[Updated 4/14]

The Office of Financial Management (OFM) has written to the Legislature to express its concerns with the operating budgets passed by the House and Senate. One of the items specifically mentioned by OFM is that the Legislature should “ensure appropriate backfill for lower-than anticipated document recording fees to maintain current services and programs.”

As I wrote in October, revenues from the state’s four document recording surcharges for housing programs are falling short of estimates. At the time, the Department of Commerce estimated that the shortfall was $32 million–$130 million.

The Senate-passed operating budget includes $32.0 million from the general fund–state for “grants to local governments for maintaining programs and investments which are primarily funded through document recording fees.” The House-passed budget does not include a backfill. Update: The House-passed budget would transfer $49.0 million from the general fund–state (GFS) to the home security fund. According to the House’s original budget summary, $40.0 million of that is “in response to lower than anticipated revenues from document recording fees.” Additionally, the House-passed budget would appropriate $4.0 million from the GFS to the landlord mitigation program account for the same purpose. (Gov. Inslee had proposed transferring $40.0 million from the GFS to the home security fund to backfill the lower revenues.)

Meanwhile, both houses have also passed slightly different versions of SB 5386, which would combine the four current document recording surcharges for housing programs into one surcharge. As Table 1 shows, the four current surcharges are split between the county and three state accounts. Each surcharge is distributed differently under current law.

SB 5386 would not change the total amount of the combined surcharges, and the same total amount would go to each account. The bill would simplify the distribution of revenues, as shown in Table 2. Under both current law and SB 5386, the combined surcharges total $183. Of that, $57 goes to counties, $99 goes to the home security fund, $24 goes to the affordable housing for all account, and $3 goes to the landlord mitigation account.

(Note that there is an ongoing lawsuit over these surcharges. The Building Industry Association of Washington argues that they are not fees and are instead unconstitutional property taxes. In October, a Thurston County Superior Court judge ruled in favor of the state. The lawsuit is now before the Court of Appeals (case no. 57502-7-II).)

Finally, as I noted Tuesday, the House and Senate have both passed versions of a bill that would add a new $100 document recording assessment that would be used to fund down payment and closing cost assistance for certain home buyers.