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Tax Law

State Net Capitol Journal – December 16, 2013; Budget and Taxes: States Rush to Land Boeing

Budget & Taxes

STATES RUSH TO LAND BOEING: After Washington machinists rejected a contract last month that would have guaranteed Boeing's planned 777X airliner would be built in that state, the company decided to explore other options for its 777X manufacturing center. And states have been tripping over themselves to try to lure the facility and the jobs and revenue it promises to bring.

Illinois, home to Boeing's international headquarters, planned to submit its incentive package last week, according to a spokesman for the state's Department of Commerce.

"We believe our proposal is compelling for a company that already has its headquarters in Illinois," said Commerce spokesman Dave Roeder. But he added that a confidentially agreement prevented him from revealing details about the proposal.

South Carolina, however, revealed it was offering the company land near its existing assembly line in North Charleston. Free or very low cost land is one of the things Boeing is looking for, according to a confidential document leaked to the St. Louis Post-Dispatch. The document indicated the 777X facility would cost up to $10 billion to build and potentially provide 8,500 jobs, but the company hopes the winning state will significantly reduce that price tag, and the jobs could be divided among assembly plants in multiple locations. The document was reportedly sent to 15 states, including Illinois, South Carolina, Missouri, Alabama, California, Georgia, Kansas and Wisconsin.

California Gov. Jerry Brown's (D) Office of Business and Economic Development confirmed last week it was throwing its hat into the ring.

"Based on our skilled workforce, existing manufacturing base and targeted business incentives, California is in a strong position to compete," said Mike Rossi, Brown's senior adviser for jobs and business development.

Washington state also remains in the running. Lawmakers there passed $8.7 billion in tax incentives last month to try to keep Boeing building planes in the state. But relations between the company and its Seattle workforce have only become more strained by the rejection of the contract offer.

The company has not given a firm deadline for when it will choose a site, but it is expected to do so early next year. (SEATTLE TIMES, ASSOCIATED PRESS, KOMO NEWS, CHICAGO TRIBUNE, ST. LOUIS POST-DISPATCH)

INDIAN TRIBES EYEING ONLINE GAMING: Native American tribes operate 460 gambling facilities in 28 states. None of them offer online gaming, but that may soon change.

California's Alturas Indian Rancheria Tribe is planning to launch the first online tribal gaming operation in the nation by the end of the year. The Cheyenne & Arapaho Tribes in Oklahoma intend to launch a website for gamblers located outside the United States. And Wisconsin's Lac du Flambeau Band of Lake Superior Chippewa Indians is trying to form the Tribal Internet Gambling Alliance to "bring Internet gaming to Indian Country within the framework of IRGA and all other state and federal laws."

The IRGA, or Indian Gaming Regulatory Act of 1988, requires federal government approval of state-tribe gaming compacts and casino management contracts. But that mandate only applies to "Class III" gaming, which includes slot machines and other video and electronic games of chance, as well as craps, roulette and blackjack, not to "Class II" gaming, such as bingo and lotto. The online games the tribes in California and Oklahoma are planning to launch are of the Class II variety.

It's unclear how much money the online tribal gaming operations will generate for their respective states, but the Oklahoma tribes will turn over 10 percent of their revenues from online card games and up to 6 percent of their revenues from online bingo, lottery and other games. And Oklahoma's tribal casinos generated $134 million for the state in 2011, while those in California generated $387 million, the most in the nation. (STATELINE.ORG, TRIBALINTERNETGAMINGALLIANCE.COM

STATE BUDGETS EXPECTED TO IMPROVE MORE SLOWLY IN 2014: State budgets continued their trend of modest improvement throughout fiscal 2013, with significant fiscal distress subsiding in more states, according to the National Association of State Budget Officers' Fall 2013 Survey of the States. But the survey also indicates that trend won't continue at the same pace this fiscal year.

NASBO reported that tax collections outperformed projections in fiscal 2013, with revenues rising 5.7 percent. Much of that gain, it said, was due to some taxpayers maneuvering their finances to avoid paying higher federal tax rates expected to begin Jan. 1, 2013. With that revenue bump unlikely to recur, NASBO said revenues are expected to increase by only .8 percent in fiscal 2014.

But NASBO's Executive Director Scott Pattison said that rate might turn out to be a little higher, given the rapid growth of the stock market and the recovering national economy.

"That .8 percent for 2014 is so low that I won't be surprised...that it would be higher than expected," he said.

NASBO also reported that 43 states have enacted higher spending levels for fiscal 2014 than for fiscal 2013. But a number of states still haven't returned to prerecession spending levels when adjusted for inflation, and many are dealing with pent-up demands, such as aging infrastructure and underfunded pensions, that have been building since the recession began.

"We are having to make some very tough choices," said George Naughton, NASBO's president, as well as Oregon's chief finance officer. (STATELINE.ORG, NASBO.ORG)

BUDGETS IN BRIEF: Democratic legislative leaders in MAINE informed Gov. Paul LePage (R) and state department heads last week that they would be taking the lead in writing a supplemental budget for the current fiscal year. That unusual action was prompted by LePage's repeated comment that he will not submit a supplemental budget during next year's legislative session, regardless of the state's fiscal condition (BANGOR DAILY NEWS, STATE NET). WISCONSIN Gov. Scott Walker (R) signed into law another increase in the tax credit for restoring historic buildings. Walker okayed a similar tax credit increase earlier this year (MILWAUKEE JOURNAL-SENTINEL). • CALIFORNIA Assembly Speaker John Perez (D) said last week that lawmakers will seek voter approval next November for an $8 billion boost in the state's rainy day fund. With the state's independent legislative analyst having projected annual operating surpluses of about $10 billion a year by the 2017-18 fiscal year, Perez said the budget reserve would "finally bring an end to the spend-and-slash roller coaster budgets that we've seen for the last 20 years" (ASSOCIATED PRESS, SFGATE.COM). • U.S. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MICHIGAN) said last week that an agreement on a farm bill won't be reached before the end of this year's session but will be ready for a vote in January (POLITICO). Standard & Poor's has revised its outlook for ILLINOIS' debt from "negative" to "developing" as a result of the state's pension-reform deal. But the ratings agency maintained its rating for the state's debt at A- (BUSINESSWEEK).

- Compiled by KOREY CLARK

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