♪♪
-Hello, I'm your host, Brian Callanan.
State leaders are preparing for a new legislative session
in Olympia, with some new and familiar hurdles ahead.
-I know that there are many people in Washington state
who are feeling a range of emotions
from the presidential election results.
-Governor-elect Bob Ferguson says he's ready
to protect the Evergreen State
during a second Trump presidency.
But Washington has some homegrown challenges, too.
-We are proposing a balanced budget.
-Governor Jay Inslee leaves office with a projected
$10 to 12 billion deficit over the next four years,
and a controversial plan to help fix it.
-I am proposing a new wealth tax.
-The proposed 1% annual tax on residents with
over $100 million has state Republicans seeing red.
-Olympia never seems to have an appetite to cut taxes,
only to increase taxes.
-But Democrats have larger majorities
in the State House and Senate,
and party leaders say a push for new revenue
is definitely on the docket.
-Whether it's a wealth tax or a payroll tax,
I do think there's capacity.
-We need to really think carefully about
how to do that in a way
where we'll actually collect the money.
-And what other priorities are on the horizon?
Our panel of lawmakers weighs in.
-We need to make sure our permitting
and environmental review laws are up to date.
-A look ahead at the 2025 state legislative session,
next on "City Inside/Out."
♪♪
Welcome, once again, to "City Inside/Out."
I'm Brian Callanan. Great to be with you.
And I have with me three members
of our Seattle delegation from Olympia.
That would be Senator Jamie Pedersen, the Democrat
from the 43rd District, downtown Seattle, up to UW.
He's also Senate Majority Leader.
Great to have you, Senator Pedersen.
-Thank you.
-Joining us also,
we have Senator Rebecca Saldaña,
the Democrat from the 37th District,
down in Southeast Seattle.
She's also Chair of the Labor and Commerce Committee.
Great to have you, too.
-Thank you, good morning. -Good morning to you.
And also from the House,
we have Representative Joe Fitzgibbon,
the Democrat from the 34th District,
from West Seattle out to Vashon Island.
He's also the House Majority Leader.
Great to see you again, Representative Fitzgibbon.
-Thanks. -Let's dive into this.
And Senator Pedersen, I want to start with you
on the state budget deficit that we've been hearing about.
$10 to 12 billion anticipated over the next four years,
this coming from the Office of Financial Management.
But then I saw this study a couple months ago from WalletHub
that showed our state's economy is the strongest in the country,
number one when it comes to economic health and innovation.
So why are we talking about a budget deficit?
-Well, to be clear,
it's not because our revenues have crashed.
So this is a very different situation
from what we experienced in the Great Recession.
-Mm-hmm.
-What happened, I think, is really two things.
Number one, there were some unusual spending patterns
during the pandemic.
People bought a lot more goods and bought fewer services.
-Okay.
-And because Washington's tax system is uniquely bad
and very dependent on sales taxes,
we had -- and we taxed goods and not services,
for a period of time,
our tax revenues just went through the roof.
That has flattened out over time,
but wasn't accounted for in the projections,
which sort of thought
that they would keep on going up at the same rate.
At the same time,
we decided to make some significant investments,
for example in childcare,
making it less expensive and more affordable for families
and providing better wages for people
who are employed in childcare.
And we programmed those increases to come in over time.
What you're now seeing in the four-year outlook
is the effect both of the flattening of revenues
and the increased commitments for services.
And so in all likelihood,
we're going to have to look both at the possibility
of additional revenue and at slowing down
or reducing some of the planned increases
that we had in programs.
-Thank you for that overview.
Senator Saldaña, maybe I can get a Chair of Labor and Commerce
perspective from you.
What are your thoughts about the deficit?
-Well, I mean, I think part of it is, you know, again,
unlike the last recession,
when we faced the pandemic,
we said that we are going to prioritize equity
and prioritize making sure that people are putting people first.
And so we did strengthen protections for workers.
We did make sure that we smoothed things out
for employers
so they wouldn't see spikes in unemployment insurance rates.
And all of that meant
that we are doing the right thing, in my opinion...
-Okay.
-...of making sure that we're keeping people healthy and safe
and being a partner to business to make sure
that we can smooth where we can the impacts
of the COVID pandemic and economic challenges
that we're seeing with inflation now.
-Okay. -And so that means, you know,
we made good decisions,
but this year we're going to have to look at,
you know,
how do we make sure that we continue to be a good partner
in supporting a strong economy. -Thank you.
And before we get into the revenue discussion,
which I really do want to get into,
maybe I can talk about Governor Inslee's budget proposal
because it's talking about some cuts.
And Representative Fitzgibbon, I'll start with you.
Maybe the idea of postponing putting more money
into programs like the Fair Start for Kids Act,
which is all about early childcare and education,
could save more than $2 billion
over the next four years by itself.
Is that the right place to cut?
Talk to me about some of the different reductions that
the Governor's talking about and your reaction to them, please.
-Yeah, well, there's no reductions
that the Governor has proposed
or really, you know, substantial reductions
that we could ever consider that wouldn't have impacts
on Washingtonians.
And we have to be clear-eyed about that,
and we have to be upfront about that.
Certainly childcare accessibility and affordability
is a really high priority for Washingtonians
and it's not something
that we take lightly to look at potentially delaying some
of those expansions.
That said, I think in general,
we feel that it's less harmful to delay a planned increase
in benefits than to cut benefits for,
that are currently being provided today.
So expanding the number of Washingtonians
who qualify for subsidized childcare
is scheduled in both 2025 and 2027.
It's probably less harmful for us to delay those expansions
than it is for us to cut the number of Washingtonians
qualifying for some other service like healthcare,
childcare, higher education. -Okay.
Any other thoughts about these cuts here
before we move on to revenue, Senator Saldaña, some thoughts?
-Well, I mean, I'm, of course, representing Southeast Seattle,
and, you know, was with many of the folks
that voted no on those initiatives
to say that we don't want to go backwards.
And I do think it really is looking at equity.
I mean, I do think that there's ways
for us to look at new revenues...
-Okay. -...and look at
how are we adjusting -- I mean,
basically looking at new revenues and looking at
where are there places that we can actually
make government smarter, and unnecessarily,
like, delaying access to childcare
is not necessarily one of those things.
I mean, we've heard from business and workers
and families that,
really, childcare is a backbone to making sure the rest
of our economy works. -Okay.
Some thoughts before we move on to the revenue piece,
which I know we're going to get to,
but some final thoughts about these cuts
before we do, Senator Pedersen?
-Well, I think the thing that we haven't talked about
is that it's the outgoing governor
who proposed those cuts, and we have a brand-new governor
who's about to start who probably will have a lot
of different ideas,
both things that he wants to fund that are new,
and other ideas about potential cuts.
And so I think we're going to have an interesting session
ahead of us working through those conversations with him.
-Okay, that's a very good point.
I appreciate you bringing that up.
So let's jump into revenue here.
Maybe Representative Fitzgibbon, I'll start with you.
And just to add some perspective here,
I know you've heard it before
from the Minority Leader of the House.
Republican Drew Stokesbary
wants to slow down the growth of government,
not add new taxes.
I just bring that up for some perspective here.
Does Washington State need new taxes?
And if so, who should be paying them?
-Yeah, well, I think that we'll be looking at an approach
that is balanced, that looks at, you know, are there places
that we can be more efficient with state government?
Are there cuts that we can make that aren't really,
you know, critically impact the lives of Washingtonians?
As well as looking at revenue options,
particularly revenue options that
ask the wealthiest people in our society,
who currently pay very little in taxes,
to pay a little bit more of their fair share.
We know that Washington has now the second
most regressive tax structure of any state, up from first most,
so that's an improvement,
but we still have a tax structure
that relies pretty heavily on the spending
of the poorest Washingtonians. And I think that we'd like
to see whatever revenue strategies we pursue this year,
and I do think that we need to pursue revenue strategies
if we want to support public education and higher education
and childcare and healthcare in our state,
that our goal would be to both protect Washington's
competitive economy as well as to ask the wealthiest people
in our state to, you know, to support the investments
that we need to make our state continue
to have a strong economy.
-I know Governor Inslee has talked about a wealth tax.
We can touch on that in a little bit.
And Senator Saldaña, maybe I can phrase it this way.
I've just heard from a number of different people,
a number of Democrats,
that the November vote to reject a ban on capital gains taxes,
2109, is an indicator
that our state is maybe primed to consider taxes
on wealthy people or corporations.
Is that the way you see the situation,
or what's your position on looking for new tax revenue
in the 2025 season here?
-Yeah, I mean, I do think that Washington State is a --
we're so lucky to live in Washington State.
We have so many strong resources,
and many businesses and individuals
have been able to be highly successful
with global companies doing well.
And so yeah,
I mean, I do think that those that have done really well
need to pay what they owe.
And they owe a huge debt to Washington
for what we've been able to contribute
with our infrastructure, with the resources,
and with this beautiful place that we get to call home.
And so I think capital gains is something
that showed a lot of strength and support for,
and I do think that, you know,
whether it's a wealth tax or a payroll tax,
I do think there's capacity in Washington State
for us to be able to make sure we can address housing,
childcare, and education. -Right.
Senator Pedersen, is there an option that looks good to you?
I know the Governor's talked about this 1% wealth tax
on assets over $100 million.
There's even some talk about a payroll expense tax model,
a lot like the Seattle Jumpstart model, going statewide.
What makes sense to you?
-You know, I think one of the things
that the three of us have in common
is we can probably vote for just about anything...
-Okay. -...for our constituents.
And the question is really sorting through what are
the options that have the fewest downsides, right?
We have, with the wealth tax,
I think the potential to make the tax system a lot fairer.
But on the other hand,
the narrower the base of people that you're talking about,
the more likely it is that there could be avoidance behavior,
right?
You see people moving out of state
or structuring their lives so that they don't owe the tax.
-Right, because this wealth tax,
last year, there was that $250 million threshold,
I think the government -- -A billion dollars.
-Excuse me, yes, right.
-A billion dollars, yeah. -Right.
-So then you're literally talking about
15 or 20 people.
-I see.
-And the way that the tax was structured,
at that point you had to be present in the state
for more than 183 days a year in order for it to apply.
-Okay.
-Well, it's not that hard to, you know,
if you have wealth on that scale,
you probably have homes all over the world,
all over the country,
and you probably naturally travel several months a year.
It's not that hard to imagine
that if it could save you a billion dollars in taxes,
that you might stretch out your time in Hawaii or Switzerland
or something.
So, we need to think really carefully,
because that's not a tax that anyone else has tried to impose.
We need to really think carefully about
how to do that in a way
where we'll actually collect the money.
Because the point is not to make a political point
off of villainizing people
because of their wealth and success.
It's to raise money to support programs
that we need for -- whether it's kids with disabilities
who are going to public school,
or families who need access to childcare or healthcare,
those are the kinds of programs that we want to make sure
are robustly funded.
-Okay, thank you.
And I wanted to follow up with you, Senator Saldaña,
on maybe a little bit more about what you heard from voters
this past November.
I mentioned the capital gains tax vote on 2109,
but there's also a no vote on 2117
which will in effect preserve the Climate Commitment Act
and its cap and trade system.
Then you have I-2124, another measure that was rejected.
It will keep in place our state's
long-term care insurance program.
I just wanted to ask you in general here what message
that you drew from those votes
and how that shapes your approach to the session ahead.
-Well, I mean, I think what I heard is that people recognize
that the infrastructure
that we've built in Washington State
will not stay as great as it is without investment.
People want to see a clean-fueled future.
They want to see roads that are smooth and allow people,
whether they're walking or rolling or driving,
to be able to get where they need to go safely.
They want,
and so many of us now are experiencing what it is
not to have adequate care,
whether you're caring for your parents,
whether you're caring for your children,
or you're caring for someone with a disability.
And we all know that the economy in the private market
is not providing that for us,
that we need a strong government
to partner with private enterprise
and with our residents to be able to make these things happen
that one individual family can't do by themselves.
-Okay. Representative Fitzgibbon, I just thought
it was really interesting looking even bigger picture
here just how the Republican Party used
the initiative process last year.
Three out of four initiatives
that went to a public vote were defeated.
We talked about a few of those there,
but during the session,
three measures the GOP put together
were passed by the state legislature on police pursuit,
ban on a state income tax,
this measure calling for parental notification
about student health and discipline records.
I just wanted to ask,
Do you anticipate seeing this tactic again with the GOP
using the initiative process in this way?
-Well, I'm not going to make any predictions
about what we might see from the Republicans.
I think the initiative process has been used
by folks on all sides of the political spectrum
to advance goals that were not getting through the legislature.
You know, that's been true in Washington for,
you know, nearly 100 years.
I'm sure we will see more initiatives in the future.
I think that I'm really proud of
how Washingtonians and Democrats in the legislature
made the case to keep a capital gains tax,
to keep long-term care insurance program,
and to keep the Climate Commitment Act.
I think what we really saw is that
when Washingtonians heard about
and understood the benefits of those programs,
they chose to keep them.
And I think that that will still be true in the future.
-Okay. Senator Pedersen, I could use your legal mind ahead
with what's happened with I-2066.
Voters said yes to this measure
prohibits the state from passing laws
to discourage the use of natural gas.
I know some lawsuits have been filed on this
from some environmental groups.
The City of Seattle, King County, also involved that.
Do you expect to see any action from the legislature
when it comes to 2066 this year?
-I do not. I feel pretty confident
that when the courts are finished considering that,
they'll conclude that it was unconstitutional
because it included more than one subject.
And so I think we'll be back to the law that we passed,
and I suspect
that we'll then want to make some tweaks to that.
-Okay, I'm interested to see how that pans out.
Senator Saldaña,
I wanted to talk about maybe some of the specific measures
you're working on for this session.
There are more than 300 pre-filed bills
for the legislature here as of early January,
and I know you're working on a few different things.
Do you have a top priority in 2025
that you'd like to let us know about?
Maybe something that hasn't been discussed here so far?
-Yeah, I mean, I think in general
and in the Labor and Commerce Committee in the Senate
this year, it's about making sure that the protections
that we have for workers encompass all workers.
And so I do have a bill
that builds on the good work of the people of Seattle
for domestic workers and be able to include them.
But I think the other piece,
too, is looking at the impact of small businesses.
And so I do have a bill
that would preclude big credit card companies
from charging fees,
a service fee, on tipped wages and tax collection
that small businesses and businesses across the state do
to be able to make sure that their workers have those tips
and make sure that they stay in the pockets of both the workers
and more money in the small businesses.
-And there's one other piece about oversight
for the City-County Regional Jail System.
-Yeah. -Would you touch on that?
I know this is something you've worked on for a little while.
-Yeah, I mean,
so this was when we serve in the legislature,
we often get assigned to task force
and I got assigned on behalf of the Senate Democrats
to serve on the task force for jail oversight.
And through that process,
I was alarmed to see the conditions of our jails
and that there was really, across the state,
50 different jails all with different standards,
all the different practices and unfortunately,
we're the fourth largest --
the fourth highest in the nation for deaths in our jails.
And so out of that good work,
and there was a set of recommendations
and one of them
is to reestablish an oversight committee for jail standards.
And we had this when I was born in 1977,
but got disbanded in '84. You know, I think as of --
you know, like, we did some good modernization and they're like,
Now everyone can just do their thing.
But it turns out that when everyone does their thing
without, you know, coordination and best practice in place,
it's a mix-match,
and I think we in Washington State
can join over half of the other states in our country
and make sure that we have that. -Okay.
Senator Pedersen, something you might be looking at here,
I'm on Page 55 out of 80 on that measure
you're working on with common interest communities,
places like condos with HOAs,
and I know we talked about this earlier,
is that a top priority for you?
You've been working on that for a long time.
-That has been a project for a long time.
So, you know,
about a third of people in our state
live in some kind of common interest community,
a homeowner association or a condo association or a co-op.
And this is a bill,
probably the fourth or fifth in a series of bills
that I've worked on over time,
that try to improve the governance of those associations
to strike a good balance between making sure
that the rights of homeowners are protected,
and that the communities are actually functional,
that their little governments
that they have can work appropriately
and have democracy flourish on that scale.
-Okay, interested to see what happens there.
Representative Fitzgibbon,
a personal goal for you this session
or some legislation you'd like to see go forward?
-Sure, yeah,
we will definitely be looking at our climate and energy policies.
I think now with Initiative 2117 behind us,
looking at what are some opportunities
for us to make sure all these laws are working well together.
I think we'll be looking at the Clean Buildings law
and the Clean Electricity law, both of which passed in 2019,
to make sure that now that they're four years in,
or six years in, that they're working well.
I think there are some opportunities
to strengthen those and also to ease compliance.
I think we'll be looking at the Clean Fuel Standard,
which passed in 2021, and looking at,
you know, are there some ways
that we can tighten up some loose aspects of that law?
And then I think our really big project on energy and climate
in the years
to come is to make sure that we can actually site
and build the energy facilities of the future.
The dirty energy facilities that were built
before we had strong energy laws,
strong environmental protections,
you know, have the power of incumbency
in order to get the new energy, the new transportation fuel,
the new clean electricity online
that we need to protect our climate.
We need to make sure our permitting
and environmental review laws are up to date.
And so that's something
we've been working on for a number of years
and I expect we'll continue to work on this year.
-All right. Thank you for that overview.
It is time to wrap up.
Senator Pedersen,
I think I've counted around 30-plus seats
in the House and Senate with new people in those roles,
varying levels of experience there.
You've got some long-time reps and senators stepping down,
and there are others like Senator Kuderer
leaving to become Insurance Commissioner.
Senator Nguyen, new leader of the Department of Commerce,
so you're going to need some replacements there.
I just wanted to ask, What are your expectations?
You have a long session ahead, a busy budget year,
a lot of turnover.
You're the Senate Majority Leader.
How are you going to steer the ship?
-Well, I do think that given the number of new folks
that we have,
we have nine new members out of thirty in our caucus,
that there's going to be a need for a lot of conversation,
a lot of team building,
to make sure that we know where we want to go together.
We have been having those conversations all through
the interim in our caucus,
and I think have a lot of alignment
around the idea that we need to focus on funding
for public schools, on housing, and behavioral health,
public safety as the sort of big focuses for this session.
All of that of course happens in the context
of a really challenging budget situation.
So there will be no end of fun...
-Okay. -...in the next four months.
-I'm sure of that.
And Senator Saldaña, this is something
I wish I could have touched on earlier,
but we also have a new presidential administration
that's promising mass deportations
and a lot of uncertainty for our state here.
I've heard the governor-elect gearing up for this.
I just wanted to ask
how will a second Trump term impact our state
when it comes to immigration?
What are you getting ready for?
I know this is an issue that's near and dear to you.
-Yeah, I mean, I joined the legislature at the end of 2016,
and over that time period, what's different this time
is that we've put a lot of strength in.
We have Keeping Washington Working,
we have added immigration status to our law
of protection against discrimination,
and we have invested in making sure
that we have people having access to healthcare
in Washington State.
So I think we're in a strong place.
It's about defending and making sure that people know
that here in this state,
we will continue to stand up for all Washingtonians.
-Thank you very much for that.
Representative Fitzgibbon, I'll let you wrap up.
Over the past couple of years,
I've heard different sessions called the Year of Housing,
or other such names.
Do you have a name for this session in 2025
or what are you looking forward to?
-Well, I think sometimes those names are easier
to identify in hindsight
than they are headed into the session.
-Yeah.
-I will feel really great about this session
if we can get out with a budget that protects the things
that Washingtons care about the most.
K-12 education, higher education,
behavioral healthcare, public safety, childcare.
Those are the biggest things that state government does.
They're also the most expensive things
that state government does,
and it's become more expensive
for state government to provide services,
just like it's become more expensive
for households and businesses to pay for their expenses.
So that's just the unfortunate reality of the economy
that we're in right now.
But I think that if we can get out of town with,
you know, feeling really good about, you know,
education and behavioral health,
then I would call it a great year.
-All right, thank you all for this, and we will be right back.
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We will see you next time on "City Inside/Out."
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