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Key Legislative Changes That May Affect Your Budget

August 13, 2015
Category: Budgets and Budgeting

Key Legislative Changes That May Affect Your Budget

Attention all local government budgeteers, the annual budget season is here! There is no need to hide out and retreat until December 31 or when the budget has been adopted, MRSC is here to help. Our annual publication, Budget Suggestions, has been completed for 2016 and is available for your use. With a wealth of financial information and  guidelines for your budget process, it is a great resource to help you successfully adopt your city or county budget.

As you dive into the complex process of preparing your budget, we want to make sure you are aware of some of the key legislative changes that may affect your budget. Therefore, in this blog you will find information on recent legislative updates that can assist you as you begin to project revenues and expenditures for the coming year.

New Revenue Stream from Motor Vehicle Excise Tax

The increased gas tax as part of the transportation package (ESSB 5987) captured the attention of much of the media, but there is a fact about it that makes ESSB 5987 particularly beneficial to local governments: direct distribution of these new fuel taxes.

The bill provides direct transfers of revenue to local government from the new motor vehicle fuel tax. Cities and counties will begin to see these revenues in September 2015, when they will receive a combined distribution of $2,929,750 on the last day of the first quarter of the state fiscal year (September 30). Thereafter, quarterly distributions will occur throughout the 2015 – 2017 biennium. For those planning ahead, this quarterly distribution will increase to $6,278,000 starting with the next biennium (September 30, 2017).

Higher Liquor Excise Tax Distributions

Many in Washington felt a sigh of relief when the governor finally signed the state budget into law, but local government had an extra reason to cheer. The Fiscal Biennium Operating Appropriations Bill (ESSB 6052) not only provided for appropriations to state government and its departments, agencies, and programs, but it returned the percent of liquor excise tax distribution revenue to a 35% share for Washington cities, counties, and towns. In the previous biennium it was only 22.5%, and we won’t talk about the biennium previous to that!

New Fee Authority for Transportation Benefit Districts

The transportation package (2ESSB 5987) had some interesting amendments for transportation benefit districts (TBDs). From a budget perspective, TBDs now have the ability to increase their license fees.  Amendments to RCW 82.80.140 provide that if a $20 nonvoted fee has been imposed for at least 24 months, that fee may be increased without a public vote to $40. If, subsequently, a $40 nonvoted fee has been imposed for at least 24 months, that fee may be increased without a public vote up to $50; however, that nonvoted fee of more than $40 is subject to referendum.

Revenues from Marijuana Taxes Coming but Exact Figures to Local Jurisdictions Unknown

The laws passed this legislative session changed the Liquor Control Board to the Liquor and Cannabis Board. This legislative session also revealed how much the state has made in marijuana excise tax revenue, $65 million to be exact. Unfortunately, we still aren’t exactly sure how much of that revenue will be distributed to local governments.

The Marijuana-Reforms-Taxation (HB 2136) provides revenue sharing from the state to cities and counties. Section 1603 provides $6 million for each year of the 2015-2017 biennium, however the distribution formulas are a bit complex. It works like this: 60% to counties that have not prohibited marijuana sales, production, or processing ratably based on the total amount of taxable sales subject to the marijuana excise tax in the prior fiscal year. Then, after making the county distribution, the state treasurer is to distribute the remainder to eligible cities ratably based on total retail sales from the prior fiscal year.

The easier forecast will begin in fiscal year 2018. If marijuana excise tax collections deposited into the general fund in the prior fiscal year (2017) exceed $25 million, then the legislature must appropriate an amount equal to 30% of such deposits to the treasurer for distribution to cities, towns, and counties. 30% of these deposits will be distributed to local jurisdictions that have licensed marijuana retailers in their jurisdiction and the amount will also depend on the volume of sales. The remaining 70% will be distributed to eligible cities, towns, and counties on a per capita basis. We have currently estimated those 2018 distributions to be $2,848,842 for cities and $4,272,723 for counties, but this is a forecast that is a few years down the road.

Image courtesy of John Stahl.

MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.


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