rainy Day Fund. That does two things: First, it makes us save some of that money and second, we don’t spend it — so it has a double effect of making the budget more sustainable over time.
Q: You mentioned that it saves money in two ways — the second being that you don’t create new programs with extraordinary revenue. Can you say more about that?
Zarelli: Well, the biggest problem is that when you have a spike in revenue that you know isn’t going to continue and then you spend that spike, it creates a bow wave — you have no way to support that spending. When revenue comes back down to its historical growth pattern and then spending is way out of balance, that creates problems like we’re in now. The idea is to harmonize the spending pattern so it stays consistent with what is long-term growth instead of the ebbs and flows.
Q: There hasn’t been much opposition to this Constitutional amendment. Does that reflect bipartisan support across the state?
Zarelli: Well, there are some of those in the social services arena who think that we can’t commit to saving money, we have to spend it because there’s a huge need. There is a small group, but my message to them is that it does us no good if we commit to spending that we then have to withdraw from. (more…)
Tags: Budget, budget stabilization, Q&A, Rainy Day Fund, revenue, SJR 8206, taxes, Zarelli
Last week, I spoke to Tim Eyman about his latest initiative and how it would affect tolling across the state. This week, I spoke with Doug MacDonald, former secretary of transportation. He retired in 2007, just after the Tacoma Narrows Bridge opened. He’s an opponent of the initiative. Here’s what he had to say.
Q: First, what does this initiative do from your perspective?
MacDonald: Well, the worst part of the initiative is that it’s going to stop a whole lot of progress that’s been made on roadway improvements. I’m not sure that Tim Eyman, when he drafted this initiative, understood what some of its effects would be. But the kind of bomb that it dropped that’s most significant is on the 520 bridge project, because that’s structured to be financed by tolls to pay back bonds that would pay for some of its cost. That’s a good thing because it means that costs get paid in part by the users and not fall on taxpayers across the state. That’s a plan that’s been very attractive.
But the initiative says that tolls have to be set by the Legislature, which is absolutely not consistent with tolls being used to pay back that kind of a bond. And the confirmation of that isn’t coming from people like me, it’s coming from our state treasurer, Jim McIntire. McIntire has analyzed all this and he has put out a statement, reflected in the OFM fiscal analysis, that says that investors won’t buy bonds at as favorable a rate if there’s the political uncertainty of having tolls being set by the Legislature. (more…)
Tags: Doug MacDonald, funding, initiative 1125, Q&A, taxes, Tim Eyman, tolls, transportation
At the end of session, House Democrats voted on a bill to close tax loopholes to fund education. The bill got the majority of votes, but because it didn’t get a two-thirds supermajority, the bill failed. That raised plenty of speculation that the vote was the foundation of a lawsuit challenging the legality of Tim Eyman’s Initiative 1053, which requires any tax increase — even the closure of a tax exemption — to pass with a two-thirds vote of the House and Senate or a vote of the public.
Today, we learned that 12 House Democrats, along with education advocates and one former Supreme Court justice, are going ahead with that lawsuit. (Check out the link for more on the case and a copy of the legal complaint.)
Tags: Eyman, House, taxes, two-thirds requirement
This week’s Q&A is with Rep. Andy Billig, one of 11 House Democrat freshmen who introduced a bill yesterday to close certain tax exemptions to fund smaller class sizes for Kindergarten-3rd grade classes. Here’s what Billig had to say this morning about the bill, its prospects and what message voters really sent in the last election.
Q: First, tell me about the proposal you unveiled yesterday to cut tax exemptions to fund education.
Billig: Well, we — the 11 freshmen Democrats along with the support of a total of 48 colleagues — really feel that we need a balanced approach to solving our revenue crisis and that’s what this bill is about. It’s about making the investments in kids that we need over special interest tax breaks.
Q: It would take a two-thirds vote to get this through, and I think for that reason some people have written it off. Was this just a statement?
Billig: No, we think that this has a good chance to pass. I think most of our colleagues will agree that we should put the interest of young children first and invest in their academic achievement and invest in their future over special interest tax breaks.
Q: Tell me more about what specific tax breaks you’re targeting. There’s the end to the out-of-state sales tax exemption …
Billig: Yes, out of state shoppers, and then the other one – it’s not closing the bank tax exemption but limiting the mortgage B&O tax exemption for banks to $100 million. We’re the only state in the country that has this tax exemption so we want to limit that to $100 million so that most of the in-state banks wouldn’t be affected.
Q: I think that’s one exemption you hear about but it’s very confusing. Can you explain it further?
Billig: Banks have revenue from different sources. One of the sources is from mortgage interest. So when you pay your mortgage, part of what you’re paying is interest and that is revenue. So all businesses – I have a business, and I pay B&O tax on all of our income, and the banks don’t. They don’t pay B&O tax on the interest that they get on first mortgages. So this would basically cap that exemption so that they would be paying B&O tax just like any other business. (more…)
I’m at the Gig Harbor Chamber of Commerce meeting, listening to Reps. Hans Dunshee and Gary Alexander debate Referendum 52, which would weatherize schools and use a bottled water tax to service the bond debt.
Rep. Larry Seaquist is in the audience, and asked why the referendum is important — and worth a tax increase.
“Dan Evans went out to the people in ’72 with what would be the equivalent of $2 billion today to stimulate jobs,” he said. “I think that every kid in the school, in the state, ought to have a healthy building …. I think that’s our paramount duty,” he said. “There’s nothing in this room that if we increased (the cost) by 1.5 percent, you would be able to tell the difference.”
Rep. Alexander: “In the same four years, the previous four years, the capitol budget grew by almost 43 percent,” he said. “Now, all the sudden, when we hit the debt service limit we have to look at other types of debt service” opportunities. Alexander said he’s against R52 not because he doesn’t want healthy schools, but because he does want fiscal responsibility.
Another guest asked why not take a bit of lottery money to pay for the improvements. Alexander said the lottery brings in about $150 million a year, and some of that easily could have been diverted. Dunshee said that’s a policy call, “you can stop construction to do this,” he said, which would pit maintenance against construction.
Another asked how the increased debt would affect the state’s bond rating. Dunshee said that the state treasurer said this debt would not affect the bond rating, and that Washington is already in a better position than many states. “This recession is the biggest thing that any of us have ever seen in our lives,” he said. “We are cutting,” he said, but this is a good investment.
Alexander, however, said the state treasurer also has told the Legislature that they may not have enough in the bank to pay bills. “I am concerned about the bond rating.” “We are at our constitutional debt limit,” he said — 9 percent. “Our debt service costs are somewhere in the top third” of other states, he said.
Now, time for closing statements.
Alexander said it’s been a good debate. “I just want to sum up by saying it’s always enjoyable to discuss issues with my comrade over here,” he said, referring to Rep. Dunshee. “I just believe that at this point in time, Ref 52 is not in taxpayers’ best interests,” he said. He also said there are many important issues on the ballot this year and encouraged voters to learn about them all.
Dunshee: “We may disagree, but it’s how you disagree that matters in Democracy,” he said, of the debate. He said this referendum would save money, “I would offer to you to go to the web site — healthyschoolsforwa.org — you can see examples, you can see testimonials, you can see financing,” he said.
Tags: Referendum 52, taxes
Watch this week’s edition of The Impact right here. Host Jessica Gao goes over the budget, which Gov. Chris Gregoire just signed, and what it will mean for higher education.
Tags: Budget, Higher Education, taxes, The Impact
This week’s Q&A is with Janetta Taylor with the Department of Revenue. I was interested in finding out how the department is dealing with nearly 70 changes to the tax code worth $800 million that go into effect on a handful of different dates — including tomorrow, when cigarettes will cost $1 more per pack.
Taylor told me about some big changes to the tax code that could help local businesses, what it would take to implement an income tax, and much more.
Q: How many changes did the Legislature make, and what does the DOR have to do to implement those changes?
Taylor: With this session we have 68 changes that came through, which is quite a few. It will be a challenge for the department to make sure that we contact all the businesses that are affected. That really is our focus: educate, educate, educate.
We have a wide variety of mechanisms to do that. In Washington, most businesses and household are connected to the Web. The first thing we did is post the information on our Web page. There’s a link to all the information with the write-ups. Of course, also some of Mike’s (Mike Gowrylow, communications director at DOR) media releases. And we also try to target mailings to the specific businesses that are impacted. We have about 450,000 registered businesses. Not all of these changes affect all businesses. We look at businesses by their activity and we tailor specific mailings to them and try to get them all the information they need.
We also have special things going on with electronic filing. A large number of our tax payers actually file electronically so we can send them e-mails or send them alerts in the system.
Q: The $1 per pack addition to the cigarette tax goes into effect tomorrow (May 1). What did you have to do to implement something like that?
Taylor: The ones that start tomorrow were quite challenging because we did have a short time frame. We actually started planning before the bill was signed. (more…)
Tags: Department of Revenue, income tax, Legislature, taxes
Gov. Chris Gregoire is scheduled to sign into law the $800 million increase in taxes today. And Jordan Schrader with The News Tribune has the scoop on an effort to thwart the soda pop tax.
I’ll be there blogging on the bill signing and TVW will tape it to air this afternoon. Check back with the blog at 1:30 to follow along.
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