On Monday, May 13, Governor Jay Inslee, http://governor.wa.gov/ called the state legislature back to Olympia for a 30 day special session. The legislature’s, www.leg.wa.gov, primary task is to agree upon and pass a two year operating and capital budget for the period beginning July 1, 2013 and ending June 30, 2015.

While the governor and others want to take on other issues, such as strengthening DUI laws, there is less likelihood that non-budget issues will get much attention unless they are tied directly to the budget.

The House and Senate budgets are separated by about $1.3 billion, with the House at the higher amount.  The House and Senate budget both add about $1.2 billion to K-12 education to respond to the McCleary decision.  But they spend that $1.2 billion differently.

The House budget for higher education is better than the Senate’s , although the Senate has no tuition increases in its budget compared to a 3-5% tuition increase in the House version.  The House version is also more specific regarding computer science and engineering, spending approximately $37 million specifically on computer science and engineering at UW, WSU and WWU.

The House budget assumes approximately $900 million in various tax increases and the closing of tax preferences, including the B&O credit and sales tax deferral for R&D, which are widely used by the IT and life sciences sectors.

WTIA and our Information Technology Coalition, https://www.washingtontechnology.org/advocacy/coalition.aspx are working to keep the R&D incentives in place (some changes may be necessary).  If these valuable incentives are repealed, it would increase the cost of doing R&D in Washington.  Companies would not be able to take a B&O credit against their R&D spending, nor could they defer sales tax on R&D labs and facilities.

If this happens, Washington will see its competitveness as a state drop.  44 states have some kind of tax incentives for R&D.  Washington would stick out like a sore thumb if these are repealed.

The argument used to repeal and close the R&D incentives is that money will be used to pay for more STEM degrees.  This is a fallacious argument.  It is the legislature’s job to pay for higher education and to make it a higher priority since it is obvious that the economy is demanding higher level degrees.  Those with bachelor’s degree, generally, have much lower unemployment and higher wages.  It is not as if the state’s tech based industries haven’t been growing and hiring–they have been for years.  Other than the dot-com blip in 2001-03, IT employment in Washington has grown steadily since the early 90’s.

If this argument is taken further, then that means the hospitals should pay for medical and nursing degrees, the banking industry should pay for finance degrees and art galleries should pay for arts majors.  It doesn’t make sense.

WTIA and our members are pefectly willing to discuss changes to the R&D incentives that make sense.  The largest tech companies might be willing to trade some tax benefit for more computer science majors.  But repeal does not make sense for either the state or for companies.  The competition is real from other states and regions and from companies located elsewhere.

The tech industry pays hundreds of millions in B&O taxes and many millions more in sales, property and other taxes.  Tech industry employees generate about $500 million in state and local taxes through their own spending.  Not to mention the substantial multiplier effect of computer science and engineering jobs.  The bottom line is that the state’s tech industry is a huge contributor to the state of Washington.  Smart public policy suggests that our education system be geared to the realities of the 21st century world, which means a greater emphasis on having more people educated and skilled for the economy of today, which is a technology based one.

if you are concerned about the direction of the state, higher education or the tech industry, please take our call to action: http://www.capwiz.com/techvoice/wa/home/

The state’s tech industry sympathizes with our legislators who have a very difficult job balancing all the needs and desires of a wide range of constituencies.  However, we are asking them to be cautious when adopting tax policies that are counterproductive.