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July 28, 2017

Dear Friends and Neighbors,

After 193 days and three special sessions, the 2017 legislative session finally came to a close last Thursday. While we were able to pass an operating budget and a transportation budget, we failed to pass a capital budget for the first time in our state's history. There had been a four-corner agreement on a framework for the capital budget, but it was contingent upon the Legislature passing (and the governor signing) a fix to the state Supreme Court's devastating Hirst decision — a decision that has denied families across the state access to water on their underdeveloped property.

In the end, House Democrats decided against bringing a bill to the floor that would've provided a long-term Hirst fix, opting instead to propose a temporary “fix” that would have failed to provide certainty to those affected by the court's decision. Had they brought a long-term solution to the floor, it would've overwhelmingly passed with bipartisan support. They simply did not want such a vote to take place.

It was a disappointing way for the longest session in state history to end, especially considering how much was, and still is, at stake. I'm hopeful negotiators will keep working throughout the interim to come up with an adequate solution to Hirst so we can bring relief to rural landowners and also pass a capital budget.

2017-19 operating budget

The 2017-19 operating budget we passed in late June makes many critical investments, including $7.3 billion in additional K-12 funding over the next four years. This means more than 50 percent of the operating budget will be dedicated to basic education for the first time since the early 1980s. In fact, by the end of the 2019-21 biennium, the Legislature will have increased state K-12 education spending by more than $13 billion since the 2011-13 biennium — an increase of 98 percent!

Other highlights of the 2017-19 operating budget include:

• No capital gains income tax, carbon tax, or business and occupation (B&O) tax increase on service businesses;
• Makes critical investments in our state's mental health system, building on previous efforts;
• Makes a number of improvements to our state's foster care system to help bring an end to our ongoing foster parent shortage;
• Invests in homelessness relief, assisting individuals with a history of mental illness and providing housing opportunities for homeless youth;
• Increases funding for the State Need Grant program, which assists the state's lowest-income undergraduate students; and
• Provides a significant rate increase to child care providers, many of which are struggling to stay in business.

One major disappointment was the governor's veto of an agreed-to section of the budget that would have extended the preferential B&O tax rate Boeing currently receives to all manufacturing companies in the state. This would have spurred economic development and job creation, while also providing a major lift to an industry that has underperformed economically in recent years. It's a shame the governor didn't see the value in a policy that had such overwhelming support.

Not only was a tax cut for thousands of middle class workers vetoed, but the sales and use tax exemption on bottled water was also repealed. Additionally, as of 2018, companies making internet sales in Washington will be required to collect state sales taxes.

The other issue I have with the budget is how much it grows state spending — 14 percent in the 2017-19 biennium and another 14 percent in the 2019-21 biennium. While the economy is relatively strong in many parts of the state, we need to be mindful of the fact things can turn in a hurry. These growth rates are not sustainable, so we must exercise more restraint in future budgets. Below is a chart of state spending since the 1995-97 biennium.

House Bill 2242 brings an end to the McCleary saga

Along with investing $7.3 billion more into basic education through the operating budget, the Legislature also passed a McCleary fix bill, House Bill 2242. This bill, which passed easily in the House and Senate, creates equity for students, teachers and taxpayers, promotes local control, and ends the state's overreliance on local levies to fund basic education. Highlights include:

• Increases state salary allocations by nearly $5.3 billion per biennium to equip all school districts with sufficient resources to recruit and retain high-quality staff;
• Establishes minimum and maximum salary levels to ensure an equitable distribution of funding for teachers in all districts at all experience levels;
• Increases starting teacher pay to a minimum of $40,000 per year, up 12 percent from current levels;
• Eliminates a fragmented and unfair health benefit system that punishes working families, and replaces it with a modern and uniform health benefit system modeled after the state employee health benefit system;
• Remedies our current regressive local levy system by capping local levy rates to provide tax relief to those in school districts where property valuations are on the lower end of the scale;
• Establishes a vigorous reporting and accounting system to ensure separation and tracking of revenues, thus providing transparency in both state funding and local decision-making, and to prevent unconstitutional overreliance on local levies; and
• Increases the uniform state property tax to ensure property-wealthy districts pay their fair share, while still ensuring property tax relief for taxpayers in most property-poor districts.

Regarding the last bullet, due to current maintenance and operation levy rates remaining in effect through next year, every district in the state will see increased property taxes before a new school levy cap is enacted in 2019 — set at $1.50 per $1,000 of assessed value. However, many 47th District residents will then see a property tax reduction in subsequent years.

In terms of the increase in funding school districts in the 47th will see as a result of this policy change, take a look at the chart below:

As you can see, each of our school districts will receive substantial increases in funding over the next four years under this new policy as compared to the previous policy. Per pupil funding in each of our school districts will also increase — 20 percent in Auburn, 13 percent in Enumclaw, 19 percent in Federal Way, 23 percent in Kent and 19 percent in Tahoma.

If you have any questions about Hirst, HB 2242 or the operating budget, please don't hesitate to send me an email or call my office at (360) 786-7918. I would also be happy to meet with you in district.

It is an honor to serve you in the state House.

Sincerely,

Mark Hargrove