Please see below legislative update from Lew McMurran, Vice President of Government & External Affairs at the Washington Technology Industry Association (WTIA).
The first legislative cutoff has passed, which means many bills have died in their policy committee. Many bills are still alive, including 3 WTIA likes.
- HB 1472, the AP computer science bill. See details in report.
- HB 1693, the B&O exemption for startups. Hearing in Rep. Carlyle's Finance Committe Tuesday at 8 a.m. Need someone or two to testify or show up to support.
- SB 5605, the bill to help AHPs. Passed out of Senate Health Care.
Per Lew, more threats are coming to the R&D credits. We don't know all the details yet but we will have to weigh in with legislators this session to hold on to these. More details are in the report. No doubt more pressure will come to allow the R&D incentives to expire to “fund education”. The IT Industry grew 25,000 jobs from 2005-2011, even during the recession. We have done our part to keep the state economy going. Not renewing tax incentives for R&D, even if less inclusive as before, is not good tax policy. Washington has to compete and let its tech sector compete as well.
Lew and WTIA will continue to fight against efforts to limit or allow the R&D incentives to expire. We will need the help of the WTIA/TAG Board and members to keep this economic development tool.
Thank you for your support.
This message comes to us from Lew McMurran, Vice President of Government & External Affairs at the Washington Technology Industry Association (WTIA):
Legislative Session Update for Week Ending Feb. 23, 2013
Week 6 of the 105 day legislative session finished with a flurry of activity as yesterday was the deadline for bills to be voted out of policy committees. Next Friday, March 1 is the deadline for bills to be voted out of fiscal committees.
I am following 86 bills total, some of which are “companion” bills, i.e. the same bill but two versionsundefinedone in the House and one in the Senate. While I am following a large number of bills, we are actively working only a few.
HB 1472 makes AP computer science the equivalent of a third credit of math for high school graduation, instead of an elective, and sets up a Computer Science professionals task force. This bill passed out of House Education Committee Feb.21 and now moves to the House Education Appropriations Committee. WTIA supports this bill.
HB 1693 provides a B&O deduction for some types of new manufacturing and tech businesses for the first three years of their existence. These businesses can deduct up to $1 million in revenue before their B&O liability kicks in, which can be a huge help to young companies. This bill passed out of the House Technology and Economic Development Committee and is scheduled for a hearing in the House Finance Committee next Tuesday, Feb. 26 at 8 a.m. HB 1693 also has extensive reporting requirements. WTIA supports this bill.
SB 5605 relates to Association Health Plans. This bill attempts to codify in state law the conditions that the federal Dept. of Labor sets out for member-governed groups to be considered bona fide employers for the purposes of selling health insurance under the Affordable Care Act. Passage of this bill would be helpful to WTIA in guaranteeing that we can continue to offer a large group health plan to our members. This bill passed out of the Senate Health Care Committee. WTIA supports this bill.
As is customary, the K-12 arena is very active with all kinds of legislation being proposed and discussed. The McCleary decision is the overriding concern of the legislature this session. The state Supreme Court said in essence that the state needs to spend a lot more money to provide a “basic education” to all the state’s students. The assumption is that at least $2 billion more needs to be spent on K-12 education over the next 5 years to comply with the McCleary decision. Some estimate put compliance with McCleary at $6 billion in new spending. With a slowly recovering economy, tax revenues are growing but not at the pace of the legislature’s desire to spend it on K-12.
Below is a short list of K-12 bills that I am watching that are moving.
HB 1177 is a bill dealing with persistently failing schools. Current law identifies them but does not allow any intervention. Federal grants are available for failing schools and a number of schools have received these grants in the past. HB 1177 makes changes to the conditions and action plans for failing schools. State funds may be used if appropriated. OSPI needs to develop more robust plans for helping failing schools but intervention by the state is still prohibited.
HB 1252 sets up an online professional development system for teachers. The idea is for OSPI to find and collect various online resources that can be used for teacher professional development at low or no cost to teachers.
HB1692 implements the 24 credit graduation requirement and the allocation formulas for schools to increase their teaching time to have a 6 period day, up from 5 currently. This new allocation drives cost up dramatically but is what is required under the education reform proposals from 2009-10. There are a number of other provisions dealing with various K-12 programs.
SB 5587 adjusts the various student assessments required for graduation. Students have to pass a reading, writing and one math assessment currently. By 2015, an additional math and a new science assessment are required to graduate. With adoption of the common core standards, assessments will change. The reading and writing assessment will be combined into one test. Students will still have to pass two end of course math tests and one test in biology as the science requirement.
SB 5755 is Gov. Inslee’s STEM bill. This bill attempts to coordinate all the various STEM related activities going on in education around the state, find best practices, use student data more effectively to improve STEM teaching and learning and to increase the pipeline of students pursuing STEM degrees.
As has become customary, the higher education budget is the area where the legislature, particularly the House, uses to cut or balance the budget. With K-12 a “must” increase and with Medicaid expansion and a health benefit exchange, higher education will be lucky to stave off cuts and just keep even. Plus the legislature is in a mood to limit tuition increases but knows there is no other way to see students get served. Demand for higher education at all levels remains high.
HB 1043 deals with differential tuition. The legislature had allowed the state’s colleges and universities the authority not only to set their own tuition for resident undergraduates but to allow for “differential” tuition. The idea being that schools to charge more for the more expensive degreesundefinedsuch as engineering or computer science or other majors that require labs or equipment. However, due the negative effect this arrangement could have done to the GET program, differential tuition will be disallowed.
HB 1624 sets a goal for affordable tuition to not exceed 10% of median family income. It also sets a goal to have state funding be no less than 50% of the cost of tuition. The bill sets up a task force to look at a wide range of higher education issues around funding, access, performance and other key measures.
SB 5624 requires alignment between K-12 STEM and career related programs with Community and Technical College applied baccalaureate programs. This is designed to ensure better coordination between high schools and CTCs in STEM related career training.
HB1017 sets efficiency standards for battery chargers and battery charger systems. By 2014, battery chargers and battery charging systems must be compliant with the California regulations governing energy efficiency for these systems. These systems cannot be sold in the state unless these standards are met.
HB 1364 is another battery related bill. This bill sets up a battery recycling program, similar to the one for computers and TVs. The majority of the burden falls on manufacturers to provide for collection and pay for the costs of recycling. Retailers also have significant responsibilities in the collection process. This is another bill to try to reduce toxics, harmful chemicals and metals from the solid waste stream.
SB 5211 This bill disallows employers from asking for the social networking account passwords of prospective employees in order to gain access to the prospective employee’s account. Civil penalties are allowed for violations. There are some exceptions for complying with other state and federal laws.
Government IT bills. There are several bills related to state government IT policies and enabling “one stop” portals for businesses to do all state licensing and permitting without having to go to multiple agencies. These ideas come up regularly. Many state agencies can be accessed online for a wide range of transactions, while others are not. There are still various and sundry IT policies among state agencies, some are in the cloud, others are not. Then there is how to best use the state albatross, aka the state data center. New state CIO Mike Cockrill seems like a capable person and with a new governor, there may be an opportunity to see state IT usage and policies improve.
Tax and tax incentives
This is the most contentious area that we are involved in. The tax incentives for R&D expire Jan. 1, 2015. A Joint Legislative Committee published a report saying the B&O credit (sales tax deferral was not included) produced very few jobsundefined454 to be exact. They used an economic model that the staff admitted was flawed. The study did not look at a number of other factors related to the $7.7 billion of R&D that goes on in the state, or the multiplier effect of R&D spending.
The Washington Education Association (teachers union) opposed HB 1303, which extends the B&O credit and sales tax deferral for R&D for an additional 20 years to 2035. There has been some negative media written by certain tech columnists about the use of tax credits.
These two tax incentives total about $50-$70 million annually of tax benefit. This is based on about $22 -$23 mil in B&O credit and another $25 - $50 in sales tax deferral (DOR’s reporting requirements make it difficult to know the exact amount of sales tax deferred).
This dwarfs the hundreds of millions in B&O and sales tax that tech companies do pay, in addition to the $500 million in taxes employees in the tech industry pay in state and local taxes annually.
Nonetheless, the desire to raise taxes and raise revenue goes unabated (at least in one particular caucus). To be fair, there is a strong case for more revenue for K-12, even as reforms need to be implemented and quality improved. Plus higher education is under the gun so the tax/revenue picture cannot be ignored. The spending “problem”, if you will, comes from health care and related. State reimbursements to nursing homes, other providers, Medicaid expansion, state employee coverage, new health benefit exchange all combine to put enormous pressure on the state budget. As previously stated, K-12 funding will have to be increased and getting higher education back to 11% of the state budget is one of our goals.
We ought to think about a position on taxes that puts us in a position to be helpful to the state’s coffers while still being able to take advantage of useful tax credits and deferrals. We ought to think about allowing the B&O tax to keep going at 1.8% beyond the June 30 expiration if we could get certainty on the R&D side.
No doubt more pressure will come to allow the R&D incentives to expire to “fund education”. The IT Industry grew 25,000 jobs from 2005-2011, even during the recession. We have done our part to keep the state economy going. Not renewing tax incentives for R&D, even if less inclusive as before, is not good tax policy. Washington has to compete and let its tech sector compete as well.
We will continue to fight against efforts to limit or allow the R&D incentives to expire. We will need the help of the WTIA Board and members to keep this economic development tool. Thank you for your support.
Please contact me if you have any questions or comments. Lmcmurran@washingtontechnology.org or 253-653-5331.