Law

Policy: A Firm Grip

By Erik Smith May 20, 2013

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Several weeks ago, state Rep. Reuven Carlyle posted a note on his Facebook page. He was getting a little tired of looking for business tax loopholes to close in his effort to balance the states $32 billion budget. If you need me, he wrote at the time, Ill be in my blanket fort. Coloring.

It was probably the first time during the 2013 legislative session that anyone had heard a discouraging word from Carlyle, the fast-rising Seattle Democrat who this year took over the reins of the House Finance Committee. He is one of a roster of new players at the statehouse who are putting business issues front and center in a way that hasnt been seen in recent years.

In the Senate, a new fiscally conservative coalition has taken over, vowing to do something positive for the states business climate. In the House, where Democrats continue to hold sway, Carlyle is leading an effort to rein in business tax breaks. While the two groups were most likely headed for a cataclysmic confrontation in the last 24 hours of the legislative session and the now routine special sessionwhat Olympians like to call the end gamethe funny thing is that everyone seemed to have such genuine enthusiasm, Carlyles facetious Facebook posting aside. It seemed this years fresh faces hadnt had a chance yet to become disillusioned.

The public is just thrilled, says state Sen. Janea Holmquist Newbry, R-Moses Lake, the new chair of the Senate Commerce and Labor Committee. They come to hearings and see a debate that has been stifled for years. And I am loving it, of course.

You might have the idea the governor is the most important person at the statehouseand maybe he is, singly. But the House and Senate have 147 minds of their own, and there is a saying at the Capitol: The governor proposes; the Legislature disposes. So at the end of March, newly elected Democratic Governor Jay Inslee offered up his solution to the knotty budget problem this year, brought on by the state Supreme Courts decision that Washington isnt spending enough on K-12 education. Inslee suggested raising an additional $1.2 billion with a grab-bag of proposals to end business tax exemptions, all of which had been considered and rejected by lawmakers in the past, and by continuing temporary taxes due to expire this month on beer and service businesses. So much for Inslees much-publicized campaign promise to avoid tax increases.

To Inslees consternation, members of his own party sat down with the Republicans and worked out a deal that raised no taxes at all. The budget approved by the Senate on April 5 certainly wasnt the end of the argument, and there were some inelegant parts, such as a few hundred million in cuts to social programs, child care for welfare mothers and cash stipends for disabled adults. Even the Democrats who sat at the table said they think some sort of tax increase will ultimately be needed. But it certainly wasnt the sort of budget Republicans would have written alone. When was the last time you saw them embracing labor contracts negotiated by the public employee unions? Nine Democrats joined 21 Republicans in a bipartisan vote of 30-18.

Driving that voteand pretty much everything else that has taken place so far this year at the statehousewas a decision made by two Democrats right after the November election. The way things were shaping up, it was going to be a taxapalooza year, and Sens. Rodney Tom of Medina and Tim Sheldon of Potlatch wanted no part of it. Instead, they would caucus with the Republicans, thus changing control of the Senate and establishing a new majority. Tom, the most celebratedand deridedof the new players that have come to the fore, is now Senate majority leader. The people dont want this to be like the other Washington, says Tom. They want people to work together to find solutions that are right for the people of the state. And whether my political career survives, that really doesnt matter.

Tom is a sort of case study in bipartisanship all by himself: He began his political career as a Republican, then switched parties to run for the Senate. His new majority coalition23 Republicans and two Democratshas bent over backward to involve the other team, though the other team hasnt been altogether grateful. When the coalition offered to share committee chairmanships at the start of the year, furious leaders of the Democratic caucus decided they would rather sit things out as a powerless minority. Nevertheless, three Democrats accepted gavels as individuals and cooler heads prevailed when it came time to write the budget. The big idea all along was to steer the Legislature toward the middle, Tom says, and a big part of that endeavor is business policy.

Suddenly, business bills were getting heard and coming up for votes after being introduced year after year and getting nowhere during nearly a decade of full Democratic control of the statehouse. There was broad-scale reform of the state workers compensation system, regulatory reform, an effort to force state agencies to develop a single website for licensing and tax payments. And by the time the session was finished, lawmakers were predicting a move to repeal the states never-implemented family leave insurance plan, passed in 2007 but stymied because it required an impossible-to-swallow payroll tax. It has just been a sea change, says Patrick Connor of the National Federation of Independent Business (NFIB). At least in the Senate, things are remarkably different. Theyre actually interested in hearing from those of us in the business community. When I testify, they dont cut me off after two minutes.

Two senators have been key in that transformation. One is Holmquist Newbry, a longtime member of the Legislatures commerce and labor panels who finds herself wielding a gavel for the first time. Its not as if any of the ideas are new, she says; its that until this year they didnt stand a chance. We wanted to move our state down the road to economic recovery and we knew what we needed to do in order to get there. Another player is her second in command, Sen. John Braun, R-Centralia, a freshman senator who became very prominent, very fast, as the sponsor of most of the Senates business-oriented legislation. Braun is president of Braun Northwest, a company that modifies vehicles for use in law enforcement and emergency medicine. As an active member of NFIB, the Association of Washington Business and other lobbying organizations, Braun says he possessed an intimate familiarity with the agenda of the business community long before he got to Olympia.

When Senate Democrats rejected the power-sharing offer from the Republicans-plus-two, Braun won his own gavel and transformed the Senate Economic Development Committee into a proving ground for business bills. He and Holmquist Newbry shepherded more than 20 measures across the Senate floor. Not that anything much happened with them.

The House Democrats didnt bother sending over any big controversial bills and its a little hard making a one-sided trade. We cant say, Well look at this if you look at our bill, Braun notes. We can just say, Look at our bill, and theyre saying, No.

In fact, Sen. Karen Keiser, D-Kent, cant help but laugh when a reporter asks if all is sweetness and light in the Senate and a new era of enlightenment has broken out across the land. You should know better than to believe their press releases, says Keiser, a staunch ally of labor. The former Washington State Labor Council spokeswoman says it always comes down to deal making with the House. And what happens there is anyones guess because House Speaker Frank Chopp, D-Seattle, rarely speaks publicly and seldom submits to questions from the pressreasons for his longevity, perhaps. Everyone always assumes there is a master plan; where the business bills are concerned, there may even be one.

Instead, the spotlight goes to committee chairs like Carlyle who may or may not speak for the party. A veteran of several Seattle-area tech startups, Carlyle is the whip-smart House point-man on taxes. He pledges a rigorous and analytical look at business tax breaks, the $4 billion field of contention that always is raised by spending advocates when cuts begin to hurt. Carlyle says he wants to bring the same level of rigorous examination to tax exemptions that is given to every spending program in the budget. I come from the innovation economy of Seattlethat is my subculture, those are my peepsand I just dont believe that most exemptions would pass the straight-face test.

Accomplishing this task is harder than it sounds, and those who have tried in the past usually found it was like legislating the weather. Every break had its defender; every break had a rationaleoften to prevent double taxation or some other inequity. Business has nothing to fear if it can make a compelling case, Carlyle says. My goal is to take the politics out of tax policy.

Its a mighty ambitious goal, one that might be hard to accomplish before sessions end. Before the legislative session ended in late April, Carlyle thought there might be a few moves in this years budget. And check back next year. These fresh faces are just getting started.

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