Good, Bad, Ugly
Wednesday, July 5, 2017
GOOD, BAD, UGLY: Sometimes you have to pass a budget to know what’s in it.
The Washington State Legislature did indeed pass a historic general operating budget, avoiding a fiscal crisis. Governor Jay Inslee signed a new two-year $43.7 billion state operating budget within minutes of the Friday deadline to avoid a partial government shutdown.
The budget spends $1.8 billion on K-12 public schools over the next two years. That amount is part of a $7.3 billion hike over four years designed to satisfy a state Supreme Court ruling that the state had not adequately funded public education.
“This budget, at long last, meets our constitutional obligations to fully fund basic education, and addresses the responsibilities we have under the McCleary decision to equitably fund our schools,” Inslee said.
For Democrats, the budget came at the cost of surrendering to a realignment of property taxes to fund public schools. Democrats had sought new revenue from new revenue sources. But under the approved budget, property owners in 110 schools districts will see an increase in their taxes under the new state budget; those in 185 school districts may see a decrease in property taxes.
McCleary erupted into being because local school district levies were shouldering a disproportionate burden of school operations and teachers’ salaries. Districts with poorer property values—many of them conservative districts clustered in the eastern portion of the state—were also not passing local levies and equitably funding their schools. Bellingham and other communities around Puget Sound with higher property values also pass their levies. So one irony of this agreement is communities that were routinely funding their excellent schools must now endure a property tax increase in order to assist those communities that weren’t fully funding their schools.
The solution to McCleary “is primarily funded by a $4.1 billion property tax increase that disproportionately impacts many communities across the state,” Sen. Kevin Ranker, the Democrats’ top budget writer, admitted. “I believe a more progressive plan including other options, such as a carbon tax on polluters, would have provided a better path forward. Unfortunately, the Senate Republicans have insisted on the biggest state property tax increase in our history.”
Despite its focus on public education and a bare bones approach to the remainder of state operations, the budget agreement is not without other merits.
The budget also manages to improve funding for the state’s mental and physical health systems—at $116 million about half of the projected need—as well as health care, programs for people with disabilities, services for vulnerable seniors and job training for the under-skilled. With the budget agreement, Washington also became the fifth state in the nation to approve paid family leave.
The program will provide up to 16 weeks of leave for those wanting to take time off to care for a new infant or care for a family member. Depending on their earnings, employees will receive up to 90 percent of their wage or salary or up to $1,000 per week. The program will be implemented by 2020.
“This budget makes a historic $7.3 billion investment in our children’s future,” Ranker said. “It spends tens of millions more on mental health and homelessness, fully supports family planning and Planned Parenthood, fully funds our state employees, increases funds for higher education, implements the Clean Air Rule, and closes tax loopholes on bottled water and big oil.
“For over 50 years, big oil has taken advantage of a unique loophole intended originally only for the timber industry,” the Orcas Island Democrat explained. “We were able to close this decades-old loophole saving Washington taxpayers tens of millions of dollars that previously were given away to big oil companies.”
Ranker was also pleased with a bill that enhances enhances the solar production incentive for renewable energy systems, “supporting hundreds of jobs, local businesses and renewable energy for our communities,” he said. “After several years of collaboration between installers, manufacturers, utilities and environmental groups, the Legislature passed major support for a local, sustainable solar industry in Washington. This bill provides clear incentives and rules to put renewable energy systems on homes and businesses and in communities. This is a great step forward in continuing Washington’s solar industry leadership and supporting family-wage jobs and extending the incentive program into the future.”
With steps forward, the package of bills approved alongside the state budget also included several steps back, including a new tax loophole for manufacturers. Business-and-occupation (B&O) tax rates for manufacturers will be reduced 40 percent over four years, starting in 2019, according to the Seattle Times.
“By 2022, manufacturers will be taxed at the lower rate that lawmakers gave to Boeing and other aerospace companies in 2003 and later extended as part of a record-setting $8.7 billion tax-break package,” the Times reported.
The last-minute insertion was intended to bolster a weakened and dwindling segment of the state economy, its rural manufacturing base, but sends a terrible message to the many thousands of property owners in Western Washington who will see their taxes rise.
Like much of the midnight budget, details of the tax-break plan—such as the text of the tax amendment and the official estimate of its financial impact—were not available to the public or even most lawmakers until shortly before a final vote.
“It’s unacceptable that lawmakers neglected to apply any of the standard transparency and accountability provisions applied to other recently enacted tax breaks to this tax break,” analysts at the Washington State Budget & Policy Center said in a statement.
“Legislative leaders have agreed to a spending plan to fund state services for the next two years—and as such, they may avoid a state shutdown—but they have left a lot of important work undone,” Misha Werschkul, executive director of the Washington State Budget & Policy Center, said. “Notably, lawmakers have passed up an historic opportunity to address our state’s broken tax code, and instead have relied too much on unsustainable fund transfers and budget gimmicks that will threaten the economic strength of the state in the future. The budget deal includes some investments in critical programs, but it falls short of meaningfully strengthening many of the state’s most important long-term investments.”