The budget proposal released by the Senate yesterday invests $1 billion less than the House proposal. It shortchanges critical investments in our state's children, workers, and families.
The House proposal released last week raised new revenue to meet Washington state's obligation to fund K-12 education, as well as other essential investments in early learning, mental health, social programs, and environmental protections. The Senate does not raise new revenue. Instead, it relies on fund transfers and reductions to balance the budget, and it gives away more money in wasteful tax breaks.
The biggest areas of difference between the House and Senate proposed budgets include:
- Revenue: The House proposes to raise an additional $1.5 billion in equitable and stable revenue to support investments in education, health, and well-being for Washingtonians. Rather than raising new revenue the Senate proposes to waste $114 million in state funds on new or re-enacted tax breaks, including the re-enactment of a tax break for business research and development activities that was recommended for expiration by a citizen commission charged with reviewing tax breaks.
- Transfers from other accounts: The Senate budget relies on $671 million in transfers from other accounts, including using $296 million in marijuana revenues to fund education, and raiding $200 million from the Public Works Assistance Account which funds local infrastructure like sewer and water projects. The House budget also transfers funding from other accounts, but a much more modest amount of $97 million.
- Investments: The House makes much-needed investments in our workforce, mental health services, early learning, and support for families experiencing difficult financial times. The Senate budget neglects to address many of the pressing needs of Washingtonians and our economy, either failing to invest in these services or doing so at a much lower amount. The Senate also relies on $50 million in reductions through unspecified cuts intended to be achieved through LEAN management, a strategy that has not yielded the level of anticipated savings in the past.
The tables below detail some of the largest programmatic differences between the House and Senate budget proposals.
While the House and Senate budgets are largely aligned on their investment in K-12 public schools to meet McCleary obligations, the House invests more in teachers and early learning. The Senate proposes to enact a new tuition policy at our public colleges and universities that aims to reduce tuition while also reducing student financial aid.
The House makes modest investments in economic security, such as food assistance and support to help parents find and keep a job. The Senate takes the opposite approach, making cuts to vital services that support Washingtonians struggling through difficult financial times.
Overall, both the House and Senate invest more in the health of Washington state’s people and environment, but the House investments are much more robust. When it comes to protecting our air, water, and land, however, both budgets fall short.
Workers get a bad deal in the Senate budget. The agreements reached between workers and the state during collective bargaining are rejected in the Senate budget and replaced with a flat across-the-board wage increase. This approach undermines workers and the collective bargaining process. It would force workers back to the table to renegotiate with the state.
When it comes to raising the resources needed to maintain investments in schools, health care, and safety, the budgets could not be further apart. The House proposes to raise stable, equitable revenue to ensure the future prosperity of our state. The Senate takes the opposite approach, spending $114 million on wasteful tax breaks.
In raising new revenue, the House budget proposal takes a big step in the right direction by beginning to address our broken revenue system. The additional resources would allow our state to meet the obligation to adequately fund K-12 education. And it would not do so at the expense of other critical investments, like those for high-quality early learning, affordable higher education, and clean air. The Senate’s decision to ignore our broken revenue system puts Washingtonians and the economy at risk by further hindering the state’s ability to invest in our future.
*The titles of each section link you to the corresponding section of our new Progress Index. Each section of our Index provides detailed analysis about how the state budget should invest in these critical areas.
While the Senate’s budget proposal released today invests heavily in education for our children, it relies on unsustainable and unworkable funding sources to pay for it. Instead of raising new revenue, like the Governor and House propose, the Senate lowers the bar on important investments in our workforce, early learning, and safety net programs. It balances the budget on unspecified savings and transfers from other funds. Further, Senate leaders propose to waste $114 million in state funds on new or re-enacted tax breaks rather than invest those scarce resources into services and programs that benefit all Washingtonians.
As budget negotiations continue, the Budget & Policy Center urges lawmakers to work toward a budget that invests in equal opportunities for our children, families, businesses, and communities by supporting a dependable and equitable tax system.
Stay tuned to schmudget for a more-detailed analysis on the budget.
Yesterday, the Senate held a hearing on three important bills that would provide greater economic security for workers, children, and families throughout Washington state – HB 1355 would raise the minimum wage to $12, HB 1356 would provide paid sick and safe leave to all employees, and HB 1646 would support pay equity for women.
Research and Policy Director Lori Pfingst provided testimony in support of all three bills, and specifically focused on the benefits of raising the minimum wage:
- It would boost our economy by providing $1 billion more in earnings annually for over 550,000 low-wage workers across the state, which would immediately be spent in local economies;
- It would help us build an economy that works for everyone by: helping to reduce income inequality, reversing a decades-long trend in stagnant wages for low-income workers, and bringing greater equity into the labor market for women and people of color, who are more likely to be in minimum wage occupations; and
- It would advance family economic security by helping more Washingtonians meet their basic needs.
We recently released a report, The Progress Index, which tells a comprehensive story of how Washington state is doing in critical areas of well-being. The section of the Progress Index focused on good jobs shows that, in spite of strong economic growth over the last 35 years, low- and middle-income workers have experienced stagnant wages and have fewer opportunities for full-time work. It further shows that many workers – especially those working part-time – lack benefits like health insurance and paid sick leave (see table). These types of benefits are essential to the economic security of individuals and families.
Raising the minimum wage, especially in combination with implementing pay equity for women and paid sick and safe leave, would be a significant step in advancing family economic security and equity in Washington state.
Join our research and policy team for our Budget Beat call on Friday, April 3, at noon to hear the fate of these important bills, along with other legislative highlights from this session.
Read this Spokesman-Review article that quotes Lori Pfingst and a high-profile Seattle business-owner who supports raising the minimum wage, Molly Moon Neitzel.
Senior Fiscal Analyst Andy Nicholas testified this morning in support of the House Revenue Package, HB 2224. Here's why the Budget & Policy Center supports this common-sense bill:
House Bill 2224 is essential to ensuring the future prosperity of Washington state. By equitably and responsibly raising about $1.5 billion in new resources in the coming two-year budget cycle, the measure makes important investments in schools, health care, and other important priorities.
Attempting to fully fund basic education without the new resources included in HB 2224 would be deeply irresponsible. Such an approach would result in devastating cuts to higher education, health care, public safety, and other investments that create jobs, improve Washingtonians’ health and well-being, and help build a strong state economy.
The new revenue resources would come from capital gains tax, the closure of wasteful tax breaks, the implementation of the Washington State Market Place Fairness Act, and a Business and Occupation (B&O) tax surcharge. The benefits of each are as follows:
House leaders wisely followed Governor Inslee’s lead by including a new tax on high-end capital gains, or profits from the sale of corporate stocks and other financial assets. The tax would be:
- An equitable source of revenue: Only 1.7 percent of households in Washington state would pay any additional taxes under this proposal – almost exclusively those at the very top of the income scale.
- A tool to help build a more sustainable tax system: Adding a rapidly growing component to Washington’s revenue mix would help create a more stable and dependable state tax system in the long run. Claims that the tax would be too volatile are overblown.
- Good for our state economy: The investments in schools and higher education that would be funded by the capital gains tax are crucial to Washingtonians’ long-term economic success. There is no credible evidence that the tax would cause rich Washingtonians to leave the state or that it would discourage wealthy families living in other states from moving here.
Closing wasteful tax breaks:
Investing in programs that help create jobs would be much better for our state economy than wasting resources on failed tax breaks. House Bill 2224 would generate $300 million per biennium by eliminating seven wasteful tax breaks including those for prescription drug wholesalers, oil refineries, travel agents, software royalties, bottled water, non-resident shoppers, and banks.
Washington State Market Place Fairness Act:
Due to federal law, large out-of-state internet retailers have a huge advantage over small “brick and mortar” retailers located in Washington state: They don’t have to charge sales taxes on Washingtonians’ purchases. The Washington State Market Place Fairness Act is a bold proposal that would require the large multi-state businesses that have agreements with Washington state businesses to collect and remit state and local sales taxes to the Washington State Department of Revenue. This allows Washington state to:
- Take action where congress has failed: Congress has repeatedly failed to clarify federal law and allow states to require multi-state businesses to collect sales taxes. This act gives us the opportunity to make progress here in Washington state despite the deadlock at the national level.
- Create a level playing field: Continuing to allow overstock.com and eBay to avoid collecting sales taxes is unfair to small businesses located in Washington state that do have to collect them. Requiring out-of-state e-retailers to collect sales taxes on purchases made by Washingtonians would help small businesses have a better chance to compete.
Reinstate a B&O tax surcharge and reducing taxes for small businesses:
During the Great Recession, policymakers adopted a temporary 0.3 percentage point increase in the B&O tax rate paid by businesses in the service industry, which expired in 2013. Reinstating that surcharge now would generate $530 million in new resources in the coming budget cycle to help fund schools and other important priorities. It is important to note that:
- Taxes would be reduced for the smallest businesses in Washington state. This surcharge would be paired with an increase in the small business credit - to $1,800 - thus eliminating B&O taxes for any service-industry business with fewer than $100,000 per year in gross income. Businesses with up to $200,000 per year would benefit from the credit to some degree.
- This surcharge would help bring the tax system more in line with the modern economy. For decades, consumers have been spending ever greater portions of their incomes on services like health care, cosmetic services, financial advice, and others. Increasing the B&O tax rate that applies to these services would help the tax system keep pace with the changing economy.
The bottom line is that these components of House Bill 2224 represent a smart, common-sense path to building a more prosperous state for all Washingtonians - and to creating a state where we all have the opportunity to make economic and social progress.
For further analysis on the need for increased revenue in Washington state, see the Revenue section of our new Progress Index. (Read the full Progress Index here.) And stay tuned to schmudget for more-detailed analysis on the budget and revenue proposals in the coming days.
Racism and inequality are looming problems in Washington State. They cast a shadow over the lives of many Black people, leading to a lack of economic security, poor health, and high levels of stress. A new study commissioned by an independent coalition seeks to encourage citizens and leaders to address these issues, engage in conversations focused on solutions, and develop policies and laws to help Blacks gain equal footing with other races and ethnicities.
The report, “Creating an Equitable Future for Black Washingtonians,” outlines some of the major ways our social, economic, and political systems in Washington state intertwine to create barriers to opportunity that impede progress within the Black community.
The coalition releasing this report is composed of Centerstone, the Washington State Commission on African American Affairs, and the African American Leadership Forum.
The report identifies multiple solutions for improving opportunities for Blacks in our state. These proposals would not only help to improve the well-being of Blacks as individuals and as communities, but they would also serve to strengthen our state’s economic and civic future. Some of these solutions are:
- Enable economic policies to ensure that all families in Washington state can meet their basic needs.
- Expand learning opportunities and resources for Black children and families, from early learning through higher education.
- Improve state policies and programs to better meet the needs of Black youth to reduce their involvement with the criminal justice system.
- Create community-driven strategies to create a more just and equitable political system.
- Promote policies so that everyone in the Black community has adequate access to health insurance and care.
By working toward these changes, we can strengthen the lives of our residents, enhance the communities in Washington State, and ensure that Blacks have the opportunity to contribute to our state’s economy now and in the future.
This report is the first phase of a longer effort by the coalition to elevate and amplify the voices of Black Washingtonians in the decision-making processes that influence their everyday lives.
The Budget and Policy Center conducted the research and analysis for this report. The research focuses on five key areas of well-being (which correspond directly with some of the key areas highlighted in our new Progress Index) – economic security, education, health, criminal justice, and civic engagement – to highlight conditions in the Black community and contribute to a robust conversation about what an equitable future in Washington State looks like.
View the press release about the report.
To build a great future for kids and families, we need public policies that provide all children with the opportunities they need to succeed. Our public policies – the laws, budgets, rules, and other decisions of elected representatives and engaged Washingtonians – can either advance those opportunities or place obstacles in front of kids.
Racial equity assessment tools can shape our public choices so that they enhance every child’s access to opportunity. KIDS COUNT in WA, a partnership between the Budget & Policy Center and Children’s Alliance, has produced an online assessment tool that allows policymakers and members of the public to ask questions about the effect of a proposed policy on closing the opportunity gap.
The new Racial Equity Policy Tool is a questionnaire designed to help users consider issues like:
- How will the proposal address the opportunity gap that exists for children of color and children in low-income households?
- Has the proposal been developed in consultation with members of our state’s diverse communities?
- Once enacted, how will we measure the proposal’s effects?
The tool builds off of previous, similar assessment guides and tools issued by other organizations and government entities, from the Annie E. Casey Foundation to King County. (Links to these guides can be found on the Racial Equity Policy Tool webpage.) It is intended to help refine the ability of engaged Washingtonians to create equal opportunities for kids.
All babies born into this world will one day dream of what they want their future to be like. It is the job of all adults – parents, teachers, coaches, faith leaders, and lawmakers – to provide children with the opportunities they need to realize a future of unleashed potential.
We ask that you use and share the tool. Access it here.
The House budget released this morning recognizes that fixing our broken revenue system is necessary to make progress toward creating shared prosperity in Washington state (a message that was also detailed in the Progress Index we released earlier this week). The two-year spending proposal prioritizes investments for kids and students using $1.5 billion in new revenue. The House proposal makes sizable investments in early learning, makes college more affordable, and keeps the state on track to fully fund basic education for all children by 2018 (required in the McCleary court case). It does this while also protecting the health, safety, and well-being of Washingtonians. Investment highlights in the budget include:
Education* (see graphic for breakdown)
- Adding over 6,000 subsidized child care slots ($72 million)
- Improving the quality and stability of child care ($114 million for Early Achievers and Early Start Act)
- Making the next installment toward fulfilling the constitutional and court-mandated obligation to fully fund basic education ($1.4 billion)
- Providing cost-of-living adjustments and increased health benefits to teachers ($588 million)
- Freezing tuition and increasing financial aid at public colleges and universities ($220 million)
- Fully restoring the funding that was previously cut for food assistance ($10 million)
- Allowing parents receiving Temporary Assistance to Needy Families to keep a portion of their child support payments ($8 million)
Healthy People & Environment***
- Increasing investments in mental health services ($130 million)
- Adding staff to respond to reports of child abuse and neglect ($16 million)
To make these important investments, lawmakers outlined the steps they intend to take to raise additional resources while also addressing our upside-down tax system. These include:
- Taxing high-end capital gains ($570 million): The House plan would apply a new 5 percent tax on profits from the sale of corporate stocks and other financial assets above $50,000 per year for a married couple ($25,000 for singles). Check out our capital gains tax website for more information on why this is a sensible improvement to Washington state’s upside-down tax system.
- Eliminating seven wasteful tax breaks ($300 million): Tax breaks for the following would be eliminated to help fund improvements to schools: travel agents; prescription drug wholesalers; royalties from licensing software, trademarks, and other “intangible” property; oil refineries; bottled water; nonresident shoppers; and banks.
- Ensuring out-of-state retailers play by the rules ($85 million): Due to federal law, most large, out-of-state retailers get a huge advantage over small “brick and mortar” stores located in Washington state: they don’t have to charge sales taxes. The House plan would help level the playing field by requiring out-of-state retailers who have agreements with businesses located in Washington state to apply sales taxes to goods sold here.
- Increasing the Business & Occupation (B&O) tax applied to personal and professional services and reducing taxes for small businesses ($532 million): During the Great Recession, policymakers temporarily increased the B&O tax applied to service businesses – ranging from doctors and lawyers to plumbers and hair stylists – to 1.8 percent from 1.5 percent. That 0.3 percent surcharge expired in 2013. The House plan would reinstate it, but would also increase a tax credit for small businesses. The credit would eliminate B&O taxes for businesses with gross incomes below $100,000 per year. Businesses with gross incomes as high as $200,000 per year would benefit from the expanded credit.
While no revenue is included in the budget proposal for capping and pricing carbon pollution, lawmakers have expressed interest in pursuing a proposal that would yield even more revenue.
Stay tuned to schmudget for more-detailed analysis on the budget and revenue proposals in the coming days.
To learn more about what state lawmakers can do to make progress in Washington state, read our Progress Index. And specifically, read more analysis on:
*how state investments are impacting education
**how state investments are impacting economic security
***how state investments are impacting healthy people and environment