HOUSE BILL REPORT

ESHB 2833

BYHouse Committee on Revenue (originally sponsored by Representatives Haugen, Ferguson, Basich, Nealey, Dellwo, Wood, Todd, Horn, Jones, Prince, Wang, Holland, K. Wilson, McLean, Dorn, Winsley, Rayburn, Ballard, Schoon, Sprenkle, Prentice, Hine, Phillips, Brough, Morris, Rector, Spanel, Valle, Smith, Cooper, May, R. Fisher, Scott, Forner, Leonard, Walker, Locke, Fraser, Belcher, Nutley and Raiter)

Changing local government revenue sources and levels.

House Committe on Revenue

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (9)

      Signed by Representatives Wang, Chair; Pruitt, Vice Chair; Basich, Fraser, Grant, Haugen, Phillips, Rust and H. Sommers.

Minority Report:  Do not pass.  (5)

      Signed by Representatives Holland, Ranking Republican Member;  Horn, Assistant Ranking Republican Member; Brumsickle, Fuhrman and Van Luven.

House Staff:Rick Wickman (786-7150)

AS PASSED HOUSE FEBRUARY 21, 1990

BACKGROUND:

Cities, towns, and counties are authorized to impose a variety of local option taxes and to receive state shared revenues, including moneys for sales tax equalization.  The state treasurer is responsible for distributing state shared revenues, state collected local taxes, and other moneys to local governments as directed by law.  For example, sales tax revenues are distributed bi-monthly. Cities and towns have additional local option taxing authority that counties do not possess.  For example, cities and towns may impose business and occupation taxes.

Cities, towns, and counties may impose regular property taxes up to specified maximum levy rates.  Forty-five cities may impose a higher levy than other cities and towns for purposes of funding pre-LEOFF firemen pension programs.  These cities also receive a share of the state's fire insurance premiums tax for funding pension.  Cities, towns, and counties are responsible for paying all medical and health related costs of LEOFF I retirees.

Cities, towns, and counties receive sales tax equalization payments that are based upon collection of local sales tax revenues. Formulas distribute moneys under the equalization program.

In addition, specific appropriations are afforded for various aspects of the criminal justice system, i.e., local judge's and prosecutor's salaries.  In the past, the Legislature has provided counties with capital funding for local jail facilities from state bond proceeds.

Various court fees, filings, and penalties are authorized to be imposed by county and city courts.  With few exceptions, these moneys are divided between the local courts and the state.  The local courts retain 68 percent and the state receives 32 percent. The moneys remitted to the state are pledged to the Public Safety and Education Account and are earmarked for various state purposes.

Local jurisdictions may report three or more unpaid parking violations to the Department of Licensing at least 150 days prior to the renewal date of a motor vehicle license. A surcharge of $10 is charged for parking violations by the department to defray the cost of administration.

Certain unclaimed property may be retained by local governments under the uniform unclaimed property act.

State mandates upon local governments that result in increased levels of services or new programs must be reimbursed by the state.

SUMMARY:

The Local Justice Assistance Board is created within the Department of Community Development.  The 17 board members serve for six years to coincide with termination of the board's activities.  The board is directed to develop formula financing and grants-in-aid criteria for county and city criminal justice programs.  An appropriation of $10 million is authorized for formula financing for counties. An appropriation of $5 million is appropriated for grants-in-aid and an additional one-time $5 million is appropriated for "emergency" criminal justice grants-in-aid.

An appropriation of $14.4 million is provided for local jail funding from the state building and construction account to the board.

Cities, towns, and counties are authorized to impose up to a 0.5 percent real estate excise tax and the local option sales tax at the same time.

Counties may impose a levy of $.03 per $1,000 of assessed value on all the property of the county for purposes of funding LEOFF I city and county medical and health costs.

Cities and towns may impose the maximum $3.60 levy, regardless of whether they possess pre-LEOFF firemen pension programs.

Cities and towns are required to inform the state actuary by November 1st of each even numbered year on the fiscal condition of specified firemen's pension systems.  The state actuary is required to report to the Legislature by January 1st of each odd numbered year the fiscal condition of these specified pension systems.  Moneys not used from the Fire Insurance Premiums tax shall be returned to the state for redistribution to other cities with firemen pension obligations.

The sales tax equalization program for counties, cities, and towns is altered.  Counties will receive a minimum floor of up to $375,000.  Cities and towns will receive a distribution equal to 75 percent of the per capita average of all city sales tax revenues will minimum payments of $500 and maximum payments of $26,000 annually.  The motor vehicle excise tax distribution to counties for these purposes is increased from two percent to three percent.  The cities and towns distribution from the motor vehicle excise tax is increased by one-half of one percent.

All counties are authorized to impose an employer tax measured by the number of employees in a business in the unincorporated area only.  The rate of tax shall not exceed $5 per month per employee and each employer may only be taxed once where the employer is located in more than one county.  Exemptions may be provided by ordinance, including but not limited to nonprofit organizations and governmental agencies.

Various county civil court fees and fees charged by court clerks for various services are increased.  Where applicable, the current court fee division of revenue is maintained under the public safety and education account (68 percent of revenue is retained by counties and 32 percent is remitted to the state).

Cities, towns, and counties will receive monthly instead of bi- monthly distributions of sales tax revenues from the state treasurer.

Specified unclaimed property may be retained by local governments however, such property must still be reported to the state.

The requirement that three or more unpaid parking violations may be reported to the Department of licensing is reduced to two. Notification requirements for local jurisdiction reporting unpaid parking fines to the Department of Licensing for motor vehicle license renewal purposes is reduced from 150 days to 90 days.  The $10 surcharge imposed on unpaid parking fines is increased to $15.

The provisions of state reimbursement for new programs or increased levels of services required on the part of local governments is altered.  New revenues or increased existing revenue sources approved after 1979 shall be considered as reimbursement for mandated costs.  Reimbursement does not include changes for criminal justice sentencing or enforcement procedures before July 1, 1990 or changes to criminal justice activities that have historically been the responsibility of the taxing district.  In addition, no further state reimbursement is necessary for new programs or increased levels of service through July 1, 1990.

Appropriation:    $20 million from the general fund account and $14.4 from the state building and construction account.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Requested February 15, 1990.

Effective Date:The bill contains an emergency clause and takes effect immediately except for sections 14 through 16 and 23 through 27, which shall take effect on January 1, 1991, and sections 35 and 36, which shall take effect on July 1, 1990.

House Committee ‑ Testified For:    Gary Lowe, Washington State Association of Counties; Bob Bonuchowitz, Washington Defense Association; Bill Pupo, City of Spokane; Stan Finkelstein, Washington Association of Cities; Mike Redman, Washington Association of Counties; Paul Kraabel, City of Seattle; Howard Vietzke, Firefighters Association; and Fred Saeger, Washington Association of Counties Officials.

House Committee - Testified Against:      Chuck Klarich, Yakima County Commissioner; Dean Judd, Adams County Commissioner; Gary Lowe, Washington State Association of Counties; Stan Finkelstein, Washington Association of Cities; Paul Kraabel, City of Seattle; Mike Redman, Washington Association of Counties; Bill Pupo, City of Spokane; Howard Vietzke, Firefighters Association and Fred Saeger, Washington Association of Counties Officials.

House Committee - Testimony For:    We need the flexible authority to deal with criminal justice problems. Optional local government revenues are needed to improve the capability of local governments to deal with crime and other local services.  State assistance is necessary to directly fund local criminal justice needs.

House Committee - Testimony Against:      We need predictable funding for criminal justice problems through statutorily directed formulas.  There is not enough money appropriated to deal with criminal justice problems.  Eliminating the mandatory reimbursement provisions of Initiative 62 is not acceptable.