The day after: A brief look at how the Legislature resolved some key tax and spending issues.

We’ll leave the unpacking to others for another day. Right now, though, from a fiscal standpoint the recently concluded legislative session appears to have lived up to the modest expectations set for it in January, while taking steps to address the emerging coronavirus pandemic. In all, not a bad outcome. We’ll look briefly at the supplemental budget, the transportation budget, the suspended aerospace tax incentive package, and the King County payroll tax that didn’t happen.

Supplemental Budget

On fiscal policy, the supplemental budget may have increased spending too much, but the revenue surge in recent years built up a fair cushion. Sustainability, which was our concern from the beginning, remains a major concern, greatly exacerbated by the economic fallout from the public health crisis.

The adopted supplemental budget in the end added more money to combat the coronavirus crisis. In the Spokesman-Review, Jim Camden reports,

With the threat of a growing novel coronavirus outbreak hanging over Washington, the Legislature ended its 2020 session by pulling $175 million from its reserve account for state and local agencies to fight the disease and another $25 million for businesses hurt by its economic fallout.

Lawmakers passed a supplemental operating budget that recognizes a possible economic downturn in the Washington economy might result in less tax revenue coming into the state…

But they did increase overall spending in the biennial budget passed last April by about $1 billion, adding money to programs to address homelessness, boost public health, suppress wildfires, improve child care and increase mental health counselors in schools.

The Republican budget lead, he reports, called it a “mixed bag” that ultimately boosted spending by 20% more than was spent in the previous biennium.

Transportation Budget

The session began with transportation advocates still reeling from passage of Initiative 976, which tore a huge hole in revenues for essential transportation infrastructure. Heidi Groover reports in The Seattle Times that lawmakers managed to minimize the damage in the transportation budget. For now.

State legislators nearly unanimously approved a transportation budget Wednesday that avoids significant cuts to road projects or transit service.

The $10.4 billion budget relies largely on money in existing budgets but not yet spent, “a little bit of budget magic,” said Sen. Steve Hobbs, D-Lake Stevens, who chairs the Senate Transportation Committee.

Legislators warned those tricks won’t last forever. “Next year we’re going to have some serious problems,” Hobbs said.

The governor’s office wrote in a wrap-up piece,

The Legislature also approved a supplemental transportation budget that will allow the governor to unpause highway, rail and other projects. The Department of Transportation froze these projects at the direction of Gov. Inslee after the November 2019 passage of Initiative 976…

“Because of the resources saved during the pause — and due to some one-time opportunities to capture unspent funds this biennium — I am directing WSDOT to move forward on projects that have been paused,” Inslee said. “I have asked the department to move as expeditiously as possible to restart the paused projects.”

Major transportation challenges will again confront lawmakers in 2021. 

Aerospace Tax Incentives

Lawmakers overwhelmingly approved legislation to suspend the aerospace tax incentive package, as requested by The Boeing Company in an effort to resolve an international trade dispute. TJ Martinell reports in The Lens,

The state legislature has passed SB 6690, a measure that removes aerospace industry tax incentives in order to avoid possible retaliatory tariffs. The bill cleared the state Senate on March 10 in a 43-5 vote and the House on March 11 with a 73-24 vote…

In The Seattle Times, Joseph O’Sullivan writes,

The legislation would allow a return to a preferential tax rate if an agreement between the United States and European Union settles their long-running trade dispute in a way that allows for some tax incentives.

But in order to pass the bill,  state legislators had to find agreement on provisions for what should happen if the WTO allowed a tax preference for Boeing in the future…

After discussions with lawmakers, Boeing and labor groups, a compromise was reached to require Boeing to increase the size of its current workforce apprenticeship program, Liias said.

…And the compromise allows the potential for Boeing and other companies to get B&O tax preference again in the future, but at a higher level than the current tax incentive, Liias said…

In a statement, Boeing spokesman Bryan Watt said the legislation will bring the company into compliance with the WTO’s rulings.

King County Payroll Tax

It never got off the ground. Austin Jenkins writes in his “what passed and what didn’t” wrap-up for KUOW,

In the end, the Senate version of the bill didn’t even get a hearing. The House bill passed out of the House Finance Committee, but didn’t ever come up for a vote on the floor.

More later.