A Preview of the 2021 Washington State Legislative Session

by John Stafford

INTRODUCTION

The Washington State Legislature will begin the 2021 legislative session on Monday, Jan. 11. The legislature operates on a biennium basis: it conducts 105-day full sessions in odd-numbered years (like this year) and 60-day short sessions in even-numbered years. In the odd-numbered years, three budgets are created — the operating budget, the transportation budget and the capital budget; in the even-numbered years, these budgets are modified.

This article will discuss the upcoming legislative session. There are three sections: a review of the background issues that establish the context for the session, a summary of legislative priorities, and a discussion of themes.

SESSION CONTEXT

There are a number of issues that provide the context for this year's session:

• Democrat Control of the Legislature: Washington State is one of 15 states in the country with a Democratic trifecta — a Democratic governor, a Democrat-controlled House of Representatives (57-41), and a Democratic-controlled Senate (29-20). In addition, there have been gains in minority representation in the state legislature. For example, voters elected six Black women to the legislature for the 2021 session, an all-time high, according to Crosscut's Melissa Santos.
• Level of Federal Financial Support to the State: Washington State's trifecta will be mirrored at the federal level. This is highly significant in the era of the pandemic, as the state will look for significant, ongoing financial relief from the federal government. The magnitude of that aid will have major budgetary implications for the state.
• Legislative Capacity in the Online Environment: This year's legislative session will be conducted virtually because of the coronavirus pandemic. Many analysts indicate that this may reduce the capacity of the legislature to pass bills. Indeed, House Democrats have been asked to reduce the number of bills that each representative introduces from 12 to seven. Democratic Rep. Joe Fitzgibbon wrote: "The remote session will reduce the number of bills that we can get through the process. What I don't know yet, and I don't think anyone knows, is how much will it reduce the throughput."
• State Revenue Decline: The pandemic-driven recession is devastating the state's budget for two reasons. First, state revenues have decreased dramatically due to a drop in tax revenues caused by a decline in business activity. Second, many state expenses are increasing to cover things such as expanded health care expenses and prolonged unemployment benefits. The revenue forecast has improved over time. In June, the projection for pandemic-driven declines in revenue from 2019 to 2023 was $7.8 billion. This forecast has been revised downward twice, and now stands at $3.2 billion. This is more manageable, but still represents a significant challenge, and it raises the critical question of whether the budget will be balanced with a tax increase, spending cuts, and/or tapping into the state's Rainy Day Fund. Republican Rep. Drew Stokesbary observed: "Even if you raid the entire rainy day fund, we're still in the hole by almost $1.5 billion for the upcoming biennium. That is not chump change and still suggests there are going to be some difficult budget choices ahead."
• Debate Over Priorities: There is general agreement several key priorities in the upcoming session: making the difficult decisions necessary to balance the budget, effectively addressing the vaccination and health care demands of the pandemic, promoting the economic recovery, and responding to demands for racial justice. However, there are significant differences of opinion between the parties on how these issues should be addressed, as well as on what the additional priorities should be. In a recent Seattle Times op-ed, Democratic Speaker of the House, Laurie Jinkins, wrote: "To protect families in our state, we will prioritize your health and well-being through a focus on COVID-19 response, economic recovery, climate change and addressing systemic racism."
• Inter-Party Acrimony Over Re-Opening Decisions: The pace at which businesses re-open will have implications both for Covid-19 transmission rates as well as the business failure rate and state revenues. To date, Gov. Jay Inslee has been instituting business re-opening guidelines based on Executive order, and Republican Party leaders have argued that he has not sufficiently solicited Republican input. They responded by withholding their support for expedited unemployment benefits. There will be ongoing debate over how to best make business re-opening decisions.

LEGISLATIVE PRIORITIES

Lawmakers plan to introduce a number of bills in critical policy areas in the upcoming session.

• The Budgets. Inslee and the party leadership of each chamber will each create a budget proposal (five total), which will be followed by negotiations to reach a compromise. Inslee's proposed operating budget calls for $57.6 billion in spending over two years, $5.5 billion (10.5 percent) more than the 2019 operating budget. Inslee's plan also includes a new capital gains tax and a new health care tax.
• Taxation: Washington State is a slightly below average tax state when measured as state and local taxes as a percentage of personal income (the most commonly used metric among economists). In 1995, it was the 11^th highest tax state in the country using this measure, and by 2018, it had fallen to 26^th, meaning we have gone from a high-tax state to a lower-than-average tax state. In addition, Washington State has the most regressive tax system in the country, with the bottom 20% income earners paying 17.8% of their income in state and local taxes while its 1% highest-income residents pay just 3%, according to the Institute on Taxation and Economic Policy. Restated, our lowest-income residents pay a tax rate 6 times higher than our richest — the worst ratio in the nation. This is because Washington State is one of seven states without an income tax or a capital gains tax, and thus must rely on the regressive sales tax.

In the runup to this session, there have been several proposals to increase taxes in a manner that will make the state's tax code less regressive. Long-serving Rep. Frank Chopp has proposed a three-pronged plan comprised of a capital gains tax, a tax on high-income earners, and a payroll tax. Inslee has proposed a 9% tax on capital gains over $25,000 for individuals and $50,000 for couples — with a number of asset categories excepted — and a health care tax.

There are several issues associated with proposed tax increases: these will be opposed by the Republican caucus; if a capital gains tax does pass the legislature, its legality will be challenged in court (the state constitution has restrictions on the taxation of income); and there are jurisdictional considerations such as the extent to which the state can and should pass a tax on high-income earners when Seattle has already done the same thing through its "JumpStart" legislation, which passed in 2020. I will note that the Republican Party always uses the same circular argument to oppose new taxes in the state: When the economy is doing well, state tax receipts increase and thus there is no need to raise taxes; when the economy is doing poorly, businesses are not doing well and we cannot afford to burden them with additional taxes. The end result: We should never raise taxes.

This is, of course, an absurd construct. The relevant question regarding taxation is what level is appropriate for the state. Given that we are a slightly-below average state with exorbitant regressivity, it makes sense to introduce a new progressive tax,like a capital gains tax. And, this is the ideal time to do so — there is a clear need for more funding to address the myriad costs of the pandemic, the budget is out-of-balance, we have a tax structure that is out-of-sync with national norms, and there are strong Democratic majorities in both chambers that should provide the political will to make this happen.

• Pandemic. The budget will include funding for extended unemployment insurance, as well as to support businesses confronting solvency issues due to the pandemic. These programs include the Shared Work program, through which the state provides payroll support for businesses in need. Other pandemic-related costs will include vaccine rollout, personal protective equipment, increased health care expenditures, testing, contact tracing, etc. In addition, Democratic State Sen. Mark Mullet is introducing a bill to change the decision making process for determining when businesses can re-open to include legislative input.
• Housing/Homelessness: These continue to be major issues, and they have been exacerbated by the pandemic. There will be numerous bills to provide additional funding in these areas, as well as to provide the means for local governments to improve their responses to these challenges.
• Racial Justice: A key focus of the session will be the passing of legislation to address the demands for racial justice that rose across the country over the summer of 2020 and have become increasingly prominent in 2021. This will include proposed reforms in a number of areas — determining appropriate funding levels for police forces, making it easier to decertify police officers, banning certain procedures (e.g., chokeholds), increased funding for police training, community investment, etc.
• Education Equity: Another issue that will be addressed is educational equity in the age of the pandemic. Copious research demonstrates that lower-income and minority communities are disproportionately and negatively impacted by online learning. Bills in this area will include proposals to expand internet access in disadvantaged communities.
• Day Care Funding: The online educational learning environment enhances the need for subsidized day care in order to enable working parents that do not work remotely to leave the home to pursue their careers. There is also a significant socio-economic dimension to this issue, as it is more important in lower-income and minority communities. There will be bills to expand subsidized day care.
• Climate Change: Climate change is an existential and time-sensitive threat. Unfortunately, the state is far behind its target of reducing carbon emissions by 25% by 2035. There will be a number of proposals for dealing with Climate change in the upcoming session.

Perhaps most significant are proposals to place a price on carbon in order to disincentivize the use of fossil fuels and to raise money for green energy programs. Here, there are two competing proposals. The governor, supported by a number of legislators including Democratic State Sen. Reuven Carlyle, is proposing a cap-and-invest program. An alternative plan is the Washington Strong proposal where proceeds from a carbon tax are securitized into a bond. This proposal will raise funding for a number of clean energy initiatives. Many analysts (myself included) find it troubling that progressives are divided between the two competing proposals rather than uniting around one, which will only serve to diminish the prospects of passing either.

In addition, the Clean Fuels Act will be re-introduced for the third straight year (it has passed the House but failed in the Senate each of the past two years). It requires transportation fuels to be made with a lower carbon content. Also up is the Heal Act, which calls for environmental and climate legislation to be created in a manner that ensures equity by addressing the reality that the impacts of climate change and the transition to a green economy disproportionately impact lower-income and minority communities. There is also pending legislation to ban the sale of new internal combustion vehicles in the state by 2030, as well as legislation dealing with building codes (the de-carbonization of residential and commercial buildings). Other climate change bills deal with ferry electrification, reducing emissions from fluorinated gases, and community solar programs.

• Other Environmental Issues: There will be a number of proposed environmental bills in other areas, including the use and disposal of plastics, Orca recovery, and possible dam removal.
• The Growth Management Act (GMA): The GMA deals with the planning for growth statewide. It can be thought of as a statewide strategy for accommodating growth, and it addresses a variety of issues including zoning codes, which dictate what can be built where. The state's GMA will be updated this year. It will be critical to do this in a manner that is conducive to improvements in the state's climate change profile.
• Transportation Issues: There are myriad transportation proposals that will be addressed in the session. These include proposals to fund the Interstate 5 Columbia River Crossing, widen the Interstate 405 bottleneck through Bothell, widen Highway 3 on the Kitsap Peninsula, make improvements to the Highway 2 trestle between Everett and Lake Stevens, make improvements on the Interstate 90/I-405 interchange, and provide funds for the partial replacement of the West Seattle Bridge. There will also be discussions about accelerating the state's efforts to replace damaged road culverts in order to improve salmon runs.
• Transit: Transit faces a difficult situation. Ridership and revenue are down due to the pandemic. Thus, major transit systems (e.g., Sound Transit) are confronting significant budgetary deficits. Nonetheless, the decline in ridership is leading some to call for a significant reduction in transit funding. On the other hand, transit is an essential part of the longer-term transportation strategy required to address climate change. In addition, renewed investments in transit can serve as a Keynesian-style jobs creation mechanism to assist in the economic recovery. I believe that it is essential to strongly support transit during this period of pandemic-driven recession.
• Gun Control: Much progress has been made in the area of gun control legislation in recent years. In the upcoming session, bills will be introduced that call for limits on magazine capacity, background checks on the purchases of magazines, and limits on the public carry of firearms and other weapons in response to recent security breaches during rallies at the state and national level.

IMPORTANT QUESTIONS/THEMES

There are several important themes that will emerge in the upcoming session. These include:

• Avoiding Austerity: A critical question will be whether the state operating budget will be balanced via cuts to social services ("austerity"), or whether it will be balanced by tapping into the state's Rainy Day Fund and/or a new source of progressive revenue. In my view, it is essential to avoid an austerity approach to balancing the budget.
• Taxation: Will this finally be the year when the state starts to address its embarrassing regressive tax code (often deemed to be the worst tax system in the country) by instituting a new source of progressive taxation (e.g., a capital gains tax)? In my view, this must be a top priority.
• Climate Change: Can climate change obtain its necessary focus in a session that will tend to have other priorities?
• Short Term versus Long Term Focus: There will be a tendency to overreact to short-term symptoms of the pandemic, such as making cuts in transit spending due to temporary declines in ridership. This must be resisted in order to continue the longer-term vision of a powerful transit infrastructure.
• Democratic Party Courage: Will the Democratic Party utilize the opportunity afforded by its trifecta (which includes strong majorities in both legislative chambers) to effect a strong progressive agenda? The time for being bold is now.
• Capacity Mismatch: How will legislators deal with the mismatch between the need to pass a high number of bills in response to our numerous crises — pandemic, recession, budget, racial justice, climate change, etc., and the reality that the online session will likely reduce the capacity to pass bills? It will be critical to operate the online session in a highly organized and efficient manner.
• Importance: It goes without saying that in light of the state's myriad crises (pandemic, recession, budgetary, racial justice, climate change, etc.) and constrained resources, this will be one of the most important legislative sessions in recent memory.

John Stafford is a high school history teacher who resides on Beacon Hill. He is active with the Democratic Party and is involved in climate change activism. He writes periodic articles for the South Seattle Emerald.

Featured image by is attributed to MathTeacherGuy under a Creative Commons 2.0 license (CC BY-NC 2.0)