Rep. Smith, E-mail Update: May 1, 2013

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Dear Neighbors and Friends,

Good afternoon. I hope you find this update informative and useful. I’ve included information on the:

1. Budget negotiations and special session
2. Transportation budget
3. Ferry system
4. Derelict vessels
5. Bills of interest

Please let me know if you have any questions and feel free to forward this to others in our district who may be interested in receiving an update from Olympia.

Budget negotiations and special session

The 2013 regular legislative session ended on Sunday night, April 28. Unfortunately, the Legislature will need a special session to finish its business. It is disappointing because it was truly unnecessary to go into another special session – the seventh in the last three years. Here’s what is going on: Currently there are substantial differences between the operating budgets passed separately by the House and Senate majorities. This is important to remember: The state is expecting tax revenues of over $2 billion more for the upcoming budget. That is a 6.6 percent increase in revenue. Most families or businesses would love to see an increase of almost 7 percent in their budgets.

The Senate Majority Coalition Caucus passed a bipartisan budget proposal that does NOT raise taxes, yet increases funding for education by $1 billion to address the McCleary decision. It passed earlier in the session by a vote of 30-18. The senators that voted for the budget represented 30 of the 49 legislative districts, 38 of the 39 counties and over 4.2 million citizens. I may not agree with all of the Senate proposal, but it does approach our principles and priorities and is a good starting point.

The House Democrats’ budget proposal relies on $1.3 billion in tax increases. People are being told it is to fund education. But as I just pointed out, the Senate plan funds education without new or increased taxes and our House Republican plan – Fund Education First – would have done that also. Those are two options we could consider that fully fund education and don’t pit tax increases against kids and the classroom.

There is a fundamental dilemma with the House Democrats’ spending plan: It relies on $1.3 billion in new tax increases, but the tax package introduced raises “only” $879 million. So, they will either have to cut spending in their budget or find more taxes to increase. The tax bill, House Bill 2038, came to the floor for debate on April 24 but despite vigorous opposition by House Republicans the measure passed by a vote of 50-47, with all Republicans and five Democrats voting against it.

We offered two important amendments. One amendment would have deleted the emergency clause in the bill. The second amendment would have allowed the taxpayers the opportunity to vote on the tax package in the November election. With an emergency clause, the bill would take effect immediately upon the governor’s signature. Unfortunately, it also would prevent voters from petitioning to put a referendum on the ballot. The voters in our state have made it abundantly clear they like to have the opportunity to vote on new or increased taxes. The voters will not get the opportunity to take this to a referendum and vote on this measure if it becomes law because the majority rejected our amendments.

Here is a list of the tax increases passed by majority Democrats in House Bill 2038:

Tax increases

$534 million – Would permanently extend the business and occupation (B&O) surtax on certain businesses, thousands of the small businesses in our communities struggling to survive. (It’s important to understand this tax. Because it is on gross receipts, a business can owe the tax even if it makes no profit.) See below*
$14.6 million – B&O tax rates for travel agents.
$51.5 million – Would place sales and use tax on bottled water. This is the same tax that was repealed by voters in 2010.
$43 million – Would repeal the nonresident sales and use tax exemption. This could especially hit our border counties very hard along Oregon and the British Columbia borders.
$78.7 million - B&O taxes for high-tech research and development.
$63.2 million – Public utility tax on truck transport of goods in state that are destined for out of state.
$24.1 million – B&O and sales and use taxes for import commerce.
$29 million – B&O tax for sellers of prescription drugs.
$40.8 million – Fuel tax for extracted fuel.
$5.2 million – Handling losses fuel tax.

TOTAL: $879 million

*Per The Department of Revenue: What is the business and occupation (B&O) tax?

The state B&O tax is a gross receipts tax. It is measured on the value of products, gross proceeds of sale, or gross income of the business.

Washington, unlike many other states, does not have an income tax. Washington’s B&O tax is calculated on the gross income from activities. This means there are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business.

If this bill becomes law it would raises taxes unnecessarily, lead to jobs lost in Washington, and have a chilling impact on the job creators. With a fragile economic recovery in Washington state, it is the wrong decision if we want to create new opportunities for employment that offer hope and opportunity to job seekers.

Transportation budget

We did pass a no-new-taxes transportation budget that continues spending on existing big-ticket projects but does not fund new ones. I did support this budget. However, when we return for the special session, I do expect another debate on transportation funding as House Democrats’ are proposing a tax and fee transportation funding plan that would increase the gas tax by 10 to 13 cents, increase fees on licensing and registrations, as well as weight fees.

Ferry system

On April 18, I put together and hosted a meeting with David Moseley of the Washington State Ferries (WSF) and Rep. Larry Seaquist to follow up on the Kwa-di Tabil (KdT) class vessels in the ferry system. The purpose was to create a positive, problem-solving environment where ferry crews tasked with the safe operations of the vessels, and those within headquarters making design and modification decisions, could hear one another professionally and address the list of current concerns that have been raised about the KdT class 64-car ferries.

We met for four hours and I was significantly encouraged by the effort. The crew members that participated were all problem solvers committed to solutions, management was open, and the Ferry Advisory Committee (FAC) representatives offered sound input. There was respectful and honest dialogue around the long list of concerns that have been raised. For example, all of the ferry professionals in the room reached consensus to move forward carefully with ballasting the vessels by doing so on the Salish first, taking it through the fall weather challenges, then to move forward on the other two vessels if the experience demonstrates improved operational performance.

As each item was raised, learning happened on both sides that informed decisions. One of the highlights is a new ‘improvement team’ that will meet quarterly from crew and headquarters, initiated and led by the new director of vessel maintenance, for the purpose of processing issues raised and finding solutions. It was a good start to what I hope will be an improved protocol for professional communication into the future.

Derelict vessels

The derelict vessel legislation I helped draft and which I am co-sponsor, House Bill 1245, has passed the Legislature and is headed to the governor’s desk for his signature. We in the 10^th District know firsthand the dangers and economic impact of inadequate action. This bill will begin to address the ongoing challenges we have with these vessels. I will be working with the Department of Natural Resources, the sponsor of the bill, 23rd District Rep. Drew Hansen and a stakeholder group this summer to continue developing a long-term plan and effectively implementing the policy contained in HB 1245. Representative Hansen and I have already convened two meetings, and the momentum and commitment of everyone involved is impressive. In addition to the sound policy put forward in the current legislation, we’ll be addressing three key components of the bill’s directive:

1. Vessel owner responsibility and the challenges associated with the economics of moving vessels from the water;

2. Limits on transfer of high risk public/private vessels; and

3. Identifying the challenges and roadblocks to deconstructing derelict vessels and transforming them into a viable scrap metal product to ensure responsible disposal and salvage, creating new opportunity rather than just funding crisis response.

Working with Rep. Hansen, D-Bainbridge Island, has been a terrific experience, and represents the best of the legislative process.

Bills of interest

Two bills I have been working on this session have been signed by the governor.

House Bill 1141 – is a good-government bill that will provide Department of Ecology with the management resources to keep water pollution control funds revolving in perpetuity. It also gives the department the ability to help small counties and cities with water quality problems.

House Bill 1403 – is one of four bills I had hoped to get through to improve our state’s business climate by improving our licensing process. This is a good first step but it is only a beginning. This bill clarifies which agencies must supply information to the Business Licenses Service (BLS) and the types of information they must provide. Currently, BLS is administered by the Department of Revenue and only has a fraction of licensing information available on its Web site. The purpose of the legislation is to get all the licensing information in one place to make it easier for job creators to access the data. This is a recommendation from the state auditor’s report on regulatory reform.

A third bill I prime-sponsored, House Bill 1818, is awaiting the governor’s signature also. It started out as a discussion with innovators during a meeting with the Economic Development Commission. This law will launch a pilot multi-jurisdictional program that will pull businesses from a specific sector within a geographic locale and inventory all regulatory hurdles and make recommendations to streamline regulations and reduce barriers. The government entities in the region would also be included – city, county, state agencies and other stakeholders. The first sector to be reviewed is manufacturing.

Again, I would be very grateful if you would forward this information to others in our district. It’s good to remind friends that I’m not allowed to send them the update unless they contact my office to request being added to the list.

Please contact me with your questions and concerns. Thank you again for the honor of serving as your state representative.

Sincerely,