On March 25, the House Appropriations and Transportation Committees released and heard their proposed budgets for the FY 2019-21 biennium. On March 26, the House Capital Budget Committee heard their proposed budget for the biennium. The operating and transportation budgets are expected to pass out of the House later this week. The Senate Transportation Committee released its proposed transportation budget on March 26. The Senate is releasing its capital budget on March 27 and hearing it in the Ways & Means Committee on March 28. The Senate operating budget proposal is expected to be introduced within the next week.

What you can do
Now is a good time to contact your legislators and remind them of the programs important to cities in the state budget. For a full list of programs AWC is supporting in the budget, see our earlier letter to budget leaders.

We ask that when you talk to your legislators, first thank them for preserving state shared revenues and supporting other city priorities, but also express your opposition to the sweep of money from the Public Works Trust Fund.

Operating budget

Overall, the House-proposed operating budget has mixed impacts for cities. The operating budget represents what is likely the highwater mark for the budget proposals from the House and Senate. It funds $52.6 billion in state near-general fund expenditures, representing an increase of $2.3 billion over the maintenance level budget.

The budget relies on three new state revenue sources generating $1.4 billion:

• A capital gains tax dedicated to education;
• Implementation of a graduated real estate excise tax (REET); and
• A state B&O tax rate increase from 1.5% to 1.8% on certain industries such as technology, doctors, and accountants. The increase would be dedicated to higher education.

For more information, see the budget summary chart or read some of the highlights below.

Highlights of budget impacts for cities

State shared revenues:
The House proposal fully funds state shared revenues, with the exception of an expected increase in marijuana excise tax distributions, which were funded at the last biennium's level of $30 million instead of $40 million originally anticipated when distributions were approved (HB 2136 in 2015). Streamlined sales tax (SST) mitigation funding is continued for those warehousing jurisdictions impacted by the state's change to destination-based sales tax sourcing (HB 1948).

Pensions:
We are concerned about the LEOFF 2 pension fund transfer of $300 million to the Benefits Improvement Account (BIA), which would reduce the funded status of the plan. Further, these funds are held to provide current member benefits, and this proposal transfers those funds to an account to provide new benefits. Funding the BIA is a state obligation which should not be shifted to the LEOFF 2 fund.

Basic Law Enforcement Academy (BLEA):
Funds 19 classes each year as requested by cities. The annual increase of 9 classes will help cities keep up with the need to train new officers and supports public safety in our communities.

Mental Health Field Response Grant Program:
$4 million is appropriated in response to the Trueblood settlement to help phase in a grant program statewide. $3 million of the appropriation will help advance the program in Pierce and Spokane Counties, and parts of southwest Washington. The additional $1 million is set aside to administer and grow the program. This program is an invaluable tool to help our local law enforcement address the behavioral health crisis in our cities.

Affordable Housing Local Option:
Funds a new partnership between the state and local governments in support of affordable housing. This $70 million per biennium funding for assumed passage of HB 1406 will provide for a new local option sales tax flexible funding source to address each city's unique affordable housing needs.

Municipal Research Services Center (MRSC):
Fully funds MRSC and the crucial technical assistance it provides to cities.

Capital budget

Housing and behavioral health:
We appreciate the state's investment in affordable housing and homelessness through a very significant investment in the Housing Trust Fund of $150 million. That investment, combined with the over $211 million investment in behavioral health and addressing opioids in our communities, represents historic levels of proposed commitment to addressing these critical needs across the state.

Public Works Trust Fund (PWTF):
We are disappointed that the proposed budgets further sweep funds out of the PWTF. The House sweeps an additional $160 million out of the PWTF—in addition to continuing the diversions of REET, solid waste utility revenues, and public utility tax revenues. This is a step backward from the Legislature's commitment in 2017 to restore local infrastructure funding. Of the $100 million remaining in the fund, approximately $20 million is earmarked for specific projects leaving only $80 million available for competitive funding applications.

Cities have supported a new broadband funding program to expand service in unserved areas of our state. However, we have been clear that we will not support funding for the new program at the expense of other infrastructure funding. We oppose the diversion of $25 million in PWTF money into the new broadband program.

Transportation budget

Culverts:
We appreciate the state's continued investment in local culvert funding and recognition that the state must use a strategic approach to address both state and local barriers. We hope to continue to refine that strategic approach this session so that all entities engaged in culvert repair at the state level are effectively coordinating to maximize the value of the state investment.