On the 65th Washington Legislature
Washington State’s 65th Legislature began its 2017 legislative session on January 9th, with the one requirement to produce a 2017–2019 biennium state budget. As session opened, the elephant in the room was the McCleary education funding decision, which required the Legislature to enact significant changes to the size and structure of K-12 education funding in the state. This combined with a narrow one seat Republican majority in the senate and a two seat Democratic majority in the House made for a particularly contested session.
After three special sessions, and on the brink of a state government shutdown, the House and Senate agreed to a compromise between their two proposals and were able to pass a budget without instituting a major new tax on Washingtonians. But huge issues still linger, as Republicans and Democrats were not able to come to any agreement on a Capital Budget. Many had hoped that a deal would be brokered that would have funded around $4 billion in capital projects, for a solution to the Hirst decision. Legislators remain around Olympia in attempt to make progress Capital Budget solution, but Governor Inslee surprised many by vetoing a tax preference on manufacturers that was part of the agreed upon final budget negotiation, and it remains to be seen what impact that will have on delicate negotiations.
With control of the Senate up for grabs in 45th legislative districts special election, there is a continuing possibility of more special sessions (before or after November 28th) to tackle new revenue streams, carbon, housing and other capital projects, and many other contentious policy battles that hang on a few key votes.
The 2017 Legislative session finally concluded July 20, only 12 days before the August primary. It was the 195th day of the 2017 legislative session, making this year’s convening easily the longest single year session in the history of Washington State, ever. Since the Washington moved to rotating sessions of 105 and 60 days, the average length of session has been 104 days.Not only was it the longest session ever, it was also the least productive (see table). In 2017, lawmakers sent 377 bills to the governor’s desk for signature, or 1.9 bills per legislative day. Since 1991, the average has been 4.0 bills. The divide that has been widening between Republicans and Democrats was torn wide open this year with open hostility and fighting between the caucuses, largely mirroring the country.
Governor Jay Inslee released a proposed budget on January 31st, which included large increases to education and behavioral health spending. To pay for this $4.7 billion dollar increase in spending the Governor proposed a $4.4 billion dollar revenue package primarily consisting of an increase to the state B&O tax from 1.5% to 2.5%, a tax on the emission of carbon from the combustion of fossil fuels, and a state capital gains tax. While none of the Governor’s proposals were taken very seriously, different versions of a carbon tax and capital gains excise tax were discussed at length in the legislature.
The McCleary decision found that Washington State was violating its own constitution by not fully funding basic education and instead relying on local levies. This put the legislature under court order to find a solution by the end of the session or face serious penalties. Senate Republicans and House Democrats both put forward different plans to address this issue. The Republican”levy swap” plan eliminated the local levies, and replaced them with a flat property tax across the state, while moving education funding to a more direct per-student formula for districts. In practice this had the effect of substantially increasing taxes in the highest property value areas (Puget Sound), while decreasing them in the lowest (Eastern Washington). The House plan involved increasing education funding through additional revenue, and pushed for a statewide capital gains excise tax on high earning individuals, an expansion of the state internet sales tax and the elimination of several existing tax incentive programs. The eventual compromise included elements of both plans, keeping a smaller version of the Republican “levy swap” proposal and adding to it elements of the Democrats internet sales tax and tax incentives removal proposals.
Another huge issue, albeit less publicized, was the Hirst decision, which ruled that small residential wells weren’t exempt from permitting and water impact analysis required for larger water users, as they had been in the past. Basically, if you are going to drill for water on your private property, a building permit cannot be issued unless the owner of the property proves that there is no impact to the groundwater table, or streams that may impact fish and wildlife habitat. The burden is on the property owner to provide a study/report to the county that they reside in proving no impact. Costs for these studies would be devastating to rural property owners. This decision left many rural landowners with land they could no longer feasibly build on, and is therefore almost worthless. Negotiation between those pushing for easier well permitting and those concerned about cumulative impacts of small wells on the water table is still ongoing. Caught up in this negotiation is the Capital Budget, which some legislators have refused to work on until a Hirst fix is in place.
Carbon tax legislation was a particularly hot topic this year. The carbon tax initiative 732 failed but the general perception is that another, far larger and more unified initiative campaign will be coming in 2018. While carbon tax legislation passing under normal circumstances was very unlikely, the threat of a far more politically extreme initiative measure brought many of the industry players together to look for common ground, but nothing passed in 2017.
In the telecommunications sphere there was a large push by a coalition of telecommunication companies on permitting and fees for attaching a new generation of cellular network infrastructure on city and utility poles. The legislation was fought hard and killed by cities and utilities, but will likely be a recurring battle next session.
Negotiations on two issues, solar incentives and paid family leave, had appeared stalled and expectations were low, but compromise legislation made it through on both issues at the end of session. Similarly a compromise on buildable lands was passed in an attempt to ease some of the pressure on homelessness and low incoming housing.
Rental Housing Issues
As longstanding stakeholders in the business advocacy community, RHA’s government affairs team worked to defeat the following new revenue proposals to fund basic education, which appeared in multiple bills over several regular and special legislative sessions:
- New State Capital Gains Tax (6%).
- Raising Real-Estate Excise Tax (REET) from the current 1.28% to 2.5% at time of sale of real-estate.
- New Carbon Tax
- Sales Tax on Services.
- Increasing a State B&O Tax on residential and commercial services from 1.5% to at least 2%.
Homelessness Housing Surcharge Private Rental Housing Payments
RHA negotiated a bill in 2015 that required 45% of the document recording fees for funding homelessness programs that are granted to counties by the state, be set aside for private rental housing vouchers. Because the fee itself is set to expire in 2019, housing advocates pursued legislation (HB 1570) that would have made the temporary homeless housing and assistance surcharge permanent and allowed counties to charge and retain an additional surcharge for homeless housing and assistance. Further, their proposal would amend the definition of private rental housing to include nonprofits, fundamentally undermining the agreement made in 2015. Senate Republicans offered a bill (SB 5254), sponsored by Senator Joe Fain (47th District), that would push out the sunset date on the fee, and also create significant reforms in local planning obligations under the Growth Management Act.
The issue was a high priority for housing advocates and interested lawmakers, with many meetings on both bills, before and after public hearings in the committees. Rep. Andrew Barkis (2nd), a newly elected representative sitting on the House Housing Committee, was able to leverage his experience in property management and housing development to play a critical role in negotiations on behalf of the rental housing industry. Having a voting lawmaker in the legislature that not only understands the operation of rental housing, but also depends on a healthy housing industry.
The final legislation extended the fee at its current amount until 2023, while preserving the 45% set aside for private rental housing payments. The definition of private rental housing was not amended, and counties were not given statutory authority to raise their own document recording fees. The final bill allows for certain Real Estate Excise Taxes to be used for public housing maintenance, and makes many other minor reforms to the Growth Management Act.
After several years of negotiating a “squatters” policy for the state of Washington, the legislature finally agreed to send legislation to the Governor. This bill now establishes a process for a property owner to empower local law enforcement to remove unauthorized persons from the premises. The Senate Bill (SB 5388), sponsored by Senator Hans Zeiger (25th District) passed both the House and the Senate and was signed by the Governor. The new law goes into effect on July 23, 2017.
As the prime sponsor of the House companion (HB 1305), Representative Andrew Barkis (2nd District) was integral in brokering the final tweaks to the legislation. Often, the last points of contention between parties can undermine an entire agreement, but Representative Barkis’ ability to speak plainly to the tenant advocates, and work with reasonable members across the aisle, helped finally deliver a bill to the Governor.
Source of Income Discrimination
Tenant Advocates again pursued legislation that would have prohibited landlord discrimination based on lawful sources of income and created a civil cause of action for violations. While opposing the legislation as drafted, RHA participated in a series of negotiations with industry stakeholders to better understand the barriers subsidized tenants experience in findings available units. The bill did not pass the House, but remained alive in draft form throughout the special sessions.
As local governments continue to adopt various source of income protection ordinances, lawmakers and advocacy groups in Olympia will continue to pursue a statewide policy. RHA will continue to participate in relevant conversations across the state on this issue, along with further advocacy for voluntary housing subsidy incentive programs for private landlords, which have shown positive results in other states.
Protected Classes in Housing
Due to the increasing amount of protected-class housing policies being pursued by local governments across Washington, RHA’s government affairs team developed legislation (SB 5569) in 2017 that would prevent local governments from creating new protected classes in housing. While there was significant opposition to the concept from tenant advocates and cities, the public hearing on the bill allowed for a valuable conversation about how regulatory overreach is adding to the cost of housing. The bill did not move out of the Senate, but RHA will continue to pursue regulatory reform in future sessions.
For more information and to read our entire report please visit our Advocacy page.