LEGISLATIVE UPDATE | May 24, 2017
Legislature heads into Second Special Session: Inslee Tells House and Senate to "Start Over" on Budgets
Inslee suggested ideas such as an internet sales tax, reform
of the real estate excise tax, closing tax exemptions and even
a carbon tax may be in play as budget writers search for feasible
sources of revenue to ensure the state can “fully and amply”
fund public schools as the state Supreme Court demands.
Lawmakers had made very little progress towards reaching compromise on a balanced state operating budget during the first special session. Budget writers and legislative leaders had remained on Olympia hoping to break the logjam that prevented this year’s regular legislative session from adjourning on time. Most everyone else has returned to their home districts to meet with constituents and to regroup.
Lawmakers did receive some good news when the state’s Economic Forecast Council reported that tax collections were up slightly, by around $44 billion, but that good news was quickly erased when it was also shared that state entitlements have also increased resulting in the possibility that June’s much awaited forecast will be either flat or slightly negative.
The State must have a new operating budget adopted by July 1st or face either a partial or complete government shutdown.
The House Democratic budget relies on a package of new taxes, such as a 7 percent capital gains tax and 20 percent business and occupation tax increase on some businesses, to balance. The Senate Majority Coalition Caucus’ budget restructures property taxes to address school funding equity issues between property-rich and property-poor school districts across the state, a plan House Democrats do not support. This is, essentially, what has created the impasse lawmakers find themselves at now.
The House Finance Committee has held one public hearing on two bills that would significantly modify the aerospace tax incentives agreed to by the State in 2013, tying the incentives directly to employment levels at Boeing. AFA members provided critical testimony before the committee highlighting the need for incentives to remain competitive in a global market and opposing both measures. AFA continues to vigorously oppose these bills and is making every effort to prevent those measures from essentially undoing years of hard work by our industry in Olympia. (See background information below, as well as your opportunity to let legislators know how these proposals could impact your business!)
Aerospace Tax Incentives
TAX INCENTIVES, PROPERTY TAXES, AND CARBON TAX STILL IN PLAY
Current Budget Proposals
AFA continues to monitor the House and Senate Budgets as they enter into the second special session of the year today, called by Governor Jay Inslee.
Inslee suggested both houses throw out their current budget proposals and start over, adding a collaborative budget should be "reality based."
Governor Jay Inslee speaking at AFA's 11th Annual Governor's Aerospace Summit
AFA Call-to-Action | HBs 2145 and 2146
Your voice is needed on this issue. The indirect impact of "clawing back" aerospace tax incentives from Boeing could have a chilling effect on the industry in WA. Send the House Finance Committee an email letting them know how your business, and your workforce, benefit from your work with Boeing, and how these measures could impact your business (please send a copy of your email to firstname.lastname@example.org):
House Finance Committee Members
AFA convened aerospace leaders to speak in opposition to the bills in public testimony at the House Finance Committee's Hearing on Tuesday, May 2, along with numerous other business leaders in a variety of industries speaking to the value to their businesses and workers from the incentives Boeing uses.
Highlighted were the investments Boeing has made in compliance with the 2013 tax incentive extension package--including more than $1 billion in the 777X Composite Wing Center in Everett, the commitment to build the 777X in WA, and the expectation that additional inherent benefits--from jobs and investment--are expected by the end of the year when Boeing begins production on the 777X line.
Jim Lee, Tool Gauge (Tacoma), spoke about their company's planned expansion, going from approximately 130 employees to more than double that number in the next several years. 80% of Tool Gauge's work is Boeing, and 100% is aerospace. They are preparing for 777X work, in line with the intent of the incentive package.
Several speaking in support of the bills mentioned the movement of Boeing jobs from WA to other states. This despite data that shows otherwise. A recent article in Flight Global magazine emphasized the ratio of where Boeing's workforce changes are taking place:
Boeing's employment data does not suggest that Washington is being singled-out within
the company for head-count reductions. Overall employment within Boeing has declined
by 15.8% over the same period, or only 2.6 percentage points less than reductions in
Washington alone. By comparison, Boeing's employment in California has plummeted
27% over the same period, as the last C-17 was delivered from Long Beach and the
company reduced activities in Anaheim and Huntington Beach. Other major Boeing
sites, meanwhile, have not gained at Washington's or California's expense, as employment
levels in Missouri and South Carolina have remain essentially unchanged over that period.
In the near-term, the company's position in Washington looks relatively stable.
Both measures set employment targets (75k in the Republican bill, 70k in the Democratic bill). If Boeing employment falls below those targets, the incentives no longer apply or are reduced. The money is instead diverted to K-12 funding and small business tax incentives (in the Democratic bills) and small business tax incentives, state need grant and career/technical training (in the Republican bills).
Rep. Kristine Lytton, Chair of the committee, has stated she is not sure whether the bills will be voted on.
For more information:
Background on public hearing regarding HBs 2145 and 2146