Part five in a series “Special Legislative Session: The Big Picture.”  The Legislature will return to Olympia on Monday, where the focus will continue to be on education. Lawmakers in both the House and Senate have made additional investments in education & opportunity a high priority. However, the House budget proposal goes much further in making the key investments that expand early learning opportunities and fulfill our obligation to fund basic education.

Due to last year’s McCleary ruling by the State Supreme Court, policymakers must take significant steps toward fully funding basic education over the next five years. Among other things, increased investments must be made to reduce class sizes, transport kids to and from school, phase in full-day kindergarten and maintain school buildings and supplies. Yet investing in these things alone is not enough to ensure that opportunity is widespread and readily accessible. Greater investments in early learning, closing the achievement gap and making higher education more accessible are critical to continued prosperity in Washington state.

Overall, the House budget invests $1.1 billion -- nearly $400 million more than the Senate – in expanding opportunity through education. The two budgets present a stark contrast in funding for education:

• Early Learning: Both the House and the Senate make sizable investments in expanding the state’s early learning system. The Senate expands access to pre-school opportunities for more than 800 kids  while also increasing the reimbursement rate to early learning providers by 10.3 percent. The House nearly doubles this investment, putting $45 million into increasing early learning access to over 1800 additional families while also expanding home visiting care to new mothers and infants.
• Basic Education: The House budget puts a much larger down payment towards meeting our obligation of fully funding basic education – investing $1.2 billion towards McCleary compared to $760 million in the Senate proposal. The House invests $225 million into reducing class sizes as well as another $90 million for implementing full-day kindergarten. The Senate puts no additional dollars into reducing class sizes and only $43 million for full-day kindergarten.
• Expanding opportunity: The House makes a much broader range of investments geared toward closing the opportunity gap, putting nearly $13 million into bilingual education along with additional funds for drop-out prevention. The Senate however makes a $240 million investment in the Learning assistance program (LAP) -- the state’s major educational support program for struggling students –$200 million more than the House proposal.
• Higher Education: Neither budget proposal takes steps to adequately address rising tuition costs paid by students and families across the state. The House proposal allows for moderate tuition increases at four-year institutions and technical colleges, but provides additional funding for financial assistance through the State Need Grant and College Bound programs. The Senate restricts universities from raising tuition and provides minimal additional funds – leaving colleges and universities holding the bag in terms of how to make ends meet.

For more information on the difference between the House and Senate’s investments in education & opportunity, see the table below.

Earlier today, Senate Bill 5843, a measure that would place strict transparency and accountability requirements on all future tax breaks passed out of the House  on a bipartisan vote. The House adopted a series of changes to the measure, which will have to be approved by the Senate before it can be sent to Governor Inslee and signed into law.

The adopted changes to SB 5843 significantly strengthen the legislation. Specifically, the revamped bill:

• Incorporates a 10 year sunset date for all new tax breaks: SB 5843 mandates that all newly enacted tax breaks – along with tax breaks already on the books that are being renewed or expanded – sunset 10 years after taking effect. Incorporating expiration dates allows policymakers and state auditors to review these loopholes and weigh their value against other important public priorities.
• Strengthens reporting requirements: The adopted changes to SB 5843 would require individuals and businesses that utilize tax loopholes to publicly disclose the total value received in state tax breaks with the Department of Revenue (DOR). In cases where releasing such information may be detrimental to the economic health of a business or individual, DOR may grant a waiver from public disclosure.
• And, requires a comprehensive statement of legislative intent: All new tax breaks must fit into one of four categories; 1) encouraging industry competitiveness; 2) creating or retaining jobs; 3) reducing market inefficiencies, or 4) encouraging specific economic behavior. SB 5843 also mandates that newly enacted tax breaks include a comprehensive statement of legislative intent and key metrics and data requirements for evaluative purposes.

SB 5843 is a strong first step towards increased transparency in our revenue system. While much more can and should be done moving forward, the Senate should approve these changes and begin to ensure that our tax code is held to the same level of scrutiny as our state budget.

Executive Director Remy Trupin issued the following statement in response to this morning’s House Finance hearing.

“These two bills would go a long way in making our tax system work for the state so we can invest in services that will boost our economy and bring a more prosperous future.

The bill debated today to close outdated and unnecessary tax breaks in order to invest in our schools rightly prioritizes our children over tax breaks for oil refineries, out-of-state shoppers or luxury car trade-ins.

The other bill discussed at the hearing today will make sure that future tax breaks actually help our state by measuring their benefit to the public and to Washington state’s economy. Lawmakers should also  apply this important reform to the more than 600 tax breaks already in place.

Together, these pieces of legislation will help expand our resources to fund schools and other important services that kids need to be successful, while creating a more fiscally responsible revenue system that produces real results for the people of Washington.”

Senior Fiscal Analyst Andy Nicholas is testifying today before the House Finance Committee on Senate Bill 5843 -- a bill which would put accountability measures in place for future tax breaks.

Here are his prepared remarks:

"Good morning Mr. Chair and members of the Committee. For the record, my name is Andrew Nicholas. I am the Senior Fiscal Analyst with the Washington State Budget & Policy Center, a nonprofit research organization that promotes sound fiscal policies in order to build a prosperous future for all Washingtonians.

Thank you for giving me the opportunity to testify in support of Senate Bill 5843, which represents an important step toward fostering a more transparent and accountable budget process in Washington state.

As many of you know, the number of special tax breaks on the books in our state has nearly doubled in just the last two decades. Yet, not nearly enough has been done to ensure all of these tax breaks are performing as advertised. And, the current budget process does not allow policymakers to adequately balance the costs and benefits of these tax breaks in the context of all public priorities, such as educating our children and ensuring we live in safe, healthy communities.

If approved, the Chair’s proposed amendment to SB 5843 would be a bold step toward tackling the endemic lack of transparency in our tax break system. Requiring all newly created tax breaks to include:

1. A clear public purpose and robust performance metrics to evaluate that purpose would give policymakers and state auditors the tools they need conduct thorough and timely evaluations;
2. Public disclosure requirements for beneficiaries would allow policymakers and the public to ensure recipients are creating jobs and investing in Washington state rather than pocketing tax dollars or using them to subsidize jobs in other states; and
3. Regular re-authorization dates would help policymakers eliminate underperforming tax breaks and reinvest those resources in more proven investments that create jobs and help middle-class families prosper.

All of these elements are needed to create a more balanced and transparent system of financing our shared investments in health care, education, and public safety. The only change we suggest is that the accountability measures included in this bill be applied to all existing tax breaks in addition to newly proposed ones.

Again, I would like to thank Chairman Carlyle and members of this committee for your leadership on this important issue and for your service to our state."

Critical investments are needed to close our state’s glaring divide in educational opportunity. Investing in expanded early learning opportunities, improved K-12 schooling, and more accessible higher education means creating a brighter future for all Washington families.

Washington state’s opportunity gap – the difference in opportunities for children from different social and economic backgrounds -- hampers our state economy and jeopardizes future prosperity, especially in communities of color. With nearly 40 percent of kids in Washington state belonging to communities of color, our state’s growing diversity can be one of our greatest economic assets, but only if we make investments that create an equitable education system and close our state’s widening opportunity divide.

The budget passed out of the House this past weekend expands opportunity and promotes racial equity through education in multiple ways;

• Expands early learning: The House budget invests over $70 million dollars in increasing accessibility to the state’s early learning system, providing nearly 2000 additional early learning slots to low-income kids ($40 million). It also strengthens childcare assistance for lower-income working parents by boosting the reimbursement rate offered to childcare providers ($31 million). 

• Bolsters K-12 education: $220 million dollars are marked for significantly reducing K-3 class sizes. An additional $90 million are provided for substantially expanding all-day kindergarten. The House also invests money towards increasing cultural competency in the classroom and adding support hours for students who are English language learners.

• Invests in higher education for low-income students: Washington state’s College Bound program encourages low-income students to work hard in school and aspire to higher education attainment. The House budget invests $50 million in strengthening this program and ensuring opportunity for future students. 
  

The Senate does invest significant resources into the Learning Assistance Program (LAP) – a program designed to help low-achieving students get the educational supports necessary to improve performance in the classroom – putting over $240 million into the LAP program for the upcoming 2013-15 biennium.

Yet overall, the House investments in education are in stark contrast to the Senate budget. The Senate invests no money towards reducing class sizes, provides less than half of what the House proposes for expanding all-day kindergarten, and restricts access to childcare for approximately 4,000 lower-income families. While the House budget promotes racial equity, the Senate budget ultimately leaves families of color behind.

Our state’s long-term economic health depends on engaging communities of color and eliminating gaps in opportunity for our kids. The House budget is a strong first step towards achieving a more equitable education system for all Washingtonians.

By Elena Hernandez, Narver Fellow - The resources collected through our revenue system allow Washington state to make significant public investments that benefit all of us. Check out our graph below for information on these investments. Printable version can be found here.

Washington state’s growing diversity can be one of its greatest assets – but only if we invest in it. The budget passed late last week by the Senate does not, instead it weakens our state economy and undermines a strong and prosperous middle class.

A number of budget cuts proposed by the Senate would disproportionately harm people of color and people with low-incomes:

• $183 million in cuts to the WorkFirst program hinders opportunities for people to find and keep a job. Communities of color make up nearly 25 percent of the working age population, yet make up over thirty percent of the adult WorkFirst population
• Elimination of cash assistance for disabled adults unable to work due to mental or physical incapacity. Adults of color account for nearly a third of program participants.
• Full elimination of funding for services designed to help low-income families build wealth in order to develop long-term economy security. Asset accumulation in communities of color drastically trails that of white households. Nearly 36 percent of non-white households are ‘asset poor’, meaning they do not have the resources on hand to build future prosperity – such as investing in a home, paying for college or saving for retirement.

Nearly forty percent of children under the age of 17 belong to communities of color (see graph). Investments that move families and children out of poverty are not only critical for communities of color, but for all Washingtonians. This must become a high priority as demographic shifts will place a heavy economic price on continued racial inequities.

We cannot invest in strong communities, economic security, and healthy people without new revenue.   Policymakers must choose to take a balanced approach to the state budget that involves closing tax breaks, broadening our sales tax, and extending current taxes.