Legislative Work Session: Overview of statutory obligations and revenue capacity of local governments and purpose of HB 2011, Local mandates and revenue funding from the county and city perspective, the feasibility of studying constitutional and statutory obligations and the revenue capacity of local governments. Pictured above from left to right: Representative David Taylor, Representative Sherry Appleton, Representative Joan McBride, Representative Strom Peterson, Commissioner Kevin Shutty, Councilmember Randy Ross, Commissioner Edna Fund and Commissioner Rob Gelder.
Thurston County, Olympia – On the morning of November 17, 2017, the Washington State House of Representative’s Local Government Committee met to learn more about the challenges that counties and cities are facing from local government leaders. Overall the message was clear; local governments are struggling to survive because there is a structural problem with how revenues are collected and the demands on counties and cities. Costs continue to grow faster than revenue. If the state does not want to take back the keys, then there needs to be more support and solutions coming from the State of Washington.
The first panel that was brought up consisted of Josh Weiss from the Washington State Association of Counties (WSAC), Monty Cobb from the Washington Association of County Officials (WACO) and Carl Schroeder from the Association of Washington Cities (AWC). This panel gave an overview of the funding structure and the taxing authorities that counties and cities currently have.
Josh Weiss from WSAC outlined the problem – when the rest of the world sees an improvement and a recovery from the financial woes of the past, how is it that counties and local government continue to struggle with revenue and are forced to lay off workers continuously? Weiss went on to explain that in most counties there are backlogs of cases to be prosecuted and some counties lack 24-hour Sheriff deputy coverage.
From the AWC, Carl Schroeder explained that ½ of the city budgets are directed to public safety. Some things are discretionary, and the state mandates some like garbage disposal. “But we can presume that you want us to continue to do that.”
WACO’s Monty Cobb explained that counties and county officials are continuously asked to “do more with less.” During the joint conference, last week many of the conversations were about how county leaders were trying to figure out how to do more with less. He went onto talk about how counties are the entities that collect the taxes for the federal and state governments but only keep 16% of all the revenue that they collect.
COUNTY COMMISSIONERS PANEL
Commissioners from several counties were called up in the second panel to talk more specifically about their counties and their budgets. The common theme among them was the fact that all the counties represented have shortfalls in their budgets, mostly because of the unfunded mandates pushed down upon them from state government. The other issue, a lack of options when it comes to creating more revenue to keep up with the demands.
Lewis County Commissioner, Edna Fund discussed the citizen outreach process used by the county to seek input and help in making difficult decisions about the county’s 2018 budget. Members of the citizen committee spent hours with commissioners reviewing the county budget and came away with an understanding of the stark choices facing the county. Two members of the committee drove to Olympia to attend the work session.
Kevin Shutty, a newly elected commissioner from Mason County, stated that running for office he knew about the different problems and challenges his county face. However, he continued to say that “what I didn’t know was how few tools we have to deal with those issues.” Not even a year on the job and he has already been faced with eliminating positions because of a $3milllion shortfall, and they are still short another $100,000. He was also shocked to learn that the county only receives $53,000 in marijuana revenue. The choices that he has to make as a commissioner are between county solvency and public safety.
An illustration of the complexity that Commissioner Shutty used was that of a ride along he did with one of his sheriff deputies. They were called to a house where someone with a mental disorder held a gun. That one call alone affected the Sheriff’s Office budget, the court budget, the mental health budget.
Commissioner Rob Gelder from Kitsap County started his testimony by stating that “if we continue down this path, counties will be something of the past.” Gelder went on to explain that his county started this year with $7 million shortfall and the county only has two sources of revenue; property and sales tax and that they continue to divert $3million from the roads fund at the cost of future infrastructure. In Kitsap County, the jails are full. It could be possible to open another pod or wing, but even if that happened, there is not enough money to fund the personnel needed to run that expansion.
Commissioner Gelder then offered some solutions. He thought that it would be helpful if attached to legislation there was a fiscal note attached that showed how costs are diverted and what the unfunded mandate cost would be to the entity that would now be providing that service instead of the state. Another solution that needed more attention was the destination of sales tax that is being collected. Since sales tax is being diverted from brick and mortar stores to online retailers, it is important to make sure that all the coding is being done correctly so that the sales tax goes to the proper municipality or local government.
Commissioner Randy Ross from Gray Harbor was the last commissioner on the panel to speak. Commissioner Ross made it clear to the legislators present that county government is an extension of state government and then proceeded to go through a list of unfunded mandates and talked about how the state had offered some relief in the form of a grant.
He went on to explain that the jail in Grays Harbor was built to accommodate 82 people and during the summer it can hold up to 192 people. There is not any wiggle room in the budget for public safety because it is already taking up to 75% of the counties’ budget. Also, there has been an increase in jail medical standards which also costs more money. Commissioner Ross went on to another unfunded mandated; ballot boxes. Ballot boxes, he explained, need to be staffed by two people and thus having more of them is an increase in cost both to build them but also to staff them. He also pointed out that the directive to build additional ballot boxes didn’t come with any financial help.
The cities face revenue issues, especially when working with the mental health community and the business communities. They are facing many problems dealing with getting more housing for citizens and there is a lack of permanent supportive housing for folks that need help. Cities are looking for flexibility in the revenues that are being provided by the state because the dollars are very restrictive in what they can be used for. City of Tacoma Government Relations Director, Randy Lewis said, “The need for additional revenue is very real but flexibility in how we are allowed to use it is equally as important.”
City of Hoquiam Administrator, Brian Shay said that they focus on bare-bones city services and don’t have any extra money to work on the mental health or homelessness issues. They do more with less but “now we are doing less with less.” He wants to see environmental regulations lessened that will help promote growth and industry in the city.
Other panelists included Bob Harrison from Issaquah and Aaron B. Miller from Kent. In Issaquah, the revenue does not keep up with our current expenses but also doesn’t allow Issaquah to invest in new sources of revenue and investment in new forms of infrastructure and businesses. Issaquah is growing exponentially and investments, though appreciated, are not keeping up with the growth. The city of Kent will have a 3.7 million deficit by the year 2020 and will have a negative general fund by the year 2023. The banked capacity that they have has been dipped into earlier then they had planned.
Lewis County Treasurer Arny Davis, and Thurston County Treasurer Jeff Gadman talked about the restraints that counties face. The Treasurer’s office is required by law to collect taxes, but there is no protected or guaranteed funding to provide these services. The Treasurer’s office operates by the grace of the commissioners granting sufficient funds to complete these tasks – which are getting squeezed by competing demands for public health and safety.
30 years ago, public safety was about 30% of the county general fund, and now it is up to 75 or 80% of the budget. Therefore, the commissioners are getting squeezed. Lewis County is already fighting the flooding issue, and the road fund is continuously being raided. The commissioners are working so hard to balance the budget; therefore, proactive economic development is so important but “how are they [the commissioners] going to support those actions when they can’t even support the basic services?” asked Davis of the committee.
This panel consisted of researchers from the Washington State Institute for Public Policy (WSIPP) and the Department of Commerce (Commerce) who were asked to look into a study that could be conducted that would give data to all parties that could be counted on as they look for more solutions in combating these county problems.
The main messages from the panelists were that:
- Without the scope or question of the project that it would be almost impossible to give a recommendation on the cost of such a study.
- Also, there have been several studies in the past that were standalone and the best way to move forward would be to create a framework that could be replicated in years to come and would be broad enough, or the framework would be such, that it could be repeated.
In reference to HB 2011, the panelists from Commerce believed that they would need at least a year to complete report. They also talked about the pros and cons of having an advisory committee and in the end, recommended that there be one to help advise on this issue.
Some of the questions that this research could try to answer are: Is the revenue capacity of local government enough to meet the legislative demands? What is the pass/fail rate of local levies? Would it be possible to get a list of what all the various options are that are available to fund various projects?
There were four Representatives in attendance during the House Local Government Committee; Representative and Chair of the committee Sherry Appleton (D-23), Representative Strom Peterson, (D-21), Representative Joan McBride (D-48) and Representative David Taylor (R-15).
The Legislators had various questions ranging from Hirst, to impact fees, to whether or not a county can proclaim bankruptcy. The first question was by Representative Taylor who asked about property value and whether or not the Hirst Decision was devaluing the property within counties. Josh Weiss from WSAC said that it indeed was an important part of the problem.
Chairwomen Appleton said about indigent defense that she knew it was “killing counties right now. Is there anything that can be done besides the money issue?” To which Josh Weiss replied, “really the money is the issue.”
Representative Appleton also commented, “I understand what you are saying and we are going to look for something to give you relief. I mean, to give all the cities and counties relief. And I don’t know what that is at this point. But, hopefully, by the start of session, we will have some ideas.” After one panel’s testimony, she also remarked that “it’s a nice sunny day. Which is good, because everything has been so gloomy here.”
Representative McBride asked the last question about just what would happen should a county become insolvent? Josh Weiss answered that “there is no process for that. There is nothing to do. We can’t file for bankruptcy. Those burdens would fall back on the state.” Commissioner Gelder went on to explain, “it’s not so much a question of bankruptcy, but it is the loss of service because there would constantly have to be cuts. The level of service would continue to erode to a point where the most minimal amount of service would be provided.”