schmudget

Estate Tax Fix in Place, More Revenue Needed

Tara Lee — 2013-06-14T17:42:31Z

By Michael Mitchell --- Late last night, legislators came to an eleventh hour agreement to choose Washington kids over multimillionaires. By fixing Washington state’s estate tax, lawmakers have prevented the loss of nearly $160 million in resources that go to educating children.

Closing the estate tax loophole is a good place to start, but much more still has to be done to ensure that adequate resources are included in a final budget agreement. Closing ineffective tax breaks and making additional technical corrections would generate revenue that could be used to invest in creating jobs and growing our economy.

The estate tax fix (House Bill 2075) prevents the loss of roughly $160 million in refunds ($97 million) and lost collections ($63 million) due to last year’s Bracken decision. The agreement goes beyond addressing the court ruling and makes broader changes.

Specifically, HB 2075;

Allows the exemption (currently for estate’s worth up to $2 million) to increase annually by a measure of inflation;
Increases the rates for the wealthiest households, making the tax more progressive overall;
and provides a $2.5 million deduction for small businesses. Estates with larger business interests, defined as those with a total value greater than $6 million, would not be eligible to claim this deduction.

Lawmakers should build on this momentum and look for additional ways to bolster resources such as closing ineffective tax breaks and addressing the way our state taxes telecommunication companies.

The House and Senate budgets take very different approaches to generating additional resources. Overall, the House proposes to raise roughly $255 million in revenue by closing tax loopholes currently on the books. Yet, only $47 million of this revenue is actually included in their budget proposal. The remainder ($208 million) must be approved by the passage of HB 2034, which proposes to close or narrow six additional tax breaks in order to invest more in education.

The Senate’s budget proposal closes zero tax breaks, and moves in wrong direction by creating 14 additional loopholes which would cost just over $11 million in the next budget cycle. Independent of its budget, the Senate proposes to raise $47 million in new revenue by transforming the sales tax exemption for Oregonians into a refund program (SB 5871).

Both the House and the Senate have proposed – the House in its budget and the Senate in SB 5873 – to eliminate the sales tax exemption on residential telephone services thus normalizing tax treatment for traditional, wireless and cable telecommunications companies. The fix protects $110 million dollars in resources in the next biennium while also protecting the state from future lawsuits from telecommunication firms.

Any final budget must include additional revenue to grow our economy and build the middle class. Lawmakers have a choice - working families, seniors and kids, or ineffective and outdated tax breaks.

Race to the Bottom: In Final Budgets, Nobody Wins

Kim Justice — 2013-06-11T00:33:55Z

By Kim Justice and Lori Pfingst

Part II in our series Final Hours of Special Session: What's at Stake-- In the latest round of budget negotiations nobody wins. Not the middle class. Not kids. Not our economy. Instead, the House and Senate are in a race to the bottom where Washingtonians lack the opportunities, jobs, and revenue we need to get on a path to prosperity.

Importantly, the Senate invests $322 million less than the House, but both budgets lack the necessary revenue to give Washington’s economy, children, families, and businesses the opportunities they need to thrive (see table below).

Both budgets fail to fully fund basic education as required by the State Supreme Court’s McCleary decision, and shortchange investments in higher education.

Neither the House nor Senate makes the necessary progress towards fully funding basic education by 2018. Each budget invests approximately half the amount recommended by the Joint Task Force on Education Funding.
Both budgets eliminate funding for voter-approved Initiative 732, which would provide cost-of-living increases for teachers and allow schools to retain the most talented educators.
Only the House invests more in the State Need Grant, which keeps college affordable for low- income families.

Savings are achieved in both budgets through Medicaid expansion and extension of the Hospital Safety Net Assessment, but resources to invest in clean air, water, and land are significantly reduced.

Both proposals expand Medicaid and continue the Hospital Safety Net Assessment, which together save the state approximately $560 million.
The House fully restores adult dental services including teeth cleanings, fillings, and dentures-- all critical aspect of maintaining overall good health. The Senate only partially restores dental benefits.
Both budgets transfer funding out of the Model Toxics Control Account, which funds clean-up of the over 5,000 toxic sites in Washington state.

People with disabilities and public service employees lose health benefits, compromising communities.

Both budgets cut housing and essential needs services for people with disabilities, increasing the chance of homelessness. The Senate cuts twice as much as the House.
The Senate budget would cut health benefits for employees who contribute to strong communities, like teachers, public health nurses, and child protection workers, requiring them to purchase health care through the Benefits Exchange.

Weakened pathways to help families with low incomes find or keep a job.

Both proposals cut over $100 million from services that help low income parents obtain employment.
The House invests a modest $15 million towards improving quality, access, and affordability in the early learning system.
The Senate cuts income support for people with disabilities and terminates services that help people access federal disability supports.

The missing ingredient in both budget proposals is meaningful revenue that allows us to invest in what we know would rebuild our middle class and economy: fully funding basic education for our children, opening doors to higher education, supporting family economic security, and protecting the health of Washingtonians and our environment.

Both the House and Senate have additional bills on the table that would raise a modest amount of revenue, but not nearly enough to make the investments in the opportunities and jobs Washingtonians need to prosper. Part III in this series will look at revenue options on the table as the countdown to the end of special session continues.

Education by Starvation Proposal: A Harmful Distraction

Kim Justice — 2013-06-10T23:48:54Z

Part I in our series Final Hours of Special Session: What's at Stake-- As the House and Senate attempt to reach agreement on investments in health, education, and other public priorities over the next two years, a harmful proposal by the Senate to fund education by starving all other investments is standing in the way.

Senate Bill 5895 would harm our ability to create jobs and rebuild the middle class by restricting future investments in health, public safety, and support for seniors, children, and people with disabilities in order to invest more in education.

The rigid and arbitrary spending limit in SB 5895, based on the growth in population and inflation, ignores the real-world costs of maintaining important investments from one year to the next. For example, in the next two years alone, the projected growth in the number of kids accessing Apple Health is projected to grow twice as much as the spending limit formula (see graph).

The harmful impact of stringent spending limits has been experienced elsewhere. After Colorado enacted TABOR (taxpayer bill of rights), it saw its share of children receiving full vaccinations plummet from 24th to 50th in the nation, and the percentage of low-income adults with health insurance fall from 20th to 48th.

Had this formula been in place in our own state during the 2005-07 budget cycle, SB 5895 would have forced $2.5 billion in cuts to important priorities in Washington state. That’s more than all of the combined funding for public safety ($1.5 billion) and services that support foster children and families in crisis ($500 million).

Funding education at the expense of all the other things that kids need to thrive – strong families, safe neighborhoods, a healthy environment -- is the wrong approach.

Statement on Final Hours of Special Session: What's at Stake

Tara Lee — 2013-06-11T00:24:18Z

Our Executive Director Remy Trupin released a statement on the final hours of special session. "As the special session winds to a close without a budget, there is a lot at stake.

Lawmakers should not rush to compromise without thinking through the long-term implications. One particularly egregious example is SB 5895 or "education by starvation," this rigid, short -sighted bill would fund education at the expense of all other vital services. It is absolutely the wrong approach to moving our state forward and should be abandoned as part of the negotiations.

In these final days, there is much more at stake than agreement on a budget. The decisions being debated in Olympia will have an impact on Washington state for generations to come. If the final compromise does not include revenue then we have failed to comply with the McCleary decision, and we have short changed our children's future for political ease and expediency."

Stay tuned for our series, " Final Hours of Special Session: What's at Stake."

Part One: Education by Starvation - (SB 5895)

Part Two: In Race to the Bottom, Nobody Wins. (House and Senate Budget proposals)

Part Three: Revenue proposals

Latest House Revenue Proposal: Right Approach, But Much More is Needed

Michael Mitchell — 2013-06-07T23:10:00Z

Two pieces of legislation have passed out of the House that would close tax loopholes and generate millions of dollars for important K-12 and higher education priorities. While eliminating tax breaks in order to invest in critical budget priorities is the right approach, the revenue generated is nowhere near what's needed to make the critical investments Washingtonians need.

HB 2034 proposes to close or narrow six tax loopholes to generate nearly $210 million for the 2013-15 budget cycle. In addition, HB 2036 would provide another $50 million by altering the sales tax exemption for Oregonians – a loophole which has no clear public purpose and no evidence of being effective – and turning it into a refund program.

Revenue generated by both bills would be dedicated exclusively to the Education Legacy Trust account. It would invest over $240 million in K-12 education through expansion of full-day kindergarten, counseling and support staff, and greater resources for increased instruction hours for bilingual students. In higher education nearly $80 million would be provided for operating expenses at along with expanding enrollment in science and engineering programs.

Closing loopholes and bringing more accountability to our tax code is a step in the right direction for addressing Washington state's revenue shortfall and long-term structural deficit. Unfortunately, neither HB 2034 nor 2036 goes far enough. By contrast, the House’s original education funding proposal, HB 2038, generated roughly $900 million in resources by permanently extending the B&O surcharge first enacted in 2010 and closing nine tax loopholes. By significantly reducing their revenue proposal, the House budget falls far short of investing in an education system that works for all kids, and leaves us far behind on our constitutional obligation to fully fund basic education.

While both HB 2034 and HB 2036 should be a part of any final budget agreement, but much more is necessary. To meet pressing obligations in public health, education and economic security, policymakers must consider a range of revenue options including broadening the sales tax, enacting a new excise tax on capital gains and reforming our tax code. The alternative – an all-cuts approach that harms kids, weakens our economy and limits opportunity – is something we cannot afford.

Expanding Opportunity Means Investing in Kids & Families

Michael Mitchell — 2013-06-06T22:24:32Z

As legislators turn their attention to funding education and other crucial priorities, more needs to be done to ensure that all kids have the same chance to succeed, regardless of their race or family income. Not only is this the right thing to do, but the future economic prosperity of Washington state depends on it.

The difference between opportunities available to children from wealthier communities compared to those from poorer communities, known as the opportunity gap, can impact outcomes in the classroom, future success in the job market, and the well-being of entire communities.

Our recent report, in partnership with the Children’s Alliance, State of Washington’s Children, shows that too many of our kids lack the opportunities they need to succeed in school and life:

Over 600,000 children in Washington state-- nearly two out of every five -- live in households struggling to make ends meet.
In 2011, 20 percent of all American Indian/Alaska Native children were without health insurance, well above the overall average of six percent.

These statistics impact everyone in Washington state. In 2011, a lifetime of restricted opportunity meant a loss of $240 million in wages for the current working population of blacks, Hispanics, and Native Americans in Washington state. Those earnings could have been used to start a business, buy a home or send a child to college – investments we all benefit from. As our state becomes more diverse, failing to close the gap in opportunity will have even greater economic consequences not only for families of color, but for all Washingtonians.

In order to make real progress in closing the opportunity gap, the state needs to make targeted investments in education, economic security and public health:

Invest in services that improve children’s lives: Kids living in low-income communities face a lifetime of challenges in education and future employment. Investments in health care and economic supports allow children and families to get the services they need to be successful. Rebuilding programs designed to help parents find at keep work and investing in enhancing the economic security of Washington state families will go a long way in expanding opportunity.
Create a culturally competent and inclusive education system: From early learning to worker retraining programs, it is critical that our educational system adapt to meet the needs of an increasingly diverse population. Investments in expanding pre-K, recruiting more minority teachers and bolstering financial aid programs for technical and four year colleges are important to creating an education system capable of ensuring opportunity to more kids and students.

Opening opportunity to more students depends on these things, and we can make these investments by closing tax loopholes, making current revenue increases permanent, and enacting longer-term revenue reform.

Read our full report, “State of Washington’s Children 2013,” which illustrates the opportunity gap in our communities. The report, issued as part of our Kids Count in Washington partnership with the Children’s Alliance, combines analysis on diversity in Washington state with how children from different racial and ethnic groups fare in education, health care, and basic needs. The report can be found here.

The State Budget and Kids: New Report Highlights What’s at Stake

Lori Pfingst — 2013-06-06T18:37:31Z

KIDS COUNT in Washington, in partnership with Children’s Alliance, released our 2013 State of Washington’s Children report this morning, which affirms that we are falling far short of providing the opportunities our kids need to succeed in school and in life. To remedy this, lawmakers must reach agreement on a final budget that makes targeted investments that provide a solid foundation for all kids to prosper.

The State of Washington’s Children data tells a story we can’t afford to ignore:

Nearly four of every 10 kids (625,000) in Washington state live in families that struggle to meet basic needs, like having enough food, safe housing, and school supplies;
Nearly 104,000 children lack health insurance, reducing their likelihood of seeing a doctor or dentist when they are sick, and putting their family at financial risk; and
Almost one in three (31 percent) students cannot read proficiently by the end of 3rd grade, limiting their future educational achievement and attainment.

Such gaps in opportunity obstruct progress toward a secure and healthy future for kids. For kids of color, who are rapidly becoming the majority of our population, the gaps in opportunity are even more egregious.

And the data in our report only provides a superficial understanding of the opportunity gaps kids of color face – limitations in available data conceal the true extent of diversity in our state (see graph). Without deepening our understanding of what kids today need to succeed, our solutions will be limited too.

The state of Washington’s children is not strong. The state budget is our main tool for making the investments that all kids need to reach their full potential, and lawmakers should act now to give this generation the opportunity to thrive. But none of the current budgets under consideration make the adequate and targeted investments that provide a foundation of opportunity for children to grow into the leaders, artists, parents, entrepreneurs, and workers of tomorrow.

Washington state needs new and sustainable resources to build a prosperous future for the next generation.

Check out the full report: State of Washington’s Children 2013: Good Data for A Stronger Future.

Kids Count in Washington is a partnership between Children's Alliance and the Washington State Budget & Policy Center to help improve young lives.

Hundreds of data indicators about the well-being of children are available through the KIDS COUNT in Washington web site: www.kidscountwa.org.