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Beyond Budget Suggestions for 2018


August 8, 2017 by Toni Nelson
Category: Budgets and Budgeting

Beyond Budget Suggestions for 2018

This week we released the annual publication known as Budget Suggestions. It’s amazing to think that this booklet has been published each year for the past 74 years!

While there are many things that have changed over the years there are others that remain the same, such as the requirement to adopt an annual or biennial budget for most local government jurisdictions and all of the associated procedures and steps required to meet this statutory requirement.

MRSC’s Finance webpage, and particularly the budget section, offers several webpages to help with this process, including Budget Preparation Procedures for Cities and Towns, Budget Preparation Procedures for Counties, Calendars, Revenue Estimators, and other tools.  

Each year we have chapter in our Budget Suggestions publication titled “Legislation That May Affect Your Budget,” where we provide a brief overview of the most significant bills that emerged from the recent legislative session. Some of these issues are a bit more complex and we feel it’s important to provide a more in-depth discussion of these key pieces of legislation.

Marketplace Fairness Act 

EHB 2163, or the Marketplace Fairness Act, was one of those pieces of legislation that we summarized in Budget Suggestions. For some of you, this will result in an increase in sales tax revenues while others may feel the impacts of a loss of Streamlined Sales Tax (SST) mitigation funds.

Part II of the legislation extends retail sales tax collections and/or reporting to remote sellers, referrers, and marketplace facilitators (internet sales). The complication will begin with local government’s ability to forecast these revenues for the forthcoming 2018 budget. The Department of Revenue (DOR) has developed a spreadsheet that reflects their forecasts for remote sales as well as the estimates of reduced SST mitigation payments for those jurisdictions receiving these distributions.

A word of caution on using the numbers provided within the DOR worksheet: The estimates are based on the state fiscal year, which is 7/1 – 6/30, so the projections shown for 2018 actual are for 7/1/2017 – 6/30/2018.

How should you incorporate these forecasts into your revenue projections for 2018? This will be a decision that each entity will evaluate individually. Some of you may decide to take a cautious approach to including these forecasts within your 2018 revenue forecasts while others may wish to use the DOR remote sales tax projections. Whether you include all, some, or none of these forecasts for 2018, be sure to implement a monitoring system to track the remote sales so that corrections or adjustments to the budget can be made if needed.

Cities and counties receiving SST mitigation funds should note the importance of monitoring remote sales. Beginning with distributions made after March 31, 2018, distributions will be reduced by the amount of its marketplace facilitator/remote seller revenues reported during the previous calendar quarter.  

LEOFF 2 Pension Contributions 

Part of the state operating budget, SSB 5883 Section 963 includes a change to employer contribution rates for LEOFF 2 pension contributions on specific types of services being performed by LEOFF 2 employees.  

At first glance the impacts seemed limited to port districts with LEOFF 2 employees. Cities, towns, and counties were happy to hear that the state budget maintained the state’s commitment to fund its share of LEOFF 2 contributions. However, upon closer evaluation it appears more jurisdictions may be impacted by this legislation than originally thought.  

For example, jurisdictions with LEOFF 2 employees that perform services where a fee is charged or where the entity is recovering its costs for services provided will now be required to contribute both the employer and state shared portions of the LEOFF 2 retirement benefit.

The Department of Retirement Systems (DRS) will be providing local governments the required reporting changes but for those hours where the jurisdiction is recovering its costs or charging a fee-for-service, the employer contribution rate will be 0.0893 (i.e., the 0.0543 current employer contribution rate plus the state contribution rate of 0.0350). Local governments are realizing that more than just a few LEOFF 2 employees will require revisions to the contribution rates of some wages being reported to the DRS.

Additionally, local government will need to evaluate fee schedules and/or contracts-for-services for those LEOFF 2 employees that are performing services under this new legislation. At the present time, the legislation indicates that this change is only effective for fiscal years 2018 and 2019 (7/1/2017-6/30/2019), but a word of caution when amending contracts for services as it is difficult to predict what the results of the next legislative session will be.

Marijuana Excise Tax 

Also part of the state operating budget, SSB 5883 Section 979 makes changes to the distribution of this state shared revenue before cities and counties have even received the first shares of the marijuana excise tax provided in the initial legislative session and codified under RCW 69.50.540 (2)(g)(i)(B).

The 2017-2019 state budget reduced the distribution from $15 million to $6 million. All cities and counties will want to adjust their 2017 numbers to reflect this reduction in the per capita number. You will find the revised, per capita rate in the state shared revenue tables of the 2018 Budget Suggestions publication.

Local jurisdictions with biennial budgets that used the state shared revenue forecasts provided in the 2017 Budget Suggestions publication should consider these reductions to the per capita numbers during their mid-biennium review.

Questions? Comments?

Budget season is upon us!

If you have questions about this topic or other local government issues, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772. If you have comments about this blog post or other topics you would like us to write about, please email me at tnelson@mrsc.org.  

About Toni Nelson

Toni has over 24 years of experience with Local Government finance and budgeting. Toni's area of expertise include "Cash Basis" accounting and reporting, budgeting, audit prep and the financial issues impacting small local government.

VIEW ALL POSTS BY Toni Nelson

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