House passes their operating budget - Negotiations with Senate will begin

The House budget was released and passed on a partisan vote last week. Negotiations will now begin between the House and Senate to reconcile differences in their approaches. Key provisions impacting cities are summarized here. The Senate-passed budget spends $43 billion and includes revenues to support it, while the House-passed budget spends $44.7 billion and includes new revenues, primarily reflected in HB 2186, which will be considered by the House Finance Committee this week (see article in Budget & Finance).

Key impacts in the House budget:

• Both the House and Senate passed budgets fully fund critical and long-standing shared revenues, including liquor profits and taxes, municipal criminal justice assistance, and local government assistance. However, these revenues will remain at risk as budget negotiations continue. Information about shared revenues your city is estimated to receive 2017-19 is available here (select your city in the drop-down arrow box).
• The budget maintains funding for the 20 percent state share of LEOFF 2 pension contributions dedicated to helping pay a portion of police and fire personnel pension costs, unlike the Senate budget proposal eliminating it. Elimination of this long-standing commitment to share the funding of these pension costs would shift $70 million in additional costs to cities.
• Both the House and Senate budgets include some funding for Public Works Trust Fund loans for the first time in four years by retaining some of the loan repayments in the fund. Both budgets continue to sweep tax revenue streams.
• The House budget originally proposed eliminating the expected increase in local governments’ share of marijuana revenues— providing $12 million. However, full funding of $30 million was restored in an amendment, as long as the state receives an additional $18 million in marijuana tax revenues compared to the March 2017 revenue forecast.
• The budget funds streamlined sales tax (SST) mitigation for 2017-19 but signals elimination of those funds for impacted warehousing cities beginning in 2019 based on implementation of new requirements for sales tax collection by internet retailers.
• The budget funds and does not place new eligibility requirements on Fire Insurance Premium Tax distributions to 44 cities to assist with pre-LEOFF and LEOFF 1 firefighter retirement and medical costs.
• The budget provides more funding for housing and homelessness, including funding for the housing and essential needs (HEN) program reduced in the Senate budget, funding for implementation of the Sec. 1115 Medicaid waiver, and additional TANF funding.
• The budget provides full funding for the Municipal Research and Services Center (MRSC), and does not include the requirement in the Senate budget for Commerce to submit an alternative funding plan by October 2018 or else funding is reduced.

Reconciling key differences on school funding approaches, funding collective bargaining agreements for state employees, and revenue options will need to occur before the Legislature can pass a budget for 2017-19 and adjourn for the year.