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2012 Session Update

2012 Session Update. Washington Mortgage lenders association March 8, 2012. 2012 Budget Shortfall . The deficit estimates changed: A $1.5 billion deficit coming into session was reduced significantly:

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2012 Session Update

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  1. 2012 Session Update Washington Mortgage lenders association March 8, 2012

  2. 2012 Budget Shortfall The deficit estimates changed: • A $1.5 billion deficit coming into session was reduced significantly: • Reduced caseloads in Medical Assistance and lower K-12 enrollment have resulted in a $340 million savings; • The revenue forecast increased by $80 million. • = the deficit about $1.1 billion. • This is closer, but still difficult to pass without 1.) new revenue, 2.) significant cuts, or 3.) gimmicks. • Senate dynamics make passage even more challenging.

  3. Revenue Options State sales tax rate from 6.5% to 7.0% = $500M Extend sales tax to business services = $600M B&O Tax Surcharge of 10% w/o exclusion for services subject to the 0.3% temporary surcharge in 2010 = $300M New Capital Gains tax … No impact next year. B&O tax on farmers’ income >$200K = $30M Repeal non resident exemption = $23M First mortgage interest deduction for larger banks = $18M

  4. Voters split on impact of tax increases

  5. First Mortgage Interest Deduction • Proposal was assumed in: House and Senate Democrat and the House Republican budget • Proposals would narrow the deduction only to banks located in <10 states ($18M impact) • Deduction would be reinstated if exemption was found to be unconstitutional • HB 2762 – another proposal that would have completely eliminated in 2017

  6. Many long-term reform measures were considered this session • Proposals were pushed by the Senate Republicans & moderate democrats • K-12: • Enact performance-based teacher evaluations • Establish transformation zones • Authorize charter schools • Higher Ed: • Provide operational flexibility • Fiscal: • Discontinue retirement incentives before age 65 • ModifyK-12 health benefits systems • Create parity with public employee benefits & private employees • Require a 6-year outlook with each biennial budget • Repeal perpetually unfunded programs (I-728, I-732) • Replace defined benefit plan pension system with a defined contribution plan • Regulatory/Government Efficiency: • Remove barriers to contracting out • Require LEAN/six sigma analyses • Require gubernatorial sign-off on all new regulations proposed by executive branch agencies • In the end, most of these reforms did not pass

  7. Budget Approaches

  8. Jobs Proposals • House & Senate worked together to come up with a package to fund capital projects • Package will likely be a combination of sources: • Bonds backed by other sources (including the state’s toxics taxes), • Cash from the Public Works Trust Fund, and • General Obligation bonds from the transfer of other sources into the General Fund • Does not require a ballot measure but requires 60% vote in Legislature • Total package close to $1B

  9. Debt Service is taking up a larger proportion of the General Fund budget

  10. Next Steps? The last day of the 2012 regular session is March 8 Because the legislature did not pass a budget, the governor may now call them back for a special session Constitutionally, it may last as long as 30 days, but may be shorter The Governor cannot restrict actions during this timeframe (so all bills are once again open for action)

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