City priorities found key support in budget, yet some issues remain

The 2018 legislative session adopted a supplemental budget and ended the session within the allotted 60-day timeline. This was a different outcome compared to recent years in terms of adopting a timely budget and ending on time. Generally speaking, it was a positive outcome for cities on fiscal matters and a key factor was the strong revenue growth during the past several quarters.

Legislators fully funded the remaining requirements of the McCleary Supreme Court decision by the September 2018 deadline, and increased investments in state programs such as housing, mental health, and opioid treatment and prevention, which were AWC priorities this year. The supplemental budget also fully funded state-shared revenues and increased marijuana revenue to cities and counties as directed in the previous biennial budget adopted in 2017. We appreciate key local government champions in each caucus looking out for city interests and hope individual cities will take a moment to show appreciation.

See AWC’s budget matrix for more details on the final budget.

AWC’s next steps

AWC staff is already monitoring a number of workgroups related to city finance issues which will have reports to the Legislature submitted prior to the start of the 2019 session. The state operating budget included a proviso for a study of the state’s tax structure, legislation approved last year included a task force related to city business and occupation tax (B&O) service income apportionment, and last year’s budget also included a proviso to study the impacts of the end of streamlined sales tax mitigation with large commercial warehousing facilities.

We are also monitoring the state’s implementation of Marketplace Fairness legislation, which took effect in January 2018, and the U.S. Supreme Court’s decision expected this summer on Wayfair v. South Dakota, a challenge to a 1992 court precedent in Quill v. North Dakota preventing states from requiring out-of-state internet and other remote sellers without a physical presence in the state.