Lawmakers negotiate release of hostage bills

The OlympianMay 11, 2011 

The House Ways and Means Committee just passed a bill closing a tax exemption for big banks’ mortgage interest earnings. The party-line vote on House Bill 2078 is a sure sign that the Legislature’s 30-day special session finally is picking up speed on Day 16, but it's still a bit crazy to think lawmakers are close to getting done.

As our TNT news partner Jordan Schrader reported earlier today, there is plenty of gum on the gears, and they don't mesh well in the best of times.

Here are the sticking points he mentioned and a few more:

** House Democrats have refused to budge on the Senate's bipartisan bill, Senate Joint Resolution 8215, which asks voters to amend the Constitution to include a 7 percent limit on revenues devoted to paying bond-debt interest debt. Groups like the state general contractors and architects like the idea of smoothing capital spending but fear the limit will kill of job creation in the short term, which is House Democrats' and organized labor's position, too.

** Despite the treasurer's support for the debt limit bill the squabble effectively scuttled a House vote on the capital-budget and construction-bond bills Monday night and again yesterday. The bonds are needed to pay for about $1.4 billion of the $3.1 billion construction budget.

** The capital-bonds bill, which is expected to pay $1.4 billion of new projects, requires a 60 percent supermajority vote for passage that Democrats can’t get without the GOP. So the House GOP has leverage on the bond bill to demand action on the debt limit, even though thousands of potential jobs are at stake if the bonds are not passed.

** Then – as Gov. Chris Gregoire herself said last week – Senate budget writers don’t think they can pass an operating-budget agreement with the House until they get a deal on a bill that allows lump-sum settlements of pensions for permanently injured workers. House Democratic leaders appear firm in opposing that reform (which labor hates) or are saving it as a late-session hostage to get other concessions not yet enumerated.

If that isn't enough, even the bank-tax loophole bill looks like a ransom payment to let the House pass an eventual compromise budget. HB 2078 is sponsored by 48 Democrats led by freshman Rep. Jinkins, D-Tacoma, and puts that money into restoring class-size reductions in the K-3 grades that both the House and Senate have proposed to slash.

Both Jinkins of Tacoma and freshman Rep. Chris Reykdal of Tumwater say they sent a clear message to House leaders that closing the bank-tax exemption (or other exemptions) is very important to them – in fact, they say it is a factor in their decision to support an eventual budget compromise when it gets to final passage later this month.

That makes the budget a potential hostage for liberal Democrats that want new tax revenues.

And perhaps with that threat in mind, HB 2078 has been retooled to get around objections from powerful retail and instate banking interests who testified against an earlier version of the bill during a late-April hearing.

HB 2078 no longer closes a sales-tax exemption for out-of-state shoppers who make purchases while visiting from states or provinces (like Oregon, Alberta, Montana and others) that have sales taxes lower than 3 percent. Retailers fear it will reduce cross-border business in counties along the Columbia River.

It also was reconfigured to eliminate the interest-exemption for all banks that are located in more than 10 states – rather than capping the exemption at $100 million, which hit two Washington-based banks, Washington Federal and Sterling Savings Bank.

As written now, HB 2078 would raise about $88 million over 18 months by taxing the mortgage-interest earnings of banks operating in more than 10 states. As amended, it now resembles a strand of Democratic Sen. Phil Rockefeller’s SB 5945, which additionally seeks to cut a slew of business-interest tax breaks by 25 percent.

House and Senate leaders haven't said whether either approach will get a floor vote or both. But Jinkins' and Reykdal's bank tax measure now looks like it is being primed for a floor vote – either to put it on the ballot with a simple majority vote or to flush out and embarrass House Republicans for voting against a bill that restores class-size money.

Lawmakers can send the tax measure directly to the ballot on a simple majority vote, avoiding the two-thirds vote requirement that Tim Eyman’s Initiative 1053 requires for legislative action that directly increases taxes or reduces or repeals tax exemptions. A vote of just 50 Democrats in the House and 25 in the Senate could accomplish that.

House Majority Leader Pat Sullivan, D-Covington, has said decisions on any floor votes on taxes must come after a budget agreement – so lawmakers know which cuts to restore, or to try restoring.

Gov. Gregoire told reporters today she doesn't really believe any of the hostages are really hostages. She said she believes in every case there are substantive policy differences being worked on in good faith by all parties.

But the construction-bond bill was House Republicans' No. 1 hostage or leverage in the workers compensation fight until recently. And it still could become that again.

House Democrats led by Speaker Frank Chopp of Seattle are still not allowing a committee or floor vote on Senate Bill 5566, which proposes to let injured workers settle permanent disability claims for a lump sum. And the Washington State Labor Council loathes – make that really loathes– SB 5566 and still believes the system is a good one after getting other reforms passed earlier this year.

Republicans have tried numerous ploys to get the worker-comp bill directly to the floor but swing Democrats haven't taken the bait, although some like Rep. Deb Eddy and Rep. Chris Hurst want to get a reform bill done.

Asked if she has any hostages, Gregoire said no. But she's also said several times that lawmakers are not leaving town without a worker compensation reform bill lowering pension costs.

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