"NEW SECTION.  Sec. 1   The legislature finds that recent events, including the 9/11 terrorist acts, the tsunami in southeast Asia, Hurricanes Katrina and Rita in the gulf coast, outbreaks of avian flu, and the earthquake in Pakistan, have demonstrated the need for a coordinated, comprehensive all-hazards disaster plan involving citizens, industry, local governments, and the state. Washington state's topography, geography, location, and strategic and economic interests place the state at particular risk from both natural disasters and man-made disasters. In response, Washington state and its local governments have implemented nationally recognized all-hazards emergency management and disaster response plans. However, recent studies have revealed the lack of a secure funding source for resolving impediments to the ability of state and local programs to integrate and coordinate comprehensive disaster preparedness. In addition, local programs suffer disparities in funding and expertise, leaving troublesome gaps in a well-coordinated statewide all-hazards emergency management system.
     Recognizing that all disasters are local disasters, the legislature therefore intends to strengthen state and local emergency response, mitigation, preparation, and coordination by establishing a stable source of funding with the intent that Washington state become the nationally recognized leader in emergency management. The funding will be dedicated to the development and coordination of state and local government emergency management programs by supporting joint training exercises, citizen and industry coordination with emergency management efforts, public education, and relationship building among local and state emergency management officials.

NEW SECTION.  Sec. 2   The emergency management, preparedness, and assistance account is created in the state treasury. All receipts from the surcharge authorized by section 3 of this act must be deposited into the account. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used only as provided in section 4 of this act.

NEW SECTION.  Sec. 3   (1) In order to provide funds for emergency management, preparedness, and assistance, an annual surcharge of two dollars per policy shall be imposed on every homeowner's, mobile homeowner's, tenant homeowner's, and condominium unit owner's insurance policy, and an annual surcharge of four dollars per policy shall be imposed on every commercial fire, commercial multiple peril, and business owner's property insurance policy, issued or renewed on or after the effective date of this section.
     (2) The surcharge shall be paid by the policyholder to the insurer that issued the policy, and each insurer shall collect from each policyholder the full amount of the surcharge payable in respect to each policy and remit the amount to the department of revenue. Beginning with invoices issued on or after the effective date of this section, the surcharge shall be stated separately from the premium in any policy invoice or bill issued by the insurer.
     (3) The department of revenue will collect, administer, audit, and enforce the surcharge under chapter 82.32 RCW. Each insurer shall retain as compensation three percent of the gross amount collected from policyholders. The surcharge is not to be considered premiums of the insurer and is not subject to premium taxes, however, nonpayment of the surcharge by the insured may be a valid reason for cancellation of the policy. The surcharge imposed on policyholders under this section is not subject to retaliatory tax provisions. All proceeds of the surcharge must be deposited in the emergency management, preparedness, and assistance account and may not be used to supplant existing local funding.

NEW SECTION.  Sec. 4   (1)(a)(i) Until June 30, 2008, the department must use twenty percent of the funds appropriated from the emergency management, preparedness, and assistance account for the purposes of (a)(ii) of this subsection. Beginning with the fiscal year ending June 30, 2009, and biennially thereafter, the department must use ten percent of the funds appropriated from the emergency management, preparedness, and assistance account for the purposes of (a)(ii) of this subsection.
     (ii) Funds appropriated under this subsection must be used for the department's administration of this section, and to: Fund the assessment required by section 5 of this act; fund state agency activities, including military department activities, that develop and coordinate comprehensive emergency management plans; train elected and appointed state officials on state laws, disaster command and response structures, and the roles and responsibilities of officials before, during, and after a disaster; administer periodic joint emergency management training exercises involving the military department and other state agencies; and implement state agency projects that will strengthen emergency response, mitigation, preparation, and coordination.
     (b)(i) Until June 30, 2008, the department must allocate eighty percent of the funds appropriated from the emergency management, preparedness, and assistance account for the purposes of (b)(ii) of this subsection. Beginning with the fiscal year ending June 30, 2009, and biennially thereafter, the department must use ninety percent of the funds appropriated from the emergency management, preparedness, and assistance account for the purposes of (b)(ii) of this subsection.
     (ii) Funds appropriated under this subsection must be used for grants to regional agencies, local governments, tribal governments, regional incident management teams, and private organizations to: Develop and coordinate comprehensive emergency management plans; train elected and appointed officials on state laws, ordinances, disaster command and response structures, and the roles and responsibilities of officials before, during, and after a disaster; administer periodic joint emergency management training exercises; and implement projects that will strengthen emergency response, mitigation, preparation, and coordination.
     (2) Projects funded under this section must include, but need not be limited to, projects that will promote neighborhood level public education on disaster preparedness and recovery issues, situate all weather radios in public buildings, enhance coordination of public sector and private sector relief efforts, and improve the training and operations capabilities of agencies assigned lead or support responsibilities in the state comprehensive emergency management plan.
     (3) Grant funding may also be used as seed money to establish a dedicated, full-time emergency management director in every county that does not have such a director as of the effective date of this section.
     (4) The department must establish criteria and procedures for competitive allocation of these funds by rule. At a minimum, the rules must:
     (a) Establish preferential funding for projects and exercises addressing needs and recommendations identified by the department in the assessment conducted under section 5 of this act;
     (b) Specify a formula that establishes a base grant allocation and weighted factors for funds to be allocated over the base grant amount for regional agencies, local governments, tribal governments, regional incident management teams, and private organizations with existing emergency management and preparedness programs that are located in a part of the state where the risk of exposure to disasters is deemed by the department to be particularly acute;
     (c) Specify match requirements; and
     (d) Include requirements that, at a minimum, a local emergency management agency have: A comprehensive emergency management plan or be a member of a joint local organization for emergency management; and a local director who works at least forty hours a week in that capacity, or have designated by ordinance or resolution an emergency management coordinator who works at least fifteen hours a week in that capacity.
     (5) No more than five percent of any award made under subsection (1)(b) of this section may be used for administrative expenses.
     (6) The distribution formula provided in this section may be adjusted proportionally when necessary to meet any matching requirements imposed as a condition of receiving federal disaster relief assistance or planning funds.
     (7) Local governments receiving funds under this section may not use the funds to supplant existing funding.

NEW SECTION.  Sec. 5   Beginning in January 2008 and biennially thereafter, the department must conduct in conjunction with the emergency management council a strategic assessment of, and issue a report on, the ability of state, local, and tribal emergency management organizations to effectively provide for all phases of comprehensive emergency management. The assessment must:
     (1) Evaluate state, local, and tribal emergency management capabilities and needs;
     (2) Evaluate the ability of state, local, and tribal emergency management organizations to provide emergency management mitigation, preparedness, response, and recovery;
     (3) Evaluate the effectiveness of the emergency management structure at the state, local, and tribal levels;
     (4) Provide findings and make recommendations that increase the ability of state, local, and tribal emergency management organizations to meet current and future risks; and
     (5) Detail where and for what purpose funds under section 4(1)(b) of this act have been distributed.

NEW SECTION.  Sec. 6   The joint legislative audit and review committee must study and review the performance of programs implemented under this act. The committee must examine at least the following factors: The number and type of joint exercises conducted under section 4 of this act; the number of programs receiving grant money and the status of those programs; the coordination of comprehensive emergency management plans between state and local jurisdictions; the number of training programs administered; the number of comprehensive emergency management or safety plans created using funds distributed under section 4 of this act; and the number of emergency preparedness officials created and trained with funds distributed under this act. The committee must provide a final report on this review by December 2008. Funds from the emergency management, preparedness, and assistance account may be provided to the committee for the purposes of conducting the study.

Sec. 7   RCW 48.18.170 and 1947 c 79 s .18.17 are each amended to read as follows:
     "Premium" as used in this code means all sums charged, received, or deposited as consideration for an insurance contract or the continuance thereof. "Premium" does not include the surcharge imposed under section 3 of this act or the regulatory assessment imposed under RCW 48.02.190. Except as provided in RCW 48.02.190, any assessment, or any "membership," "policy," "survey," "inspection," "service" or similar fee or charge made by the insurer in consideration for an insurance contract is deemed part of the premium.

Sec. 8   RCW 48.18.180 and 1994 c 203 s 2 are each amended to read as follows:
     (1) The premium stated in the policy shall be inclusive of all fees, charges, premiums, or other consideration charged for the insurance or for the procurement thereof.
     (2) No insurer or its officer, employee, agent, solicitor, or other representative shall charge or receive any fee, compensation, or consideration for insurance which is not included in the premium specified in the policy.
     (3) Each violation of this section is a gross misdemeanor.
     (4) This section does not apply to a fee paid to a broker by an insured as provided in RCW 48.17.270.
     (5) This section does not apply to the surcharge imposed under section 3 of this act or the regulatory assessment imposed by RCW 48.02.190.

Sec. 9   RCW 48.02.190 and 2004 c 260 s 22 are each amended to read as follows:
     (1) As used in this section:
     (a) "Organization" means every insurer, as defined in RCW 48.01.050, having a certificate of authority to do business in this state and every health care service contractor or (([self-funded])) self-funded multiple employer welfare arrangement registered to do business in this state. "Class one" organizations shall consist of all insurers as defined in RCW 48.01.050. "Class two" organizations shall consist of all organizations registered under provisions of chapter 48.44 RCW. "Class three" organizations shall consist of self-funded multiple employer welfare arrangements as defined in RCW 48.125.010.
     (b)(i) "Receipts" means (A) net direct premiums consisting of direct gross premiums, as defined in RCW 48.18.170, paid for insurance written or renewed upon risks or property resident, situated, or to be performed in this state, less return premiums and premiums on policies not taken, dividends paid or credited to policyholders on direct business, and premiums received from policies or contracts issued in connection with qualified plans as defined in RCW 48.14.021, and (B) prepayments to health care service contractors as set forth in RCW 48.44.010(3) or participant contributions to self-funded multiple employer welfare arrangements as defined in RCW 48.125.010 less experience rating credits, dividends, prepayments returned to subscribers, and payments for contracts not taken.
     (ii) Participant contributions, under chapter 48.125 RCW, used to determine the receipts in this state under this section shall be determined in the same manner as premiums taxable in this state are determined under RCW 48.14.090.
     (c) "Regulatory assessment" means the assessment imposed by subsection (3) of this section.
     (2) The annual cost of operating the office of insurance commissioner shall be determined by legislative appropriation. A pro rata share of the cost shall be charged to all organizations as a regulatory assessment. Each class of organization shall contribute a sufficient ((in fees)) amount to the insurance commissioner's regulatory account to pay the reasonable costs, including overhead, of regulating that class of organization.
     (3) ((Fees charged)) The regulatory assessment shall be calculated separately for each class of organization. The ((fee charged)) regulatory assessment collected from each organization shall be that portion of the cost of operating the insurance commissioner's office, for that class of organization, for the ensuing fiscal year that is represented by the organization's portion of the receipts collected or received by all organizations within that class on business in this state during the previous calendar year((: PROVIDED, That the fee)). However, the regulatory assessment shall not exceed one-eighth of one percent of receipts((: PROVIDED FURTHER, That)). The minimum ((fee)) regulatory assessment shall be one thousand dollars.
     (4) The commissioner shall annually, on or before June 1st, calculate and bill each organization for the amount of ((its fee. Fees shall be)) the regulatory assessment. The regulatory assessment is due and payable ((no later than)) by June 15th of each year((: PROVIDED, That)). However, if the necessary financial records are not available or if the amount of the legislative appropriation is not determined in time to carry out such calculations and bill such ((fees)) regulatory assessment within the time specified, the commissioner may use the ((fee)) regulatory assessment factors for the prior year as the basis for the ((fees)) regulatory assessment and, if necessary, the commissioner may impose supplemental ((fees)) regulatory assessments to fully and properly charge the organizations. The penalties for failure to pay ((fees)) the regulatory assessment when due shall be the same as the penalties for failure to pay taxes pursuant to RCW 48.14.060. The ((fees)) regulatory assessment required by this section ((are)) is in addition to all other taxes and fees now imposed or that may be subsequently imposed.
     (5) All moneys collected shall be deposited in the insurance commissioner's regulatory account in the state treasury which is hereby created.
     (6) Unexpended funds in the insurance commissioner's regulatory account at the close of a fiscal year shall be carried forward in the insurance commissioner's regulatory account to the succeeding fiscal year and shall be used to reduce future ((fees)) regulatory assessments. During the 2003-2005 fiscal biennium, the legislature may transfer from the insurance commissioner's regulatory account to the state general fund such amounts as reflect excess fund balance in the account.
     (7) Beginning with invoices issued on or after the effective date of this section, each insurer shall collect from each policyholder an amount equal to the premium paid by that policyholder multiplied by the rate then in effect for the regulatory assessment. The regulatory assessment shall be separately stated from the premium in any policy invoice or bill issued by the insurer. The amount collected from policyholders pursuant to this section shall not be considered premium as defined in RCW 48.18.170 for any purpose and is not subject to premium taxes; however, nonpayment of the amount by the insured may be a valid reason for cancellation of the policy. The amount imposed on policyholders under this section is not subject to retaliatory tax provisions.

NEW SECTION.  Sec. 10   Sections 2 through 5 of this act are each added to chapter 38.52 RCW.

NEW SECTION.  Sec. 11   Sections 4 through 6 of this act take effect January 1, 2007."