Olympia’s tax break wars rage on

State lawmakers can't agree on how to pay for education reforms. Credit: Photo: Allyce Andrew

Tax Break Wars: The Sequel is playing in Olympia.

On Wednesday, Washington House Democrats proposed ending the same four tax breaks that Senate Democrats targeted on Tuesday in their supplemental budget proposal. Closing the four loopholes would raise $106 million for 2014-2015 and $203 million for 2015-2017. The targeted exemptions benefit bottled water, five oil refineries, sales tax for out-of-state residents and for re-sellers of prescription drugs.

House Democrats are also on board with the effort by their Senate colleagues to restore teacher cost-of-living raises, which were approved by voters long ago. "We want to invest in early learning rather than in some of our most successful businesses on a global level," said Rep. Reuven Carlyle, D-Seattle, and one of the House's budget writers, on eliminating tax breaks as a way to pay for educational improvements.

House Republicans and the Senate Majority Coalition Caucus don't support either ending tax breaks or reinstating teacher cost-of-living raises idea this year.

Republicans and Democrats both allocate money — in slightly different amounts — in 2014-2015 to start complying with the McCleary decision, that infamous 2012 Washington Supreme Court ruling requiring the state to dramatically improve its "basic education" system. The court ordered the state to lower teacher-student ratios in Grades K-3, among other measures. So far, the Legislature has allocated $982 million for McCleary compliance in 2013-2015. It will need to appropriate $1.5 billion to $1.75 billion in each of the next two budget biennia (2015-2017 and 2017-2019) in order to comply with the court's ruling.

Hovering in the background is a January Supreme Court directive, chiding lawmakers for dragging their feet on education reforms — the court had given lawmakers a mid-2019 deadline — and ordering the Legislature's four caucuses to present a catch-up plan by April 30. Republicans bridled at the order, arguing that the Supreme Court cannot tell the Legislature how to spend its money, and introducing bills — which have gone nowhere so far — to increase the Supreme Court's caseload.

So a big question is this: Can Democrats and Republicans resolve in two-and-a-half weeks what they have been unable to agree on for all of 2013: tax breaks and cost-of-living raises? The Majority Coalition and House Republicans have insisted, repeatedly, that no tax breaks should be abolished. The current legislative session ends March 13. Lawmakers are sending mixed signals about whether a new special session might be needed to resolve their differences.

These education budgets are part of the caucuses' supplemental budget proposals, a routine financial adjustment for the second half of the 2013-2015 biennium. The two Democratic proposals are so similar that they can be thought of as a single position in the upcoming negotiations on the budget, McCleary work and cost-of-living raises.

Here are the three proposals:

1. House Democrats: End four tax breaks. Spend $60 million for McCleary preparation work. Spend $51.2 million for cost-of-living raises for teachers. ($219 million when all of the education and non-education sections are meshed together.) Closing the tax breaks would pay for the education increases; a slight increase in state revenue would pay for the rest.

2. Senate Democrats: End four tax breaks. Spend $101 million for McCleary prep work, plus install some all-day kindergartens and improve teacher-student ratios in some second-grade classes. Spend $51 million for cost-of living raises for teachers. (Education and non-education components combine for a total of $174 million.)

3. Senate Majority Coalition: Don't end tax breaks. Spend $38.5 million for McCleary prep work. No cost-of-living increases for teachers. (Education and non-education components total $96 million.)

So far, the Majority Coalition has not responded to either Democratic proposal. Neither the Coalition nor House Republicans has publicly declared positions in the current talks on an April 30th McCleary catch-up plan, though GOP caucuses have stated their preference to tackle administrative reforms before finding the billions needed to deal with the Supreme Court's orders. (Senate Democrats called for splitting $3.5-$4 billion in extra McCleary and cost-of-living expenses somewhat evenly between the 2015-2017 and 2017-2019 biennia.)

House Democrats are introducing a bill that would convert a set of McCleary budget guidelines — developed by a 2012 task force — into law. The task force included four Democratic legislators, four Republicans, three educators and some private citizens. They were charged with figuring out how much extra money the state would need between 2013 and 2019 to reach new goals for teacher-student ratios, classroom hours and graduation credit hours. The task force's final estimate was $4-$4.5 billion. The four Republicans dissented.

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