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HomeMy WebLinkAboutREVIEW 2026 WA Legislative Session JEFFERSON COUNTY BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST TO: Board of County Commissioners FROM: Heidi Eisenhour, Commissioner Dist. 2 Kelsey Hulse, Lobbyist at Propolis DATE: January 12, 2026 SUBJECT: 2026 Washington Legislative Session STATEMENT OF ISSUE: Jefferson County Lobbyist Kelsey Hulse will review the attached 2026 Washington Legislative Session report, including outcomes related to Jefferson County's legislative priorities, the status of key budget and policy items, and broader statewide legislative developments. The County awaits the Governor's signature on several key bills, including all three supplemental budgets. Our lobbyist has provided a comprehensive session review report summarizing outcomes and major policy discussions. ANALYSIS: The 2026 legislative session adjourned on March 12, 2026, following a 60-day session marked by significant budget activity and high-profile policy debates. Some highlights include: Jefferson County Priorities: Port Hadlock Sewer Project: A $5.7M request was submitted but not funded due to limited capital budget capacity and competing priorities. Trust Land Transfer: The County was successful in securing $3.6M for the Cape George project, with additional requirements related to a carbon offset pilot program. Housing& Families: Several policy efforts advanced, including HB 2442 (child and family services funding) and HB 2269 (housing flexibility in LAMIRDs),both of which passed. Budget Highlights: Passage of all three supplemental budgets (operating, capital, and transportation). The operating budget totals approximately $80.2B and relies on one-time solutions pending future revenue from the newly adopted"Millionaire Tax." The capital budget includes investments in housing, infrastructure, and clean energy programs. Other Key Issues: Adoption of the Millionaire Tax(SB 6346), establishing a new state revenue stream beginning in 2028. Continued diversion of Public Works Assistance Account(PWAA) funds, impacting infrastructure financing statewide. Ongoing policy debates on data centers, prescription drug pricing, and public safety technologies. Overall, 268 bills were passed into law out of over 1,200 introduced. The session also sets the stage for continued advocacy in 2027, particularly for infrastructure funding and housing-related policies. RECOMMENDATION: This is an informational briefing. REVIEWED BY: ( 7 D. P.eo 04/01/26 Josh D. Peters, County Administrator Date 2026 Washington Legislative Session In-Review On March 12th at 8:26pm, the legislature adjourned "Sine Die," meaning without a scheduled day to reconvene.The 60-day "short" session had included the longest floor debate in legislative history, the passage of ambitious supplemental budgets, and the development of numerous contentious policy issues with significant statewide impact. This report will outline progress on key legislative priorities and provide context and details regarding other significant conversations that shaped the 2026 Washington legislative session. Jefferson County Priorities Funding for Port Hadlock Sewer Connections A Local Community Project application was submitted for legislatively appropriated funding through the Department of Commerce.This year was described by many as a "bare bones" budget year. The tax package that was passed in 2025 was expected to create new funding capacity in the capital budget, since any increase in state revenue increases the state's bonding capacity. Much of the capacity was used elsewhere in the budget and did not result in expanded capacity for Local and Community Projects. Ultimately, the Port Hadlock request was not funded in the final budget. Both the size of the request ($5.7M) and competing priorities across the legislative district added headwinds in a difficult budget year. Projects that were funded across LD 24 include: Project Name Appropriation Blue Heron MS/OCEAN Permanent SBHC Construction $227K Historic Preservation for Public Arts Facility $1M Port of Port Angeles Multi-User Marine Trades Building $2.05M A Home for Gatheringplace for IDD in a Rural Community $475K Harbor Regional Health Green Facilities Modernization $2.815M Olympic Discovery Trail Port Townsend $750K Ocean City Drainage Improvement Project $112K Adelma Beach Bulkhead Removal and Restoration $161K Little Quilcene River Estuary Preliminary Design $291K North Beach PAWS $250K Northwest Maritime Grant $463K Dungeness Railroad Bridge Replacement $2.55M Hoh Highlands Resiliency and Governance Center $4.185M LEKT Wellness Center Infrastructure Upgrade $3.3M Quinault Courthouse Relocation $2M PR POLIS 1 COMMUNICATIONS Our strategy for 2027 will be informed by feedback we received this year. Consistent messaging at both the state and federal level will be important moving forward. We will also be working through the interim to bring partners into the conversation and set the stage for additional project support. Trust Land Transfer Jefferson County supported a coalition request for$31.35M in additional supplemental funding for the Trust Land Transfer program. In the end, the legislature chose to add $4M to the $16.65M that was appropriated for Trust Land Transfers in the 2025-2027 budget.Jefferson County's Cape George project was appropriated $3.6M and an additional $400k was appropriated to Yakama for their Tract C North parcels ($3.3M had been appropriated in the 2025-2027 budget). The funding for Cape George includes a condition that the county work with the Department of Natural Resources to initiate a carbon offset pilot project, with any offset credits and/or associated revenue to be retained by DNR. Housing and Families Policy priorities related to housing and families include: • HB 1805, sponsored by Representative Tharinger, was introduced during the 2025 legislative session and would have established a sales and use tax of 0.01%to be used to provide services that assist children and families. While this bill did not pass, the concept was included in HB 2442, sponsored by Representative Berg and introduced in 2026, which did pass. • HB 2269, sponsored by Representative Bernbaum, provides flexibility around wastewater facilities for housing in LAMIRDs. The bill passed and was signed by the Governor on March 9tn • HB 1867 would have expanded which counties could levy a local real estate excise tax (REET)for affordable housing and would have increased the available rate. A similar concept was also included in the original version of HB 2442, though was later amended out of the bill. The final version of the bill allows the existing local option REET to be used to abate nuisance properties but does not provide any new taxing authority/flexibility. • HB 1763 and SB 5576 (companions) would have established a short-term rental (STR) tax, also to benefit affordable housing. Neither passed this session but the issue is likely to return in 2027. 2 PR POLIS COMMUNICATIONS Other Policy Priorities 2026 was a busy and contentious session, with legislators wrestling with a variety of complex issues, in addition to a budget shortfall and impacts from federal activity. Jefferson County was active and visible supporting issues that were identified as priorities including: • HB 2199 makes it easier for "authorized public entities" under the Derelict Vessel Removal Program (DVRP) to take custody of and remove derelict or abandoned vessels. The bill passed and was signed by the Governor on March 9th • HB 2351 would have protected emergency responders and operations but did not pass. • HB 1607 and SB 5502 (companions) were introduced in 2025 and known colloquially as the "bottle bill."The bills would have established a statewide deposit return system (DRS)for beverage containers but neither passed. This issue should also be expected to return in 2027. • HB 2170 would have allowed DNR to enter into contracts related to ecosystems services projects on public lands. Ecosystems services is a broad term for public and environmental benefits of natural landscapes. The bill did not pass but should also be expected to return in 2027. As noted above, a condition of the Trust Land Transfer appropriation for Cape George includes the development of a carbon offset pilot project. • HB 1743 was sponsored by Representative Simmons and introduced in 2025. The bill would have provided liability protection for community-based health care providers providing services in carceral settings. The bill did not move forward during the 2026 session. Preserve Funding for Low Interest Infrastructure Loans Preventing additional sweeps from the Public Works Assistance Account (PWAA) was a focus for many public entities throughout the legislative session.The Governor's original supplemental budget proposal had proposed a $75M transfer into the state General Fund. The Senate later proposed to transfer$375M and backfill $300M of that funding with bond revenue. The House proposal matched the Governor's $75M transfer proposal. The legislature ultimately chose to transfer$375M out of the PWAA and backfill approximately $300M of those funds with Climate Commitment Act (CCA) cash, resulting in a $75M loss in the PWAA, consistent with the Governor's original proposal. It remains to be seen whether this use of CCA funds will add new eligibility criteria to future PWAA projects. For the 25-27 Biennium, the Legislature diverted a total of$829 million from the PWAA, which included: - $663M to fund the Operating Budget - $114M to the Move Ahead Washington Account in the Transportation Budget PR POLIS 3 CdMMUNICATIONS - $20M to the Water Pollution Control Revolving Account - $32M to the Drinking Water Assistance Account as state match for federal funds These diversions were partially offset by$380M in bonds, and $10M from the CCA. High Profile Issues Millionaire Tax The defining issue of the 2026 session was the passage of the Millionaire Tax. SB 6346, championed by Senators Jamie Pedersen and Noel Frame and Representative April Berg, seeks to challenge a 1933 state supreme court ruling that struck down a graduated income tax. Washington has relied primarily on sales and excise taxes since the precedent-setting 1933 ruling. Mechanically, the Millionaire tax sets a flat 9.9%tax rate on taxable income (with some specific exclusions) but establishes a $1M deduction per individual or joint return, starting with the 2028 tax year. The bill also creates sales tax exemptions for specific classes of consumer products including personal care products, diapers, and over the counter drugs. After a relatively smooth process in the Senate (27-22), the bill and more than 80 proposed amendments were debated on the House floor for over 24 hours before passing (51-46). Supplemental Budgets One of the last actions the legislature took before adjourning was to pass the three supplemental budgets—operating, capital, and transportation. The $80.2B supplemental operating budget, ESSB 5998 added to the $70.5B budget passed in 2025. The budget relies heavily on one-time fixes, account transfers and reserve funds to balance through the end of the biennium, as required by law, and until revenue from the Millionaire Tax begins showing up in 2029. The budget trims spending in areas like childcare subsidies and delays planned program expansions. The $889M supplemental capital budget includes significant new investments in housing, school construction, and flood response, related to recent flooding events. The plan also directs$25M in Climate Commitment Act (CCA) revenue to launch the new Washington Builds revolving-loan program for clean energy projects, as the state lags behind its peers in renewable energy development. Transportation budget writers wrestled with a projected 20%decrease in fuel tax revenue and focused their$16.6B plan on preservation and maintenance needs through 2031, including $1.3B invested in road and bridge preservation and $200M for maintenance, via a bipartisan PR POLIS 4 CdMMUNICATIONS bonding agreement. $1.5 billion in new bond authority will be used to sustain maintenance efforts through 2031, protecting current assets amidst shrinking traditional revenue streams. SB 6005 also continues funding new ferry construction, terminal electrification, and additional maintenance capacity. Other Tough Stuff Several issues received a significant share of the attention and floor time during the 2026 legislative session, including: Data centers, specifically related to the rates these facilities pay for energy and tax benefits they had previously enjoyed. HB 2515, sponsored by Representative Doglio, focused on limiting the power that utilities could deliver to emerging large energy use facilities (ELEUFs) and creating conditions around rates and charges levied by the utilities that serve them. While the bill didn't pass in the 2026 session, the issue is expected to re-emerge in 2027. Debate and negotiation related to a second data center bill ate up the clock on the final day of session. SB 6231, sponsored by Senator Frame, ended tax breaks data centers had received when purchasing new equipment. The bill was tied to more than $60M of revenue to the state, so it was necessary to get the legislation through before the budgets could be passed, creating a log jam in the final hours. Prescription drugs were a hot topic, related to an expansion of a federal program known as the 340B drug pricing program. The program requires pharmaceutical companies to offer big discounts to hospitals and clinics that serve rural, low-income, or vulnerable populations. SB 5981, sponsored by Senator Cleveland, prohibits pharmaceutical manufacturers from limiting purchasing by or delivery to contract pharmacies or satellite locations of 340E drugs. Automated license plate readers (ALPR), like Flock systems, were hotly debated in both Chambers. A robustly stakeholdered version of the legislation, originally sponsored by Senator Trudeau, was shepherded across the finish line in the House by new Representative Osman Salahuddin. SB 6002 seeks to balance an individual's right to privacy with the advantages new technology like ALPRs can bring to law enforcement efforts. The bill creates conditions on who can use the systems, where they can be deployed, and how long any resulting records can be retained and used by law enforcement. County Sheriffs will now have to meet more stringent standards in order to run for office, as outlined in SB 5974.The bill creates new background investigation processes for police chiefs, marshalls, and county sheriffs and requires those law enforcement leaders to maintain certification with the Criminal Justice Training Commission (CJTC) or face removal by their local legislative body. PR .. POLIS 5 CdMMUNICATIONS 1205 pieces of legislation were introduced in 2026 (1904 were introduced during the 2025 long session) and 268 bills were made into law, a passage rate of just over 22%. As with most legislative sessions, the vast majority of proposals that were introduced fall short of the goal. Retirements/Departures After a highly charged legislative session, the calendar rolls right into campaign season as each member of the House and half of the Senate will be on the ballot in 2026. Several members of the legislature have announced that they will not be seeking reelection: House: • 4th LD - Schmidt (R) running for Spokane County Commissioner • 6th LD-Volz (R) elected Spokane Co. Treasurer • 6th LD - Graham (R) not running • 15th LD - Dufault (R) running for Senate • 24th LD—Tharinger (D) retiring • 26th LD -Valdez (Caldier) (R) not running *swing district • 29th LD - Mena (D) running for Senate • 32nd LD - Ryu (D) challenging Senator Salomon • 49th LD -Wylie (D) running for Clark County Auditor Senate: • 8th LD- Boehnke (R) running for Congress • 13th LD—Warnick (R) retiring • 15th LD -Torres (R) running for 8th LD • 29th LD - Conway (D) retiring • 37th LD -Saldana (D) running for King County Council • 42nd LD -Shewmake (D) not running *swing district Rumors are already flying related to potential shakeups in caucus leadership but the planned departures highlighted above will also create openings for new committee leadership, including: • Chair, House State Government • Chair, House Technology, Economic Development, and Veterans • Chair, Senate Labor and Commerce • Chair, Senate Environment, Energy, and Technology PR POLIS 6 COMMUNICATIONS