Lowry budget proposal would boost state's economy, meet critical needs

OLYMPIA Gov. Mike Lowry today unveiled a supplemental budget plan that would set aside a prudent financial reserve while also expanding the job-creating tax policies that have significantly strengthened the state's economy over the past two years.

In addition, Lowry's $93 million (net) supplemental budget proposal would pay for more front-line workers to help keep kids safe and healthy, create and expand innovative programs that restore and protect the environment, and improve access to higher education for thousands more young adults and others.

In announcing his proposal, the governor said the plan will position Washington to best accommodate major reductions in federal funding over the next few years while building on what is already working here at home.

"It's no accident that our state's economy is doing so well," Lowry said. "Our economy has generated 134,500 new jobs since early 1993 despite cutbacks at Boeing and Hanford largely because major manufacturers and other businesses are looking at our tax policies, our quality of life, our highly educated workforce, and deciding to locate here.

"Those are the successes and the priorities that we need to build on over the next few years. This budget will do that."

Tax incentive programs

Gov. Lowry's proposal would reduce taxes for businesses that invest in job training and new or replacement machinery, allow most homeowners earning up to $50,000 per year to defer paying some of their property tax bill, and create new tax incentives for those who hire people on public assistance. The entire tax reduction and incentive package would reduce general fund taxes by $78.8 million in fiscal year 1997.

The governor's business tax incentive plan would expand the state's successful tax exemption program for new machinery and equipment purchased by manufacturers and apply it to research and development activities by all businesses provided those R&D efforts lead to manufacturing endeavors. In addition, the current exemption from state sales and use taxes on machinery and equipment would be broadened to include replacement parts, repairs, and labor.

Lowry said the research and development exemption would spur long-term growth in the state by helping young start-up companies and by reducing Washington's business tax relative to other states. More than 12,000 state businesses could benefit from the two exemptions.

"Company officials from major manufacturers have told us that the tax-incentive option we've had in place for a couple of years played a key role in their decisions to locate or expand in Washington state," Lowry said. "That a number of large companies have recently announced plans to collectively invest several billion dollars and create thousands of jobs is proof positive that this kind of tax reduction makes the most long-term economic sense for the entire state."

The governor's budget proposal also would encourage businesses to hire people receiving public assistance by providing a Business & Occupation tax credit to companies that offer job training through the Tax Incentive Partnership program. In addition, the budget plan would help manufacturers provide training for their workers by offering a B&O tax credit for approved basic skills or workplace training programs.

Finally, the governor's plan would help homeowners who earn less than $50,000 a year hold onto their homes when rising property tax bills might otherwise force them to sell. Lowry said the tax-deferral plan addresses the state's most pressing property tax problem.

"The budget would create a deferral program for those who stand to lose the most: their homes," Lowry said. "When people who have lived in the same house for 30 or 40 years are forced to move simply because the assessed value of their property is increasing faster than their income, it becomes pretty clear that's the real problem. Those are the people we need to help."

Meeting pressing needs

In addition to creating incentives for people and businesses to invest in the state's economy, the governor's plan would fund efforts to protect children's health and safety, safeguard the environment, bring more students into the state's higher education system, and strengthen the juvenile justice system.

According to Lowry, much of his spending proposal would not only fill critical gaps in necessary services, but would likely save state funds in the long run.

"In almost every case, you can look at the dollars we're spending in this budget and see exactly how they will save money over time," Lowry said. "Additional children's caseworkers to help kids before they fall victim to abusive surroundings, common-sense environmental programs that help attract new businesses to our state, educational investments that lead to a sought-after workforce these are critical needs that will absolutely pay off."

The governor's $24.8 million child protection package includes 132 new social workers and 22 chemical dependency specialists at the state Department of Social and Health Services (DSHS). The governor said the proposal to add caseworkers came out of discussions with children's experts and DSHS social workers who said recent tragedies such as the death of Lauria Grace and revelations about OK Boys Ranch are directly tied to the problems of high caseloads, poor monitoring and inadequate substance abuse treatment.

"We simply cannot take care of our most vulnerable children with overloaded and exhausted social workers," Lowry said.

Citing a direct correlation between a well-educated workforce and the state's economic growth, the governor also would expand access to higher education, calling for a 16 percent increase in student financial aid and adding 2,300 enrollment slots at two- and four-year institutions. Lowry said one of the most inventive ways of bringing more people into the state's higher education system is through a proposed expansion of electronic communications between existing campuses and local communities. A new Washington Higher Education Network (WHEN) could open college-education doors to thousands more people across the state by enabling colleges to transmit courses via cable TV or satellite transmissions.

Lowry also would increase funding for environmental protection efforts, calling for a comprehensive water policy initiative that would help resolve water resource issues on a watershed-by-watershed basis. In addition, the governor's proposed budget would:

One initiative would offer landowners a savings on their property taxes for restoring stream beds, shorelines, or watershed areas. Typical projects that could qualify include fencing, habitat improvements and erosion control. The second incentive would provide a tax deduction for public water systems that invest in specific types of water conservation measures, such as replacement of leaky water mains.

The governor said the environmental safeguards and tax incentives add up to good economic policy for the state, while also significantly enhancing Washingtonian's quality of life.

Lowry's three-pronged approach to improving the state's juvenile justice system would increase sentences for serious crimes and initiate a systematic review of juvenile sentencing; improve security in crowded juvenile institutions; and help young offenders "go straight" and avoid a life of crime. The governor said the funds earmarked for the juvenile justice system would help address a huge increase in arrest rates for juveniles charged with violent crimes a statistic that is expected to rise 10.8 percent more than anticipated during the rest of the current biennium.

Other funding initiatives proposed in Gov. Lowry's supplemental budget would boost international trade, tourism and business expansion; provide additional child-care assistance for working families, and pay for a minor adjustment in employee compensation for teachers and state workers.

Maintaining a prudent reserve

Lowry said the unprecedented challenge posed by Congress' New Federalism requires the state to set aside a healthy reserve fund. Current estimates are that Washington State stands to lose as much as $4.2 billion in federal funding over the next seven years under the budget approved by Congress.

In anticipation, the governor said his supplemental budget would leave a total of $505 million in reserve, which would be earmarked to help offset the loss of federal funding in the current biennium and in future years.

Lowry said that given the ongoing budget negotiations between Congress and the president and the uncertain effect those talks will have on the state budget the supplemental budget proposal he is announcing today will be revised once the president has signed the federal budget.

"No one really knows how bad the federal cutbacks will be, or when we might know for sure what's in store for Washington," Lowry said. "That uncertainly is all the more reason we need to take a prudent approach today."

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For more information, contact the Governor's Communications Office at (360) 753-6790.