Democrats led by Gov. Jay Inslee are no longer shy about raising taxes. They will confront Republicans who are as tax-averse as ever in what should be a contentious budget-writing session for the state Legislature, which opens Monday, Jan. 12, in Olympia.
On top of that, Inslee’s second-biggest new-revenue generator is a tax on industries that put carbon dioxide and other greenhouse gases into the air, and the key senator who needs to support the carbon tax is a Ferndale Republican who isn’t convinced climate change is a problem. To complicate matters even further, that same senator, Doug Ericksen, announced on Wednesday, Jan. 7, that he and a colleague will push for a new rule that would require a two-thirds vote in the Senate for any tax increase.
Democrats and Republicans don’t even agree on the amount of the 2015-17 budget shortfall. Their estimates are $2.3 billion apart.
It’s anybody’s guess what the state budget will look like 105 days after the legislative session opens — or longer, if special sessions are needed.
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Inslee’s approach to the budget, unveiled last month, signals his belief that the Great Recession is history. As the economy turns around, state taxes are beginning to fall behind the pace of personal income, according to Inslee’s analysis. He would reform the state’s tax program so it brings in more money, starting with a capital gains tax that accounts for more than half of the new revenue in 2015-17. The tax on profits from selling stock would balance a tax structure that weighs too heavily on the state’s middle-class and low-income residents, Inslee has said.
Inslee’s taxes also are meant to close a budget gap of $2.3 billion in the next biennium, created in part by a state Supreme Court requirement to fully fund K-12 education. The governor’s office estimates the Legislature will need to kick in an extra $1.2 billion for education in 2015-17.
Inslee’s shortfall estimate is at odds with that of Sen. Andy Hill, R-Redmond, chairman of the Senate budget committee. An analysis Hill released on Wednesday, Jan. 7, showed that expected revenues can meet all state obligations, including $1 billion for education following the Supreme Court’s McCleary decision.
Examining taxes on polluters
Under Inslee’s proposal, some of the money for education would come from the carbon tax, actually a cap-and-trade system that would impose a cost on the 130 or so biggest carbon polluters in the state, including several in Whatcom County — BP Cherry Point, Phillips 66 refinery and Alcoa Intalco Works being the biggest.
Sen. Kevin Ranker, D-Orcas Island, who represents south Bellingham and south Whatcom County, will sponsor Inslee’s Carbon Pollution Accountability Act in the Senate.
“We desperately need the revenue for education, transportation — this (bill) is something that as a budget negotiator becomes very attractive to me,” Ranker said. He is the No. 2 budget writer among Senate Democrats.
“It’s the right thing to do,” Ranker said, “putting a price on polluters that have been getting a free ride in this state.”
As a member of the Senate Energy, Environment and Telecommunications Committee, Ranker will have the opportunity to work on the carbon bill with Ericksen, who is the committee’s chairman.
Pre-session discussions of the carbon tax between Ericksen and the governor’s office haven’t been fruitful, said Chris Davis, Inslee’s adviser for carbon markets.
“He’s been pretty clear that he is not a supporter of climate action, so we are not surprised to see him coming out vocally in opposition to the governor’s package,” Davis said.
Davis might know more about Ericksen’s opposition to the carbon bill than the general public. The senator has been studiously noncommittal on Inslee’s plan in interviews.
“There’s a lot of moving pieces there. I’m looking forward to seeing Inslee work with Democrats in the House” on the legislation, Ericksen said.
“It’s a long session,” he added. “We have lots of things we need to be working on.”
One of those things Ericksen would work on is an overhaul of the law that directs a hazardous-material tax to environmental cleanups. The original intent of the Model Toxics Control Act was lost, Ericksen said, when the money was allowed to go to projects other than abandoned industrial sites. The focus should be on funding the cleanup of the Bellingham waterfront and similar sites, Ericksen said.
Both Ericksen and Ranker will advance new oil-train safety legislation, based on competing Democratic and Republican bills that failed in 2014.
Class size one focus of education funding
Members of both parties agree that funding K-12 education to the levels required by the McCleary decision is the most important thing to accomplish during budget planning.
That’s at least partly due to the state Supreme Court finding the Legislature in contempt in September for failing to show any concrete plans to step up funding by the 2017-18 school year. The contempt order means the Legislature has to make education funding its top priority.
Inslee’s budget proposal includes $1.3 billion over the biennium to reduce the class size to 17 for kindergarten through third grades; fund all-day kindergarten; and pay for maintenance, supplies and operating costs to meet the requirements of the bill the Supreme Court decision was based on.
The governor’s budget doesn’t fund the smaller-class size Initiative 1351, which voters passed in November, 51 percent to 49 percent.
Legislators in Olympia already are talking about suspending I-1351, which is estimated to cost about $2 billion over the 2015-17 biennium.
“From what I’m hearing in Olympia, it looks like we’ll probably end up suspending that initiative,” said Rep. Vincent Buys, R-Lynden, who represents north Whatcom County.
Buys was among two dozen legislators who sent a letter to the court in January 2014 saying they would not recognize a contempt order if the court were to file one. He said the Legislature has already started investing in smaller class sizes.
“Over the last couple years we have been investing in K-3 class-size reduction because that’s where it’s been shown to be most effective,” Buys said. “Then in McCleary, investing $1 billion this year will also work toward addressing classroom-size reduction.”
Rep. Kristine Lytton, D-Anacortes, also said McCleary will be the top priority, as educators have told her to fund those basic requirements first.
“Class size is important to me, particularly at K-3, where it’s most meaningful,” Lytton said.
Depending on who you talk to, funding those requirements will either be hard, or it will be a breeze because of increased revenue forecasts.
Projections show the state could take in an extra $3 billion this biennium, which Buys said should be sufficient to fund McCleary and other needed social services.
“If we’re able to keep the growth of government within our revenue growth, we don’t have a problem,” Buys said.
The governor maintains there is a $2.3 billion shortfall even with $3 billion in added revenue.
“We have a significant hole to fill,” Lytton said. “We’ll have to have a discussion on priorities. We have a very antiquated, regressive tax system, and I also think we need to close tax exemptions or preferences that are no longer a priority for our state.”
Buys said the legislature should fund education and necessary social services first, then put a proposal to citizens to see if they’d be willing to pay increased taxes to fund lower priorities.
Local legislators plan other proposals
Aside from the budget, Buys, Lytton, Rep. Jeff Morris, D-Mount Vernon, and newcomer Luanne Van Werven, R-Lynden, have a slew of bills lined up.
Lytton’s items include professional development for educators and ways to put underutilized farmland into use.
Morris will continue his work on complex but potentially game-changing legislation on some of the latest technologies, including drones and how solar-powered homes plug into the power grid.
“We’re at the cusp of a massive transformation of how electric utilities work, and what they charge for,” Morris said.
Van Werven, who spent the last week in new-member orientation learning about policy and ethics, said she was looking forward to working on the House Higher Education, Appropriations and State Government committees.
She plans to lead on legislation that would prevent students from losing their financial aid if they don’t complete at least 12 credits in a quarter due to extenuating circumstances.
Van Werven also plans to lead on a bill that would exempt museums from the recently passed Initiative 594, which mandates background checks on gun sales and transfers. The bill would clear up the gray area in the law that prompted the Lynden Pioneer Museum to announce it would return guns from a World War II exhibit to their owners, before a pawn shop in Bonney Lake offered to do the background checks.
“My father’s World War II rifle is part of that display,” Van Werven said.
On Buys’ agenda are plans to extend a dairy processor assessment fee that pays for inspections; clarify who can install sprinkler systems in single-family homes; add an opt-in fee on Discover Passes to allow for rock collecting at some state parks and generate more cash for the parks system; and support a hatchery partnership among recreational, commercial and tribal fishing interests in Whatcom County.