Thank you.

I am calling this meeting to order.

This is a Redmond City Council study session held on Tuesday, May 12th, 2026, commencing at 7 15 p.m.

Thanks for your patience, everyone.

All council members are in attendance, and Mayor Bernie is joining us online.

There are four items on the legis on the agenda tonight.

The first is the 2026 legislative state legislative session debrief, a 2027-2028 budget process departmental budget overview with the planning and community development department as well as the police department.

Council will continue its discussion of its retreat matrix, and we will conclude with council talk time.

So the first item on the agenda is the 2026 state legislative session debrief.

And introducing this item will be Amy Sai, our chief policy officer.

Welcome, Amy.

Thank you, Council President.

Good evening, Council members.

Let me go ahead and get this presentation started.

So Amy Sai, Chief Policy Advisor, and I am joined today by Brianna Murray, our state lobbyist with Gordon Thomas Honeywell government relations.

And I'll just take this title slide to just briefly note how grateful we are for her ever present expertise on the Hill and supporting us in the legislative agenda, and just so fortunate to have her, and you'll see her expertise tonight.

Um setting a low bar there.

Sorry, Brianna.

Uh so today we're gonna cover the 2026 legislative legislative session themes.

Brianna will talk about some of the activities on the hill that were going on this session.

Um we will then transition together to talk about our city priorities and how those outcomes worked out for us this short session and talk about some of the deep dive into some of the work that was going on to give you a flavor of the work that happens on the hill for us, and then a brief recap of next steps.

Well, thank you, Amy.

I'm gonna kick us off with the legislative themes component, and I like this section of the presentation because I think it provides the context and grounding for which you can then understand in place some of the other issues that are more Redmond specific.

So, as a reminder, the legislature operates on a two-year cycle, and this past legislative session was the second year of that two-year cycle.

As such, was a short 60-day legislative session.

Uh, Democrats continued to hold the majority in both the House and the Senate by 59 to 39 in the House and 30 to 19 in the Senate.

As the majority party Democrats were able to establish the major themes and priorities of the session, and they focused on responding to actions of the federal government, tax reform, and a focus on affordability for Washingtonians.

Um, including all bills that were considered in the first year of the legislative biennium that did not pass into law and carried over to the second year, as well as an additional 1,238 bills.

Of the many thousands of bills that were under consideration, 268 bills passed into law this session.

That is actually the lowest number to pass into law in a session over the past five years.

And uh there are a few different reasons for that low number.

One is that the legislature tackled some really big issues that took some a great deal of time.

And the second is that the minority party pulled out every single procedural motion they could think of out of the out of the rule book.

Um, in addition to working on bills, the legislature also had the task of developing supplemental budgets or mid-biennial budget adjustments amid shortfalls.

When the legislature concluded the 2025 legislative session, they had developed a balanced biennial budget that would run July 1 of 2025 through June 30th of 2027.

By the time the 2026 legislative session rolled around, revenue collections had come in flat, slightly below what was expected, nothing like a start, a stark decline.

But the cost of maintaining programs and existing services went up significantly.

So, in order to maintain those existing programs and services, the legislature really had to grapple with how to address a shortfall.

One was the short-term and immediate need of a balance of balancing the 2025-27 budget, and then the long-term need of readjusting, refocusing the state's tax code to support a lot of the new programs that Washingtonians have clearly indicated they want to see funded.

So, in an effort to bring about that more significant tax reform, uh the legislature advanced a millionaires tax proposal and enacted it into law.

The millionaires tax proposal is in addition to a slate of tax changes that were made in 2025.

So the overarching state tax code reform is really a combination of the 2025 tax code changes as well as the millionaires tax in 2026.

The bill 6346 is a 9.9% tax on income over $1 million that's scheduled to go into effect in 2029.

Uh in an effort to demonstrate that there's a reinvestment into working families.

The bill included several different uh provisions on other tax policy, including a sales and use tax exemption on diapers, hygiene products, over-the-counter medications, a repeal of sales tax on services that was enacted in 2025, expansion of the BO tax credit for small businesses to an additional 180,000 businesses, and an expansion of the working families tax credit to apply to another 460,000 families.

There's also an intent to fund child care and free lunch for all K through 12 students expressed in the bill.

One thing that's notable about this bill in relation to cities is that the sales and use tax exemptions on diapers, hygiene products, and over-the-counter medications, those exemptions apply to state and local sales tax.

Similarly, the sales tax on services that was included in Senate Bill 5814 that's being rolled back in the millionaires tax bill applied to both state and local sales taxes.

We shared with members of the House the concerns that these exemptions would have, the impact that the exemptions would have on city budgets.

And in response, the legislature allocated 200 million for city and county fiscal health that's scheduled in 2029.

While it's nice and positive that that 200 million is included in there, there are the details around that 200 million are very much unknown.

Whether or not it would be an ongoing revenue source or one time, whether or not it will grow with time, how that 200 million would be distributed amongst cities, counties, and transit agencies is all undetermined.

The millionaires tax, as I mentioned, doesn't go into effect until 2029.

And that is to both allow for Department of Revenue the implement to have the implementation timeline to implement this new tax, but also because it was anticipated that the tax would be face a legal challenge.

That legal challenge has already been filed and is beginning to work its way through the legal process and will likely take some time.

That was done really after feedback from many stakeholders in the state that there were negative impacts to that state tax, and that it made Washington State an outlier across the nation in the taxation level.

All of that tax reform discussion, while uh robust, uh did not actually have an impact on the development of the mid-biennial adjustments.

That was all long-term thinking, long-term impacts.

So to meet the immediate need of developing the supplemental budgets, uh, the legislature uh had to make several different changes.

As a reminder, there are three different state budgets.