Schmudget Blog


Final budget brings momentous victories for communities, but property tax cuts will come at a cost

Posted by Kelli Smith at Mar 14, 2018 02:30 PM |

In the final 2018 supplemental budget, Democratic leaders in the state House and Senate reached compromises to make several laudable new investments in our schools and communities – including some very worthy investments that advocates for low-income communities and communities of color have promoted for years. But lawmakers also cut next year’s state property tax using accounting gimmicks that may leave the state in financial trouble for years to come. Not only did budget writers choose to pay for these across-the-board property tax cuts with funds that should have gone toward the state’s emergency savings, they also missed opportunities to strengthen our state tax code. 

No doubt the investments lawmakers made in our communities – from making breakfast available for students in high-poverty schools to expanding health care access – will put many on a much brighter path forward. But these investments would have been more sustainable and better for the well-being of our state if policymakers hadn’t decided to prioritize short-term tax cuts over maintaining healthy fiscal reserves for the longer term.

Lawmakers should not have compromised the rainy day fund to pay for property tax cuts

In a slight variation on what both the House and Senate put forth in their earlier budget proposals, the final budget diverts funds from the rainy day fund to pay for inequitable and unnecessary property tax cuts next year. As we have written previously, any property tax reform should be targeted to low- and middle-income households that already pay a higher share of their income in taxes than the wealthy do. Higher-income households don’t need any more tax breaks.

When economic times are good, as they are now, our state should be building up reserves – not squandering them on tax cuts. Instead of depositing this year’s unforeseen revenue growth into our state’s rainy day fund, budget writers enacted a legislative maneuver that allowed them to get around their savings requirement and instead put that money toward cutting the recently enacted state property tax levy. In the long term, compromising the state’s emergency savings to pay for tax cuts is fiscally irresponsible, and it will leave our communities vulnerable when real emergencies – like natural disasters or major economic downturns – strike. 

Lawmakers missed an opportunity to enact a capital gains tax to bolster community investments and rebalance our tax code

Lawmakers once again had the opportunity this session to make solid investments in schools and other community priorities in addition to ensuring the strength of our state’s long-term fiscal health. They could have done that by closing the tax break on capital gains, which would have generated more than $700 million annually to put toward our most important priorities. This move would have also been a significant step toward rebalancing our worst-in-the-nation tax code, in which people with low and middle incomes pay up to seven times more in taxes as a share of income than the top 1 percent do.

To put the need for this new form of revenue in context: When adjusted for economic growth, our state is still well below the investment levels it had before the Recession (see chart below). That is despite the fact that lawmakers have made significant investments in K-12 schools. 

Lawmakers must get serious about making our tax code more equitable, adequate, and sustainable if they want to ensure we have a state where everybody has the chance to thrive. That starts with closing wasteful tax breaks like the one on capital gains.

Click on image to enlarge.

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On the bright side, the final budget makes progress on strengthening Washington’s communities

Despite the missed opportunities in some parts of this budget, there is a lot to celebrate in terms of the investments that lawmakers prioritized with the resources they had. Included below are snapshots of how well the final budget promotes the well-being of Washingtonians based on the Budget & Policy Center’s Progress in Washington framework

Education & job readiness

Our education system must have the resources to prepare all students – from early learning through higher education – for good jobs and jobs of the future. It should prioritize removing barriers to education and employment for communities of color. Investments in education and job readiness make up 60 percent (1) of total community investments in this budget. In the supplemental budget, lawmakers:

  • Prioritized funding teacher salaries per the Supreme Court’s McCleary order. After House Democratic leaders initially neglected to propose minimum funding for teacher salaries by next school year per the Supreme Court’s McCleary order, budget writers ultimately settled on providing nearly $800 million in additional K-12 school funding to fulfill the state’s paramount duty to fund education. Even though there is still much work to be done to ensure world-class schools for all students, this is a positive step toward bringing the years-long Supreme Court battle to an end. 
  • Expanded learning opportunities for K-12 students. The final budget includes much-needed additional funding for special education, which is critical to providing every student with the resources they need to learn. Lawmakers also included modest funding for a bilingual educator pilot initiative and dual-language programs, which are evidence-based strategies to close the opportunity gap for students who are English-language learners. 
  • Made progress toward ensuring kids have access to a nutritious breakfast each school day. After years of debate and advocacy, lawmakers included funding for Breakfast after the Bell, a program to ensure that more of our state’s lowest-income students have access to a nutritious breakfast each school day. This is a significant step in the right direction toward providing kids with the most basic thing they need to learn: food. 
  • Took significant steps forward to provide financial aid to college students with low incomes. The final budget invests an additional $18.5 million in the State Need Grant, the state’s chronically underfunded financial aid program for college students. This is a significant boost to funding, which will provide financial aid to an additional 4,600 students who need it and cut the program’s wait list by 25 percent next year. The legislature plans to eliminate the wait list by 2022, but they will need to make additional investments in the coming biennium to accomplish this goal. 
  • Focused on targeted, proven child care and family support programs. Lawmakers made some modest but impactful investments in these areas. Chief among them was funding to provide 275 additional families with home-visiting services – a proven and targeted program that gives in-home resources to new and expecting parents to help them lay a strong foundation for their child’s development and health. 
  • Did not make significant progress to improve broad access to early learning for the youngest Washingtonians. Early learning should be one of the legislature’s top priorities in next year’s budget. Lawmakers will need to grapple with how to provide funding for the planned expansion of the state’s Early Childhood Education and Assistance Program, as well as how to strengthen the Working Connections Child Care program to ensure that all families across the state have access to affordable, high-quality early learning and child care.
  • Should have done more to provide outside-the-classroom support for K-12 students who need it. Next year, lawmakers should take up strengthening investments in family involvement coordinators, guidance counselors, and other outside-the-classroom resources to help school kids – especially those facing the most significant barriers to opportunity – get the most out of their education.

Healthy people & communities

Our state should support vibrant communities that allow Washingtonians to lead healthy lives and better connect to and participate in the economy. Investments in healthy people and communities make up 25 percent of total community investments in this budget. Lawmakers: 

  • Expanded health care access for many Washingtonians. Lawmakers improved access to health care for kids from families with low incomes by increasing the reimbursement rate for doctors who care for them. They also rightly included funding to expand access to health care for Washingtonians who are citizens of Compact of Free Association (COFA) nations – the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. Citizens of COFA nations are legal residents of the U.S. who work, pay taxes, and serve in the U.S. military – but are ineligible for Medicaid health care coverage. 
  • Made necessary additional investments in behavioral health services. The final budget includes funding necessary to bring our state’s mental health hospitals into compliance with federal safety standards, which was a priority in both the House and Senate budgets. Lawmakers also included significant funding to improve community behavioral health services and opioid treatment across the state.
  • Fixed health-care-related accounting stunts from last year’s budget. The final budget provides funding to make up for millions of dollars in unrealistic health care and pharmaceutical cost savings assumed in last year’s budget to make the books balance.

Effective & accountable government

The state government supports the foundations of our communities. Our public institutions should efficiently and reliably ensure that all Washingtonians can meaningfully participate in our democracy. Investments in effective and accountable government make up 9 percent of total community investments in this budget. Lawmakers:

  • Enacted reforms to enable people to re-enter their communities more easily after being incarcerated. This budget includes funding to help administer long-needed reforms to our state’s legal financial obligations (LFOs), which are high-interest legal fines and fees imposed by criminal courts on top of a criminal sentence. The reforms in this bill will remove some of the financial barriers that previously incarcerated Washingtonians face when they re-enter their communities.
  • Strengthened resources to help people with low incomes navigate the legal system. Lawmakers boosted resources for people with low incomes who need civil legal help. This will have significant positive impacts on the lives and communities of those people who need such legal support.

Economic security

All Washingtonians should have access to employment opportunities, living-wage jobs, and financial security and stability; and they should be economically secure in the face of a financial emergency. Investments in economic security make up 2 percent of total community investments in this budget. Lawmakers:

  • Restored some of the devastating cuts made in recent years to poverty-reduction programs. The final budget takes some significantly positive steps to improve services for Washingtonians with low incomes by undoing some of the cuts made in recent years to basic assistance grants for people who participate in WorkFirst, the State Food Assistance Program, and the Refugee Cash Assistance Program. The budget also expands eligibility for the Housing and Essential Needs program, which provides housing-related assistance to people unable to work because of disabilities.
  • Made common-sense reforms to public-assistance programs. Lawmakers smartly raised the financial-asset limit for people with low incomes who receive public assistance. This move will improve a previous law in which people living in poverty were forced to sell a decent car or spend down their savings to below $1,000 in order to receive help climbing out of poverty. 
  • Set up a study to ensure the WorkFirst program can meet the needs of the thousands of families that need help getting out of poverty. The budget includes funding for an important study of how the state could take steps to halt the rapid decline in the WorkFirst caseload, which is leaving more than 33,000 Washington families in poverty without basic support. The study calls for the state to investigate the impact of implementing recommendations the Budget & Policy Center made in our recent policy brief, “Reinvest in WorkFirst: How we can restore the promise of basic support to Washington families facing poverty.”

(1) Percentages mentioned in each value area do not add up to 100. That is because funding for prisons and policing, which are not part of the Progress in Washington value areas, constitute 5 percent of spending from the Near General Fund + Opportunity Pathways account.

 

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In final budget, lawmakers should take the best from House and Senate proposals

Posted by Kelli Smith at Feb 23, 2018 05:10 PM |
Filed under: State Budget, Capital Gains

The state House and Senate, both controlled by Democrats this legislative session, have proposed budgets that contain strong investments that would take steps toward ensuring that all Washingtonians have what they need to prosper. Lawmakers have the chance to enact much-needed new forms of revenue and make our tax code more equitable. There is no reason lawmakers shouldn’t include the best ideas from each proposal in their final budget. 

As they create this final budget, they should also take into consideration the fact that state investments in communities have still not reached pre-Recession levels. In fact, overall near general fund spending in each of these budget proposals is still below spending levels in the 2007-09 budget cycle, when adjusted for economic growth. At the end of the day, the state budget must reflect our values and meet the needs of our communities in a real way. 

Lawmakers should close the tax break on capital gains, reject new tax breaks

The House’s budget proposal includes a plan to close the tax break on capital gains, which would be a significant step forward in making our tax code more equitable. Washington’s tax code is completely upside-down: low- and middle-income households pay up to seven times more in state and local taxes than the top 1 percent do. A capital gains tax would affect fewer than 2 percent of the wealthiest Washingtonians – and only modestly at that. Further, revenue from a capital gains tax would diversify and strengthen our tax code, putting resources for important community investments within reach. Budget negotiators should include this common-sense proposal in the final budget.

They should also reject new tax breaks that siphon resources out of our communities and turn them into tax giveaways for special interests. A prime example of such a giveaway is the proposed rural manufacturer tax break, which is funded in the House’s budget. It’s a narrowed version of the flawed manufacturer tax break that Governor Inslee smartly vetoed last year. This tax break would cost the state millions of dollars a year that could be used instead to fund schools, help families put food on the table, or provide much-needed senior services. The bottom line is that right now is the time to clean up our tax code to invest in the priorities we all care about – not add more tax breaks.

Lawmakers should not use the rainy day fund to pay for property tax cuts 

While the details of the House and Senate proposals differ when it comes to the use of rainy day funds, both plans would raid our state’s emergency savings to pay out statewide, across-the-board property tax cuts. As we wrote when lawmakers raised the state property tax last year to fund schools, any reforms to the property tax should be targeted specifically to making the tax more equitable for low- and middle-income families. Across-the-board cuts just give higher-income households more tax breaks they don’t need.

More importantly, using the state’s emergency savings to pay for tax cuts is incredibly irresponsible under any circumstances – but especially so during good economic times when our state should be building up reserves, not drawing them down. The rainy day fund is an essential safeguard to fund the most critical foundations – such as safe hospitals, functioning schools, and responsive emergency services – when our state endures an economic downturn or a natural disaster. 

Instead of paying out property tax cuts to many households who don’t need it, lawmakers should think about the well-being of our entire state. That means ensuring we have the resources we need to invest in our communities now, and that we have reserves to weather emergencies.

The final budget should invest in Washington’s communities

Included below are snapshots of how successful the two budget proposals are at promoting the well-being of Washingtonians, using the Budget & Policy Center’s Progress in Washington framework

Education & job readiness

Our education system must have the resources to prepare all students – from early learning through higher education – for good jobs and jobs of the future. It should remove barriers to education and employment for communities of color. Here’s how the budgets stack up in terms of: 

K-12 schools. One of the most significant differences between the House and Senate proposals is that the Senate increases funding for K-12 teacher salaries by $778 million this budget cycle to comply with our state Supreme Court’s McCleary order by the 2018 school year. House budget writers opted to ignore the Court’s order and instead put off fully funding McCleary until next year, a choice that would leave teachers and students in limbo for yet another year. Budget negotiators should follow the Senate’s approach and fulfill their court mandate to fund schools now. Students – and their teachers – have waited long enough.

Both budgets would also increase funding for special education – a positive step toward ensuring that schools can provide a rich learning environment based on the needs of all of their students. 

In addition to meeting the minimal requirements of McCleary, budget writers should ensure that the final budget contains ample funding for services that we know give students the best access to opportunities. These include investments such as Breakfast after the Bell – an essential step toward ensuring that kids who may otherwise show up to school hungry have access to breakfast each school day. The Senate budget contains some funding for the program, but more is needed in the final budget. This is a moral imperative: kids can’t focus on learning when they’re hungry. The final budget should also include additional funding for family involvement coordinators and guidance counselors, as proposed by the House, to ensure that students have the resources they need outside of the classroom. 

Early learning and child care. Both the House and Senate propose small but important new investments in the state’s home visiting program, which has proven effective at providing in-home resources related to infant care, child development, and parenting skills. While this is a step in the right direction, state lawmakers should commit to expanding access to affordable child care and fully funding high-quality early learning to serve more kids from low-income families. 

Higher education. The House budget proposes a substantial new investment of $158 million over the next four years in the State Need Grant, our statewide financial aid program, which would eliminate the long-standing waitlist of eligible but unserved students by 2021. This would be a remarkable step forward to put higher education within reach for thousands of students from low-income families and ultimately strengthen Washington’s workforce. The final budget should take the House’s approach.

Healthy people & communities

Our state should support vibrant communities that allow Washingtonians to lead healthy lives and better connect to and participate in the economy. Here’s how the budgets stack up in terms of: 

• Health care. In last year’s budget, lawmakers assumed millions of dollars in unrealistic health care and pharmaceutical cost savings in order to make the budget balance. Those savings predictably did not materialize, so both plans would restore funding to those areas to make up the difference. 

Both budgets include an increased reimbursement rate for doctors who provide care for kids from low-income families, as well as increased funding for behavioral rehabilitation service providers who deliver intensive, comprehensive care for kids with high-level behavioral health needs. 

Both budget proposals also include important funding that would expand health care access to Washingtonians who are citizens of Compact of Free Association (COFA) nations – the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. Citizens of COFA nations are legal residents of the U.S. who work, pay taxes, and serve in the U.S. military – but are ineligible for Medicaid health care coverage. The final budget should take the Senate’s approach of fully funding this investment. 

• Behavioral health. Both House and Senate leaders propose increasing funding for Western State Hospital to comply with federal safety and quality requirements, and they both propose additional investments in community behavioral health treatment services. These are steps in the right direction to improve the quality and accessibility of behavioral health care across Washington’s communities.

Effective & accountable government

The state government supports the foundations of our communities. Our public institutions should efficiently and reliably ensure that all Washingtonians can meaningfully participate in our democracy. 

Both budgets include funding to help people access essential public services, such as: enhancing our state’s emergency 911 system, streamlining how people access family law courts, and strengthening resources for Washingtonians with low incomes who need civil legal help. In addition, the House plan includes funding for economic development, such as a small business innovation exchange, which would support small businesses owned by women, veterans, and people of color. These are critical services that should remain funded in the final budget. These programs not only have significant impacts on the people who use them, but they also make all of our communities stronger.

Economic security

All Washingtonians should have access to employment opportunities, living-wage jobs, and financial security and stability; and they should be economically secure in the face of a financial emergency.

Both budgets smartly propose to strengthen services for Washingtonians with low incomes by restoring cuts made in recent years to grants for people with lower incomes who participate in WorkFirst, State Food Assistance, and Refugee Cash Assistance programs. The final budget should include those investments, plus proposals by House leaders to expand eligibility for the Housing and Essential Needs program, which provides housing-related assistance to people unable to work because of disabilities. It should also raise asset limits for low-income Washingtonians who receive public assistance, as proposed by the House.

The House and Senate budget writers have until March 8 to finalize their budget. With opportunities for new revenue and a number of good ideas on the table, they should be able to come up with a spending plan that will benefit all of Washington’s communities into the future. 

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Senate budget proposal makes key necessary investments, but paying for tax cuts with rainy day funds would undercut state’s long-term fiscal health

Posted by Kelli Smith at Feb 19, 2018 06:55 PM |
Filed under: Property Tax, State Budget
Statement from Executive Director Misha Werschkul 

The budget proposal just released by Democratic leadership in the Senate would strengthen investments in our communities, but it misses an important opportunity to begin to rebalance our upside-down tax code. Highlights of the Senate’s proposal include robust investments in key areas, such as providing nearly $900 million in additional funding to schools, an effort to finally fulfill the state’s duty per the Supreme Court’s McCleary decision, and strengthening investments in mental health. 


The Senate’s plan would also reduce the state property tax rate by 11 percent in 2019, which would result in about $400 million in lost revenue for the state. But instead of championing common-sense fiscal policies like closing the tax break on capital gains – which would generate over $700 million a year – to make up for that lost revenue, Senate leadership is proposing to draw down our state’s rainy day fund over the next several years to pay for the tax cut.

Providing across-the-board tax cuts without replenishing the lost revenue is ill-advised. And drawing down the rainy day fund – especially as our economy is booming – to pay for those tax cuts is fiscally irresponsible. The bottom line is that the rainy day fund represents emergency savings that our state will need to maintain schools, health care, and other critical investments when the next economic downturn inevitably hits. The House and Senate should reject this short-sighted approach and instead enact common-sense policies that will clean up our tax code and provide the resources we need to move forward as a state.

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State’s strong bump in projected revenue will allow lawmakers to devote more funding to schools

Posted by Kelli Smith at Feb 15, 2018 06:35 PM |

The state Economic and Revenue Forecast Council’s latest revenue forecast shows that lawmakers are within striking distance of meeting the minimum school funding requirements established by the Supreme Court’s McCleary decision. But even with positive projections, building the high-quality schools our kids and grandkids deserve without cutting other important investments will require lawmakers to go beyond the bare minimum. To fund schools – and ensure a brighter future for all Washingtonians – lawmakers still need to focus on fixing the state’s upside-down tax code. 

According to the forecast, revenues are up $628 million for the current budget cycle – a significant increase over past forecasts. And while that amount is not enough on its own to cover the Supreme Court-mandated cost of funding schools by the start of the 2018 school year, it does put a solution within reach for lawmakers. That is as long as they take reasonable steps to clean up the tax code.

In his supplemental budget proposal late last year, Governor Inslee recognized the need for additional resources to meet the McCleary shortfall by proposing to use money from the state’s rainy day fund now and replenishing part of it with revenue from a carbon-pricing proposal. While it’s not ideal to tap into the rainy day fund, this was nevertheless one reasonable way forward under the circumstances. With today’s positive revenue projections, lawmakers have more options on the table to ensure that all of Washington’s kids have access to an excellent education.

They should begin by cleaning up our tax code to generate resources to fund schools and other priorities. That means rejecting new tax giveaways to special interests and closing existing wasteful tax breaks, such as the tax break on capital gains – a $715 million annual giveaway to 2 percent of the wealthiest Washingtonians.

Washington’s school kids and teachers have had to make do with less for years while lawmakers have failed to provide adequate funding for schools. They have three more weeks this legislative session to make good on our state’s promise of an excellent education for every child. It’s past time for them to take meaningful steps to ensure they actually have the revenue to do so.

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Governor’s proposal to salvage community investments shows need for systemic tax reform

Posted by Kelli Smith at Dec 15, 2017 12:30 PM |
Filed under: State Budget
By Kelli Smith, policy analyst, and Andy Nicholas, associate director of fiscal policy

In his 2018 supplemental budget, Governor Inslee proposes to make progress on funding investments that support communities across Washington state. In an attempt to patch up the legislature’s flawed 2017-19 budget, the governor resorts to drawing down reserves to meet immediate needs, but he also plans to raise much-needed additional revenue through a new proposed tax on carbon emissions. Although the governor’s proposal is a reasonable step forward, the funding shortfalls the state is currently facing were foreseeable. The need to reduce the essential rainy day fund could have been avoided had lawmakers used the many opportunities they’ve had over the last several years to enact long-term solutions to fix our broken tax code.

Some highlights of the governor’s proposal

The governor’s proposed budget contains some promising investments. In the area of education, he proposes raising teacher salaries during the next school year. The legislature’s failure to fund adequate salaries for educators in the current state budget prompted the state Supreme Court to intervene and require salaries to be boosted by September 2018. Under the governor’s proposal, total funding for schools would increase by about $950 million compared to current funding levels. Around $600 million of that additional investment is generated by a one-time accounting trick – reducing the amount of funds that will be allocated to school districts in the coming school year with an offsetting funding increase in the following, 2019-20 school year, which falls just outside the current state budget period. 

To support healthy people and communities, the governor proposes to inject more than $100 million in additional resources to help ensure Washingtonians can access effective mental health treatment. Most of the funding would be used to improve care at state psychiatric hospitals, which have been under the scrutiny of the courts and the federal government after years of chronic underfunding led to inhumane conditions at those facilities. The legislature added funding for psychiatric hospitals in the current budget, but not enough to comply with federal standards. The governor’s proposed supplemental budget is a reasonable step toward meeting our state’s mental health needs, but significantly more funding will be needed in the years ahead to build a reliable and adequate mental health system.

The foreseeable shortfalls from the legislature’s budget

In late June, after multiple special legislative sessions and months of stalemates, lawmakers hastily enacted the current 2017-19 budget. That budget penciled out with the use of short-sighted fixes and temporary accounting gimmicks. For example, the legislature assumed they’d see about $100 million in unrealistic savings from efforts to reduce the costs of prescription drugs and provide health care to Washingtonians with low incomes. In addition, lawmakers underestimated the cost of efforts to fight wildfires by at least $40 million. The governor addresses all of these flaws in his 2018 supplemental budget, mostly by tapping budget reserves.

Most important, legislators failed to enact any long-term reforms to equip our tax code to meet the changing needs of our communities. Until it is reformed, our inadequate tax code will continue hampering efforts to build thriving communities in every corner of Washington state. While the state economy and the capacity to fund important investments has grown enormously since the Great Recession, the tax code has made it impossible to do so.

The truth about school funding and community investments 

In the last several years, lawmakers made significant investments in public schools, but the reality is that those boosts don’t represent actual increases relative to economic growth. And even with the additional investments included in the governor’s proposal, state spending remains near historic lows. In today’s dollars, the proposed levels of overall community investments in our state are actually lower than Recession-level spending. As the chart below shows, education spending in the governor’s proposed budget for the 2017-19 budget cycle will not even reach the level it was at a decade ago. And investments in every other value area have dropped significantly since then. This is the big picture that lawmakers must focus on when they meet again in January.

[Click on image to enlarge.]

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The governor’s proposal is a measured step forward given the limited good choices available to meet our state’s pressing needs. But the need to resort to drastic measures like tapping the rainy day fund could – and should – have been avoided. Had lawmakers come together and used their many chances to enact long-term reforms to the tax code, the budget picture would be much brighter. To his credit, the governor announced that he will unveil a revised proposal to tax damaging carbon emissions in January 2018. That proposal could help create a more sustainable state budget in the short term while reducing air pollution in the long run. The governor’s previous calls to close the tax break on high-end capital gains would also help bring more balance to our inequitable tax code while generating billions of dollars in additional resources for schools and other priorities in the years ahead. 

Cleaning up the tax code now – including forward-thinking proposals like closing the tax break on capital gains and enacting a carbon tax – would preserve and bolster funding for investments that benefit all Washingtonians. If lawmakers start taking steps to fix the tax code this coming session, it could also save future legislatures from having to drain reserves in order fund the needs of our schools and communities.

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Updated State Revenue Projections Show Legislators Need to Do More in 2018 to Fulfill their Obligations to Communities

Posted by Kelli Smith at Nov 20, 2017 02:10 PM |
Filed under: State Revenue

The new Economic and Revenue Forecast Council report shows our state has $319 million more to invest over the current biennium than lawmakers previously expected. This small change will have a negligible effect on lawmakers’ ability to pay for K-12 schools per the Supreme Court’s McCleary mandate and to balance the books in the 2018 legislative session. Revenues are still just barely at Great Recession levels when we account for economic growth (see chart below) – and that’s despite this year’s historic increases in resources. While those increases were a step in the right direction, the Supreme Court still says the legislature’s school funding plan is about $1 billion short of fully funding schools. And legislators also can’t lose sight this session of other critical areas of the budget, such as early learning and behavioral health. 

The revenue growth from the latest revenue forecast won’t come close to filling the $1 billion McCleary gap, let alone ensure other areas of the budget are fully supported. Lawmakers can’t continue to ignore the reality that our tax code still isn’t built to support the needs of our state. They must take action to ensure that we have adequate revenue to fund schools and other community investments, and that starts with cleaning up the tax code.

[Click to enlarge.]

Nov_2017_revenue_forecast

 

The good news is that our legislature has an opportunity in January to make meaningful progress on McCleary in the right way, by its 2018 school-year deadline, in a way that also supports strong investments in our communities into the future. If lawmakers can get real about fixing our upside-down tax code – one in which Washingtonians with low and middle incomes pay up to seven times more in state and local taxes as a share of their income than the wealthiest 1 percent – then our state will not only benefit from a tax code that better reflects our values, but it can also have more resources to support thriving communities.

Lawmakers can take steps next session to start building on the progress they made earlier this year. They should prioritize implementing common-sense, lasting fiscal policies – not short-sighted, one-time fixes. These are a few policies they can begin work on as soon as they get to Olympia in January: 

  • Eliminating the 1 percent property tax revenue cap that threatens resources for our schools; 
  • Making a tax on sales of real estate more equitable by reducing the tax rates on the sale of lower-valued properties and increasing the rates applied to properties that sell for more than $1 million; and
  • Closing the tax break on capital gains, which would both begin to rebalance our tax code and bring in much-needed revenue to close the gap on McCleary

By taking these steps, lawmakers can set up a bright future for Washington state by ensuring that our state can invest in the things we all value: excellent schools, of course, but also things like child care, long-term care for seniors and people with disabilities, and mental health and homelessness supports. Our state’s challenges are surmountable, and solutions are within reach if lawmakers get serious about reforming our tax code so that it provides for the well-being of all Washingtonians.

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Supreme Court’s McCleary Decision Shows that Lawmakers Should Clean Up Tax Code to Invest in Schools

Posted by Kelli Smith at Nov 15, 2017 03:55 PM |
Filed under: State Revenue, Education
Statement by Misha Werschkul, executive director:
 
The Washington State Supreme Court has made it clear that the legislature must take more steps to fulfill its McCleary mandate to amply fund schools. Although lawmakers did smartly enact some new investments as part of their school funding plan this past session, the court has determined that the legislature must do more to set up every kid and every classroom for success by the 2018-19 school year. The way to strengthen investments in K-12 schools while supporting investments in other priorities that strengthen our communities – like behavioral health, health care, and early childhood education – is to clean up our tax code, not rely on more short-sighted, one-time fixes.

The Budget & Policy Center continues to recommend common-sense reforms that would clean up the tax code, such as: eliminating a harmful property tax limit that arbitrarily restricts resources available for schools (see our amicus brief to the Supreme Court on the topic); making the real estate excise tax more equitable; and closing the tax break on capital gains.
 

Ultimately, lawmakers must take steps to invest in our schools and our communities during the 2018 legislative session. The court has given the legislature until the end of the session to ensure that students, classrooms, and teachers have what they need on the first day of classes in 2018. The solutions are within reach if lawmakers get serious about cleaning up the tax code.

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