While Washingtonians slept, the state legislature this weekend approved a $52.8 billion 2019-21 operating budget that includes a slew of new taxes, some of which were hastily introduced as title-only bills and approved the same day as their public hearings. The new revenue over the next four years comes in addition to $4.4 billion in surplus revenue expected for the 2019-21 biennium.
The new taxes include:
- SB 5993, changing and increases the hazardous waste tax;
- HB 2158 imposing a business and occupation (B&O) tax surcharge to pay for higher education programs;
- HB 1873 placing a tax on vaping products, also known as e-cigarettes;
- SB 5998 changing the real estate excise tax (REET) from a flat 1.28 percent to a graduated rate; and;
- HB 2167, which places an additional 1.2 percent B&O tax on certain financial institutions.
The flurry of bills moved through the legislature as lawmakers remained in the capitol through the evening into early morning in an effort to finalize the budget on April 28 – the last day of the legislative session. The new budget would leave roughly $3 billion in the budget stabilization account by the end of the 2021-23 biennium.
Major spending increases include:
- $477 million in state employee compensation changes;
- $329 million for school employee health benefits;
- $155 million for special education; and
- $100 million for natural resources.
On the House floor prior to the April 29 vote, House Appropriations chair Timm Ormsby (D-3) said the budget “invests in people…that need services, and it also invests in people that have the skills to provide those services, from before the time they are born until they spend their last days with us as part of our Washington state family.”
However, Rep. Drew MacEwen (R-35) spoke in opposition, warning that the spending levels can’t be sustained. The new budget represents a $7.7 billion spending increase from the 2017-19 biennium, a roughly 18 percent increase. In 2013, the legislature approved an operating budget that spent $33.5 billion.
MacEwen added that if there is another economic downturn “your only solution is to cut things that are very difficult to cut, the very safety nets that people are going to rely on when we’re in a downturn….”
Other criticism of the bill related to the lack of transparency. HB 2167 remained a title-only bill with no text until the afternoon on April 25, the day before its scheduled public hearing in the House Finance Committee. The bill cleared the committee and the chamber that same day.
In an email, Washington Policy Center Government Reform Director Jason Mercier wrote “(the) first time this type of tax on banks was ever discussed this session was then. What could possibly go wrong with this type of rushed tax increase without fiscal note and vetting by stakeholders?”
In a statement, Rep. Drew Stokesbary (R-31) expressed a similar opinion, writing that the new taxes “were rushed through the process, in the final three days of session, with absolutely no opportunity for meaningful review or comment from Republicans or the public. I am deeply troubled that the majority believes this level of spending growth is sustainable. In times of prosperity, we should be focused on building reserves to prevent the devastating cuts that were required after the last economic downturn.”