Washington Business Fall 2016 | Legislative Review | Page 33

issue area reports | taxation

Taxation
Eric Lohnes: Tax and Fiscal Policy

The 2016 legislative session was a supplemental budget year marked by spirited debate about budget principles and Washington’s
tax structure. The role of tax incentives, and how to prioritize spending in the face of the looming K-12 funding implications
resulting from the state Supreme Court’s McCleary decision, received specific focus. Gov. Jay Inslee started the debate with
his initial budget release in December, proposing to raise revenue and end tax incentives in order to fund new and expanded
government programs. The House Democrats followed with their own proposal to raise taxes, close tax incentives, and leave
very little in the Rainy Day Fund. The Senate Majority Coalition Caucus held the line on several AWB priorities including the
importance of upholding the requirements of the four-year balanced budget act, the appropriate use of the Rainy Day Fund, and
refusing to rely on new taxes to balance the budget. Sen. John Braun, R-Centralia, played a key role in budget discussions this
year, and Reps. Kristine Lytton, D-Anacortes, and Terry Nealey, R-Dayton, played vital roles in the House, shepherding several
AWB priority bills to the governor’s desk. Finally, there was a lot of discussion about tax preference “clawbacks” — or going back
and removing previously approved tax preferences — as a way to balance the House budget plan. While the bills to accomplish
this effort failed to pass in either chamber, this issue is expected to remain prominent in 2017 as lawmakers continue to grapple
with K-12 education funding requirements.

2ESHB 2376

supplemental
operating budget
Passed/AWB Supported

A 2016 compromise supplemental budget
was reached after yet another special
session of the Legislature. The final budget
addressed caseload changes, wildfire costs

Sen. Andy Hill, R-Redmond, chair of the Senate Ways & Means Committee, speaks to Sen. Curtis
King, R-Yakima, chair of the Senate Transportation Committee.

Bill considered as part of
AWB’s voting record

Favorable outcome for
Washington businesses

and some additional spending on mental
health. As passed by the Legislature,
the spending plan left $1.28 billion in
the state’s reserve account. Here is the
legislative budget breakdown:
• Increases Near General Fund and
Opportunity Pathways spending by a
net of $191 million from the 2015-17
enacted spending level of $38.2 billion.
This budget reflects $203 million in
maintenance level changes for caseload and other adjustments based on
current law requirements offset by
approximately $13 million in net policy
level decreases.
• Appropriates $190 million from the
Budget Stabilization Account for
wildfire costs accrued last summer
in 2015.
• Assumes additional budget- driven
revenues, including $46 million in
the 2015-17 biennium is based on the
Department of Revenue using its existing statutory authority to facilitate

Missed Opportunities

special edition 2016

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