LEGISLATIVE UPDATE | July 17, 2017
Lawmakers look to end the 2017 Legislative Year
Working toward a bipartisan Capital Budget
Lawmakers hope to conclude their work for 2017 this week by adopting a bipartisan 2017-19 Capital Budget and adjourning after a very long 105-day regular session and three 30-day, extra “special sessions.”
To accomplish this, the Legislature and the Governor’s office must first come to terms on a critical piece of water rights legislation, commonly referred to as the “Hirst Decision.” The issues to be resolved for the Hirst Decision are the result of a recent Supreme Court case by the same name. The Capital Budget has been held this year by Senate Leadership, which has insisted the issues created by “Hirst” must be first be addressed, given its impact on their constituents living in rural counties, before a Capital Budget is finalized. It is unclear if an agreement will be reached by Thursday.
As we wait to see if a Capital Budget can be adopted, there are several other pieces of legislation from this Legislative year to report on:
The predominate issue impacting the aerospace industry for most of the 2017 Session was the continuing effort lead by organized Labor to repeal aerospace tax incentives that our industry has secured over the past fifteen years.
While this debate isn’t necessarily new to AFA, what was new this year was the fact that this was the first time we had seen an repeal measure offered by a Republican. Representative Richard DeBolt (R-District 20--Centralia), authored HB 2146, tying Boeing’s ability to fully receive their current B&O tax rate to the total number of jobs they provide in Washington state. A similar measure, HB 2145, authored by Representative Noel Frame (D-District 36--Seattle), also included a provision that would have forwarded any increased revenue to the state to then be used to fund K-12 education. Both measures received a public hearing before the House Finance Committee. AFA vigorously opposed both measures and provided a number of industry representatives to testify and meet personally with lawmakers. Neither bill made it out of Committee.
The 2017 Legislature also took the unprecedented step to pre-empt a statewide initiative, again by Labor, to provide a mandatory Paid Family Leave (PFL) benefit. To date, the City of Seattle had been the only jurisdiction to adopt PFL, which was set to take effect next year. Seattle’s PFL law has been widely considered to be anti-employer and would have been difficult for many industries, such as aerospace, to implement correctly. Other local governments, such as Spokane, Bellingham and Olympia, had recently expressed interest in also adopting some type of PFL ordinance.
A bipartisan group of lawmakers concerned with the impact of how Seattle’s ordinance and Labor’s statewide initiative might have negatively impacted the business community crafted a more workable solution. Not only did their proposal address PFL, but it also has the added benefit of pre-empting Seattle’s ordinance and that of any other local government’s going forward. AFA participated in stakeholder meetings throughout the development of this new state law to ensure that it was workable for the industry, as well as to ensure that future local governments would be pre-empted from adopting their own patch-work of laws that would have overly burdened our membership.
The business community also advanced a number of Worker’s Compensation reforms that would have complemented our reform efforts from 2009. While the 2009 reforms created an opportunity for an injured worker to accept a one-time structured settlement and return to the workforce in lieu of a lifetime pension, the 2009 law capped the eligibility to workers aged 55 and older.
This year’s measure would have reduced the eligibility requirement to allow workers aged 40 and above to accept structured settlements. In addition, this year’s reforms would have more clearly address the qualifications for occupational disease benefits to ensure that a worker’s injury was clearly the result of workplace activities.
Unfortunately, these reforms quickly took on less significance given the robust conversation around Paid Family Leave and, therefore, did not pass this session. AFA will continue to look for opportunities to work with lawmakers and the business community to address these reforms in the future.
Finally, in what had to be one of the most disappointing events of this year for all industries with a manufacturing component, Governor Inslee vetoed a new manufacturing B&O tax rate for all manufacturers.
The new rates would have reset the B&O tax rate for the entire manufacturing community, eventually leveling it off at the same B&O tax rate aerospace already has access to. This rate adjustment was considered to be part of the negotiated 2017-19 State Operating Budget that passed with strong bipartisan support, but the Governor enacted a line-item veto on it. To be clear, the Governor’s veto does not impact any of the preferential rates aerospace currently receives, but would have potentially eliminated any future repeal efforts by Labor that aerospace faces on an annual basis given that the new rate would now apply universally and not just for aerospace.
It would have also benefitted the many manufacturing companies that have diversified their customer base outside of aerospace, allowing them to use the same B&O tax rate for all their manufacturing work rather than just a portion of it.
The result of this veto has been to further polarize all other negotiations going forward between the Legislature and the Governor’s office and makes a future defense of our industry’s tax incentives an almost certainty in 2018.
Resetting of the General Manufacturing B&O Tax Rate
Paid Family Leave
Aerospace Tax Incentives