Hello Readers,

The legislative session in Olympia is half over, with 30 days to go. A wide range of proposals have been considered and voted out of policy and fiscal committees. WTIA is actively engaged on a number of proposals, primarily in the areas of K-12 and higher education and tax related proposals.

With the state economy still recovering slowly, tax receipts have not kept up as they have in previous years. In last year's legislative session, lawmakers cut spending but did not raise taxes. What they did not do, however, is truly reform how the state budget is put together and truly prioritizing spending, particularly K-12 and higher education. There is a growing recognition that there is a limit to health care and social services spending, especially as the "paramount duty" of the state is to fund K-12 education. Too often social services and health care spending is increased simply by increasing elgibility in these programs. As the economy recovers, legislators need to shrink eligibility for these programs, which will help reduce spending over time.

This is particularly important in light of the recent King County Superior Court decision in the McCleary case that ruled that the state is not fully funding "basic" education. This could require up to $2 billion in K-12 spending in next year's budget.

The other side of the budget problem is on the revenue side. The 2009-11 biennium that we are now in will see an actual drop in tax reciepts for the first time in almost 30 years. In previous economic downturns there was slowing of growth in tax receipts, as was true in 2001-03, but not an actual drop in revenues.

Additionally, from a political standpoint, numerous activists and unions are in Olympia almost daily pressuring lawmakers to raise taxes and not cut programs further.

While increases in tax rates have not yet been formally proposed, several bills have been introduced that give the state much more power over taxpayers to determine what is subject to tax. Please see the attached bill, HB 3176, which was requested by the Dept. of Revenue.

The question now for the technology industry, and all taxpayers, is what you think should be done to balance spending and revenue. Should the legislature cut even more into higher education, health care, social services, environment/natural resources? Or should there be a general sales tax increase to keep agencies and programs whole? Do you support an increase in the B&O or property tax? How about eliminating tax credits, like for R&D, that the tech industry uses extensively to hire and perform R&D?

We want to hear from you about this. Please contact us at Lmcmurran@washingtontechnology.org to let us know your opinion.