Every day last week included action related to the proposed state budget for FY 2019-21. After the release of the House-proposed budgets on March 25, the Senate budgets were released over the course of last week, starting with the release of the Senate transportation budget on March 26 and culminating in the release of the Senate-proposed operating budget on March 29. The Senate Ways & Means Committee heard the capital budget proposal on March 28 and is scheduled to hear the operating budget on Monday, April 1 at 3:30 pm.

Meanwhile, the House Appropriations Committee passed its version of the state operating budget out of committee on March 28, and it passed out of the House on March 29.

Overall, the Senate-proposed operating budget is similar to the House proposal, but several key programs including homelessness, behavioral health, and Streamlined Sales Tax (SST) mitigation have less funding for cities. In addition, unlike the House proposal, the Senate operating budget does not sweep funding from the Public Works Trust Fund (PWTF) for education, although both capital budget proposals appropriate or transfer funds for other uses, including statewide broadband.

The Senate-proposed capital budget is more positive for cities than the House proposal. It assumes passage of SB 5993, which makes significant changes to the Model Toxics Control Account (MTCA) with the intent to stabilize funding, and provides additional resources for additional funding for stormwater and water programs (see our SB 5993 article).

Senate operating budget

The Senate operating budget funds $52.2 billion in state near-general fund expenditures and relies less on new taxes to generate additional revenues.

The budget relies on one major new state revenue source generating $421 million, a graduated real estate excise tax (REET), as well as adoption of several changes to tax preferences and exemptions.

For more information, see the budget summary chart and check out some of the highlights below.

Highlights of budget impacts for cities

State shared revenues

The Senate proposal fully funds state shared revenues, with two exceptions:

• Like the House proposal, the Senate does not include 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 at a reduced level than the House proposal for eleven warehousing jurisdictions impacted by the state’s change to destination-based sales tax sourcing.

Pensions

Both the Senate and House proposals include a LEOFF 2 pension fund transfer of $300 million to the Benefits Improvement Account, which concerns cities because it 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 Benefits Improvement Account is a state obligation which should not be shifted to the LEOFF 2 fund.

Basic Law Enforcement Academy (BLEA)

The Senate budget funds 19 classes each year as requested by cities. The annual increase of nine 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

Like the House, $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.

Municipal Research Services Center (MRSC)

The Senate budget fully funds MRSC and the crucial technical assistance it provides to cities.

Senate capital budget

Housing and behavioral health

We prefer the Senate’s investment in affordable housing and homelessness through an even greater investment than the House in the Housing Trust Fund of $175 million. The Senate’s budget also invests significantly in behavioral health and addressing opioids in our communities, but we prefer the higher levels provided in the House proposal.

Public Works Trust Fund (PWTF)

Unlike the House budget, the Senate-proposed operating budget does not further sweep funds out of the PWTF for education, beyond continuing the diversions of REET, solid waste utility revenues, and public utility tax revenues.

However, the Senate-proposed capital budget does expand uses of the PWTF for additional uses, including $20 million for a new broadband program to expand service in unserved areas of our state. AWC is concerned about new precedents on further diversions of PWTF money for new programs in both versions of the capital budgets.

Culverts

The Senate budget includes $30.5 million for the Fish Barrier Removal Board in the capital budget. In the House, this program is funded in the transportation budget.

Model Toxics Control Account

The Senate-proposed capital budget makes significant changes to the Model Toxics Control Account (MTCA) with assumed passage of SB 5993, which will make funding changes to stabilize funding and provide additional resources for additional funding for stormwater and water programs.

Senate transportation budget

Culverts

The Senate budget includes more resources for state culvert investment than the House. In both versions of the budgets, we support 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, but cities prefer the higher funding level for local culvert replacement projects provided in the Senate capital budget. We are working 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.

Dates to remember

The operating budget is scheduled for a hearing in the Senate Ways & Means Committee on Monday, April 1 at 3:30 pm.