HOUSE BILL REPORT

HB 2507

BYRepresentatives Haugen, S. Wilson, Ferguson, Zellinsky, Phillips and Nealey

Changing provisions relating to tax levies for medical services.

House Committe on Local Government

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (12)

      Signed by Representatives Haugen, Chair; Cooper, Vice Chair; Ferguson, Ranking Republican Member; Horn, Nealey, Nelson, Nutley, Phillips, Raiter, Rayburn, Wolfe and Zellinsky.

Minority Report:  Do not pass.  (1)

      Signed by Representative Kirby.

House Staff:Steve Lundin (786-7127)

AS REPORTED BY COMMITTEE ON LOCAL GOVERNMENT

FEBRUARY 1, 1990

BACKGROUND:

The first law enforcement officer and fire fighters retirement system (LEOFF I) covers full time, fully compensated, law enforcement officers (sheriffs, deputy sheriffs, police officers, and town marshals) and full time, fully compensated fire fighters of a fire protection district, city, or town, who were employed in such capacities prior to October 1, 1977.

Under LEOFF I, the employer is required to pay for the medical costs of active members of that retirement system, retired members, and members who have retired under disability.

Article VII, Section 2, of the state constitution, limits the aggregate of all property taxes that are imposed by the state and most local governments in any year not to exceed one percent of the value of the property upon which such taxes are imposed.  Property taxes imposed by port districts and public utility, as well as excess voter approved tax levies, are not subject to this limitation.

Statutes reduce this one percent constitutional limitation.  The state may impose regular property taxes to finance K-12 education at a rate not to exceed $3.60 per $1,000 of assessed valuation, adjusted to the state equalized value.  The aggregate of regular property taxes imposed by all other taxing districts may not exceed an amount equal to $5.55 per $1,000 of assessed valuation, except that this limitation does not apply to regular property taxes of up to: (1) 6.25 cents per $1,000 of assessed valuation each year for conservation futures; (2) 35 cents per $1,000 of assessed valuation to protect the tax levy of a junior taxing district from prorationing, or reduction, if voters of the taxing district authorize such levies by a simple majority vote to be used for each year of a five consecutive year period; and (3) 25 cents per $1,000 of assessed valuation for emergency medical services, if voters of the taxing district imposing this tax authorize such levies by a 60 percent vote, with a 40 percent validation requirement, authorizing these levies to be imposed annually for six years.

SUMMARY:

SUBSTITUTE BILL:  Counties are authorized to impose an additional property tax of three cents per $1,000 of assessed valuation for the purpose of funding the responsibility of paying for medical costs of both the employees of the county, and each city within the county, who are covered under the LEOFF I retirement system.  Receipts from this tax levy are distributed between the county, and each city in the county, on the basis of the relative number of employees of each jurisdiction who is eligible for LEOFF I medical benefits.

The last year such taxes can be imposed is in 2020, for collection in 2021.

This additional property tax is not subject to the $5.55 per $1,000 of assessed valuation limitation on most regular property taxes, but is subject to the one percent constitutional limitation.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The maximum rate of taxes was increased from two cents to three cents per $1,000 of assessed valuation.  Tax receipts finance the LEOFF I medical costs for cities in the county, as well as for the county. The taxes cannot be imposed after 2020.

Fiscal Note:      Requested February 1, 1990.

House Committee ‑ Testified For:    Ed Rackleff, Department of Revenue; Charlie Marsh, State Council of Police Officers; Gary Lowe, Washington State Association of Counties; Pete Spiller, Washington Fire Commissioners Association; and Stan Finkelstein, Association of Washington Cities.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    A staggering obligation was created under LEOFF I for these retirement costs. This tax will only partially finance these costs.

House Committee - Testimony Against:      None.