Lack of staff puts collection of tax bounty at risk

Agency pleads for more workers to ensure the state captures $1.2B counted on from new tax laws.

OLYMPIA —A lack of staff threatens the state’s ability to ensure $1.2 billion from a slew of new taxes is collected for the budget.

The Department of Revenue says it needs 44 more people — 17 now and another 27 in the next fiscal year — to handle added responsibilities created by 32 revenue bills signed into law earlier this year.

Agency leaders want to hire information specialists to help taxpayers understand what they may owe, examiners and auditors to ensure compliance with the laws, and legal support for an expected increase in appeals and other disputes.

They are asking for $4.1 million in the 2020 supplemental budget to cover the added costs.

“The agency was significantly underfunded for the 32 revenue bills that passed during the 2019 legislative session,” wrote department leaders in the budget request they submitted to Gov. Jay Inslee in September.

As a result, they told him, the current staffing level is “inadequate and insufficient to ensure that the agency will be able to collect revenues” associated with those new laws.

Inslee is reviewing funding requests from state agencies and will propose a supplemental spending plan in December.

“We’ll take a look at it with all the other decision packages,” said Tara Lee, Inslee’s spokeswoman.

The House and Senate will each produce its own supplemental budget in the legislative session which convenes Jan. 13.

“Agencies always ask for new FTEs (full-time equivalents),” said Sen. Christine Rolfes, D-Bainbridge Island, who is chairwoman of the Senate Ways and Means Committee. “I’ll do a deep dive on their request and I’ll look to see what their needs are.”

Sen. John Braun, R-Centralia, the ranking Republican on the budget committee, said he was a little surprised when he read the agency’s request. The department has a good track record of ensuring lawmakers are aware when new revenue bills precipitate a need for added personnel.

“How could we, the Legislature, be that far off?,” he said. “It appears we didn’t do a good job.”

Lawmakers and Inslee provided $4 million for “implementation and administration” of the tax legislation in the two-year budget cycle that began July 1, 2019, according to the agency request. The “true cost” is $11.3 million though the agency is not asking for that much.

Not every new tax law requires hiring additional people.

To help them figure it out, lawmakers get a financial analysis — known as a fiscal note — which will give them a good idea of what it will cost the agency to administer a proposed tax change as well how much money it could bring in to the state’s coffers.

For example, one of the new laws is House Bill 2158 which will boost the tax rate on as many as 85,000 businesses starting Jan. 1.

The increase will raise an estimated $380 million in this budget for college financial aid, workforce education and other higher education programs.

In the fiscal note, the Department of Revenue projected it would take roughly 40 full-time employees and $4.2 million in this budget cycle to make sure all those dollars are collected. The number of employees required for administering this single tax change is expected drop once the program is fully in place.

Another example is the law which ended a sales tax break for residents of Oregon and other states with no sales tax. It took effect July 1.

Those nonresidents now have to pay sales tax on their retail purchases. But if they spend enough they can submit receipts for a refund.

In the fiscal note for Senate Bill 5997, the department estimated it would take 10.6 FTEs and nearly $2 million to administer this change.

Setting up the new refund program is the big chore. Workers are needed for duties such as creating a refund application, handling phone calls and inquiries, and processing refund applications.

Clay Hill, government affairs director for the Association of Washington Business, said some of the new taxes are pretty complex so it’s no surprise the department needs more people.

Business owners want to pay the right amount of taxes, get disputes resolved quickly and be confident that enforcement of tax collections is clear and consistent, he said. The agency’s ability to achieve that objective is inextricably tied to an adequate level of staffing.

“I would envision us supporting their need for new FTEs,” he said. “It’s beneficial to have people who administer them effectively and equally and fairly.”

Jerry Cornfield: 360-352-8623; jcornfield@herald Twitter: @dospueblos.

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