BILL REQ. #:  S-4028.1 

Read first time 01/28/2004.   Referred to Committee on Ways & Means.

     AN ACT Relating to tax expenditure reports; and amending RCW 43.06.400 and 43.88.030.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 43.06.400 and 1999 c 372 s 5 are each amended to read as follows:
     ((Beginning in January 1984, and in January of every fourth year thereafter)) Biennially, the department of revenue shall ((submit to the legislature prior to the regular session)) prepare a listing of the amount of reduction for the current and next biennium in the revenues of the state or the revenues of local government collected by the state as a result of tax exemptions. The listing shall include an estimate of the revenue lost from the tax exemption, the purpose of the tax exemption, the persons, organizations, or parts of the population which benefit from the tax exemption, and whether or not the tax exemption conflicts with another state program. The listing shall include but not be limited to the following revenue sources:
     (1) Real and personal property tax exemptions under Title 84 RCW;
     (2) Business and occupation tax exemptions, deductions, and credits under chapter 82.04 RCW;
     (3) Retail sales and use tax exemptions under chapters 82.08, 82.12, and 82.14 RCW;
     (4) Public utility tax exemptions and deductions under chapter 82.16 RCW;
     (5) Food fish and shellfish tax exemptions under chapter 82.27 RCW;
     (6) Leasehold excise tax exemptions under chapter 82.29A RCW;
     (7) Motor vehicle and special fuel tax exemptions and refunds under chapters 82.36 and 82.38 RCW;
     (8) Aircraft fuel tax exemptions under chapter 82.42 RCW;
     (9) Motor vehicle excise tax exclusions under chapter 82.44 RCW; and
     (10) Insurance premiums tax exemptions under chapter 48.14 RCW.
     The department of revenue shall prepare the listing required by this section with the assistance of any other agencies or departments as may be required.
     The department of revenue shall ((present the listing to the ways and means committees of each house in public hearings)) submit the listing to the governor at the time biennial budget requests are due under RCW 43.88.030.
     ((Beginning in January 1984, and every four years thereafter)) The governor is requested to review the report from the department of revenue and prepare a tax expenditure report as part of the biennial budget documents under RCW 43.88.030. The tax expenditure report shall include the listing of exemptions prepared by the department of revenue and a budget analysis of each exemption. The budget analysis shall categorize each exemption according to the programs or functions each exemption supports. The budget analysis shall also include a determination of whether each exemption is the most fiscally effective means of achieving the purpose of the exemption, and a determination of whether each exemption has achieved its purpose, including an analysis of the persons that are benefited by the exemption.
     The governor shall identify each exemption that will terminate during the next biennium and make a recommendation as to whether the exemption should be allowed to terminate, continue, or continue with modification. The governor also may submit other recommendations to the legislature with respect to the repeal or modification of any tax exemption. The ((ways and means)) fiscal committees of each house and the appropriate standing committee of each house shall hold public hearings and take appropriate action on the tax expenditure report and recommendations submitted by the governor.
     As used in this section, "tax exemption" means an exemption, exclusion, or deduction from the base of a tax; a credit against a tax; a deferral of a tax; or a preferential tax rate.

Sec. 2   RCW 43.88.030 and 2002 c 371 s 911 are each amended to read as follows:
     (1) The director of financial management shall provide all agencies with a complete set of instructions for submitting biennial budget requests to the director at least three months before agency budget documents are due into the office of financial management. The director shall provide agencies and committees that are required under RCW 44.40.070 to develop comprehensive six-year program and financial plans with a complete set of instructions for submitting these program and financial plans at the same time that instructions for submitting other budget requests are provided. The budget document or documents shall consist of the governor's budget message which shall be explanatory of the budget and shall contain an outline of the proposed financial policies of the state for the ensuing fiscal period, as well as an outline of the proposed six-year financial policies where applicable, and shall describe in connection therewith the important features of the budget. The message shall set forth the reasons for salient changes from the previous fiscal period in expenditure and revenue items and shall explain any major changes in financial policy. Attached to the budget message shall be such supporting schedules, exhibits and other explanatory material in respect to both current operations and capital improvements as the governor shall deem to be useful to the legislature. The budget document or documents shall set forth a proposal for expenditures in the ensuing fiscal period, or six-year period where applicable, based upon the estimated revenues and caseloads as approved by the economic and revenue forecast council and caseload forecast council or upon the estimated revenues and caseloads of the office of financial management for those funds, accounts, sources, and programs for which the forecast councils do not prepare an official forecast, including those revenues anticipated to support the six-year programs and financial plans under RCW 44.40.070. In estimating revenues to support financial plans under RCW 44.40.070, the office of financial management shall rely on information and advice from the transportation revenue forecast council. Revenues shall be estimated for such fiscal period from the source and at the rates existing by law at the time of submission of the budget document, including the supplemental budgets submitted in the even-numbered years of a biennium. However, the estimated revenues and caseloads for use in the governor's budget document may be adjusted to reflect budgetary revenue transfers and revenue and caseload estimates dependent upon budgetary assumptions of enrollments, workloads, and caseloads. All adjustments to the approved estimated revenues and caseloads must be set forth in the budget document. The governor may additionally submit, as an appendix to each supplemental, biennial, or six-year agency budget or to the budget document or documents, a proposal for expenditures in the ensuing fiscal period from revenue sources derived from proposed changes in existing statutes.
     Supplemental and biennial documents shall reflect a six-year expenditure plan consistent with estimated revenues from existing sources and at existing rates for those agencies required to submit six-year program and financial plans under RCW 44.40.070. Any additional revenue resulting from proposed changes to existing statutes shall be separately identified within the document as well as related expenditures for the six-year period.
     The budget document or documents shall also contain:
     (a) Revenues classified by fund and source for the immediately past fiscal period, those received or anticipated for the current fiscal period, those anticipated for the ensuing biennium, and those anticipated for the ensuing six-year period to support the six-year programs and financial plans required under RCW 44.40.070;
     (b) The tax expenditure report prepared under RCW 43.06.400;
     (c) The undesignated fund balance or deficit, by fund;
     (((c))) (d) Such additional information dealing with expenditures, revenues, workload, performance, and personnel as the legislature may direct by law or concurrent resolution;
     (((d))) (e) Such additional information dealing with revenues and expenditures as the governor shall deem pertinent and useful to the legislature;
     (((e))) (f) Tabulations showing expenditures classified by fund, function, activity, and agency. However, documents submitted for the 2003-05 biennial budget request need not show expenditures by activity;
     (((f))) (g) A delineation of each agency's activities, including those activities funded from nonbudgeted, nonappropriated sources, including funds maintained outside the state treasury;
     (((g))) (h) Identification of all proposed direct expenditures to implement the Puget Sound water quality plan under chapter 90.71 RCW, shown by agency and in total; and
     (((h))) (i) Tabulations showing each postretirement adjustment by retirement system established after fiscal year 1991, to include, but not be limited to, estimated total payments made to the end of the previous biennial period, estimated payments for the present biennium, and estimated payments for the ensuing biennium.
     (2) The budget document or documents shall include detailed estimates of all anticipated revenues applicable to proposed operating or capital expenditures and shall also include all proposed operating or capital expenditures. The total of beginning undesignated fund balance and estimated revenues less working capital and other reserves shall equal or exceed the total of proposed applicable expenditures. The budget document or documents shall further include:
     (a) Interest, amortization and redemption charges on the state debt;
     (b) Payments of all reliefs, judgments, and claims;
     (c) Other statutory expenditures;
     (d) Expenditures incident to the operation for each agency;
     (e) Revenues derived from agency operations;
     (f) Expenditures and revenues shall be given in comparative form showing those incurred or received for the immediately past fiscal period and those anticipated for the current biennium and next ensuing biennium, as well as those required to support the six-year programs and financial plans required under RCW 44.40.070;
     (g) A showing and explanation of amounts of general fund and other funds obligations for debt service and any transfers of moneys that otherwise would have been available for appropriation;
     (h) Common school expenditures on a fiscal-year basis;
     (i) A showing, by agency, of the value and purpose of financing contracts for the lease/purchase or acquisition of personal or real property for the current and ensuing fiscal periods; and
     (j) A showing and explanation of anticipated amounts of general fund and other funds required to amortize the unfunded actuarial accrued liability of the retirement system specified under chapter 41.45 RCW, and the contributions to meet such amortization, stated in total dollars and as a level percentage of total compensation.
     (3) A separate capital budget document or schedule shall be submitted that will contain the following:
     (a) A statement setting forth a long-range facilities plan for the state that identifies and includes the highest priority needs within affordable spending levels;
     (b) A capital program consisting of proposed capital projects for the next biennium and the two biennia succeeding the next biennium consistent with the long-range facilities plan. Insomuch as is practical, and recognizing emergent needs, the capital program shall reflect the priorities, projects, and spending levels proposed in previously submitted capital budget documents in order to provide a reliable long-range planning tool for the legislature and state agencies;
     (c) A capital plan consisting of proposed capital spending for at least four biennia succeeding the next biennium;
     (d) A strategic plan for reducing backlogs of maintenance and repair projects. The plan shall include a prioritized list of specific facility deficiencies and capital projects to address the deficiencies for each agency, cost estimates for each project, a schedule for completing projects over a reasonable period of time, and identification of normal maintenance activities to reduce future backlogs;
     (e) A statement of the reason or purpose for a project;
     (f) Verification that a project is consistent with the provisions set forth in chapter 36.70A RCW;
     (g) A statement about the proposed site, size, and estimated life of the project, if applicable;
     (h) Estimated total project cost;
     (i) For major projects valued over five million dollars, estimated costs for the following project components: Acquisition, consultant services, construction, equipment, project management, and other costs included as part of the project. Project component costs shall be displayed in a standard format defined by the office of financial management to allow comparisons between projects;
     (j) Estimated total project cost for each phase of the project as defined by the office of financial management;
     (k) Estimated ensuing biennium costs;
     (l) Estimated costs beyond the ensuing biennium;
     (m) Estimated construction start and completion dates;
     (n) Source and type of funds proposed;
     (o) Estimated ongoing operating budget costs or savings resulting from the project, including staffing and maintenance costs;
     (p) For any capital appropriation requested for a state agency for the acquisition of land or the capital improvement of land in which the primary purpose of the acquisition or improvement is recreation or wildlife habitat conservation, the capital budget document, or an omnibus list of recreation and habitat acquisitions provided with the governor's budget document, shall identify the projected costs of operation and maintenance for at least the two biennia succeeding the next biennium. Omnibus lists of habitat and recreation land acquisitions shall include individual project cost estimates for operation and maintenance as well as a total for all state projects included in the list. The document shall identify the source of funds from which the operation and maintenance costs are proposed to be funded;
     (q) Such other information bearing upon capital projects as the governor deems to be useful;
     (r) Standard terms, including a standard and uniform definition of normal maintenance, for all capital projects;
     (s) Such other information as the legislature may direct by law or concurrent resolution.
     For purposes of this subsection (3), the term "capital project" shall be defined subsequent to the analysis, findings, and recommendations of a joint committee comprised of representatives from the house capital appropriations committee, senate ways and means committee, legislative transportation committee, legislative evaluation and accountability program committee, and office of financial management.
     (4) No change affecting the comparability of agency or program information relating to expenditures, revenues, workload, performance and personnel shall be made in the format of any budget document or report presented to the legislature under this section or RCW 43.88.160(1) relative to the format of the budget document or report which was presented to the previous regular session of the legislature during an odd-numbered year without prior legislative concurrence. Prior legislative concurrence shall consist of (a) a favorable majority vote on the proposal by the standing committees on ways and means of both houses if the legislature is in session or (b) a favorable majority vote on the proposal by members of the legislative evaluation and accountability program committee if the legislature is not in session.