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Inslee sees little budget progress, still hopes for carbon tax

Jay Inslee at his State of the State speech (2015) Credit: John Stang

Little progress has apparently been made in the negotiations for Washington’s 2015-2017 state budget.

“There’s been very minimal steps by both sides,” said Gov. Jay Inslee on Wednesday. The 30-day special legislative session to resolve a long list of budget disputes began on April 29. If the budget disputes are not resolved by June 30, the state government faces a partial shutdown.

Also on Wednesday, Inslee said that some type of carbon emissions tax on major polluters is an active part of the talks — at least on the Democratic side.

Inslee wants to trim carbon emissions in Washington while using the revenue from such a tax to help pay for school improvements. A bill to do this is at least dormant — if not dead — in the Democratic-controlled House, because the Democrats have not been able to publicly say that they have the 50 votes to guarantee passage.

However, Democratic leaders and Inslee have been working on this concept behind the scenes among the rank-and-file Democrats, trying to create a package that would gain 50 votes out of 98 House members. Legislators have looked warily at signature gathering by the group Carbon Washington to put Initiative 732 on the 2016 ballot. I-732 would install a $25-per-ton tax on carbon emissions beginning July 1, 2017 — a much more drastic approach than proposed by Inslee and his Democratic supporters.

Inslee pointed to a high public acceptance of this concept. In December, the Olympian reported the results of three statewide polls, with two showing a majority supporting some type of carbon emissions tax or enforcement measure under certain conditions. The third poll showed a majority wanting a significant delay in any action here to see how the concept works in California.

In the big budget picture, the two sides are $800 million apart — a $38 billion GOP budget proposal and a $38.8 billion Democratic budget plan. But internally, the two plans are structured in dramatically different ways. Also, the Democrats want to raise $1.5 billion with new taxes, tax hikes and tax-break closures, mostly to pay for $1.4 billion in educational improvements mandated by the state Supreme Court. The GOP believes $1.3 billion is needed and that the money is already in the state’s coffers. So, the Republicans oppose the entire tax package.

One big fight is over whether to pursue a capital gains tax or property tax reforms.

A major plank of the 2012 Washington Supreme Court mandating educational improvements is to overhaul Washington’s school revenue system to increase the funding and make it more stable. The GOP wants to do this with a property tax reform package — phasing up the amount of state property taxes while phasing down the amount of local property taxes. The idea is to provide a uniform funding source for the state’s richest and poorest school districts.

Meanwhile, the Democrats have proposed a 5 percent capital gains tax on the state’s wealthiest 32,000 people to raise a significant chunk of the education money. A second Democratic proposal surfaced recently to install a 7 percent capital gains tax on the wealthiest 7,000 Washingtonians.

Also, haunting the Legislature is Initiative 1351, which the state’s voters passed narrowly last November. It requires dramatic reductions in teacher-student ratios in Grades K-12. It has been expected to cost an extra $2 billion for 2015-2017, for which the state has no money.

Both Republicans and Democrats want to limit the I-1351 work to Grades K-3 in 2015-2017. But Republicans’ want to send I-1351 back to the ballot in November for a new vote on the matter. Democrats want to collect a two-thirds majority in both the House and Senate to repeal the measure.

In addition, the Inslee administration negotiated pay increases for all state employees. The Republicans want to trim the negotiated raises; Inslee and the Democrats want to honor those agreements.

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