The Democratic-controlled Washington House wants to raise an extra $1.34 billion by extending expiring taxes and closing tax exemptions. That would pay for $1.3 billon in court-mandated extra education spending in 2013-2015.
"We're proposing to put virtually every penny into education," said Rep. Reuven Carlyle, D- Seattle and chairman of House Finance Committee.
The House's Democratic-controlled leadership on Wednesday unveiled its proposed 2013-2015 budget of $34.5 billion with $337 million left at the end of the biennium.
In broad strokes, that is $3.21 billion more than 2011-2013 with a $426 million surplus left; $1.39 billon more than what the Senate wants to spend with $611 million left; and $70 million more than Gov. Jay Inslee wants to spend with $571 million left over.
The House Democrats and Inslee want to avoid slashing social and health services for the poor as drastically as the Senate plan would do.
The Senate wants to spend $1 billion in 2013-15 to meeting the Washington Supreme Court ruling that basic education -- focused on phasing in all-day kindergarten statewide, dramatically improving teacher-student ratios in grades K-3 and providing material support for those efforts — all by 2018. Inslee wants to allocate $1.26 billion to this task, while the House is aiming at $1.3 billion. A major difference is that the Senate proposal does not tackle the teacher-student ratios in 2013-2015.
The House proposal would eliminate 15 tax exemptions, totaling $751 million. Inslee wants to trim 11 exemptions — some are also on the House's list — totaling $565 million. The Senate wants to keep all tax exemptions intact, which echoes the House Republicans' position. House Democrats contended the 23-Republican-two-Democrat alliance controlling the Senate wants to add 15 new exemptions. Also, Inslee wants to add exemptions for fledgling high-tech ventures.
The House and Inslee both want to keep from expiring on June 30 a beer tax and a 0.3 percent business-and-operations tax intact on doctors, lawyers and other services. The House version trims the beer tax a little. Inslee's version would expand the beer tax from large operations to include small craft breweries. Consequently, the House version would put $592.7 million into the 2013-2015 budget, while Inslee's version would raise $661 million. The Senate version has those taxes expiring.
However, the Senate version would extend an expiring hospital safety-net tax by six years, raising $238 million for 2013-2015. The House's and Inslee's versions allow that tax to expire this year.
On higher education, the House proposal is geared for maximum tuition increases of 5 percent at the University of Washington, Washington State University and Western Washington University, and 3 percent at the other state colleges. Inslee's proposal is somewhat similar. The Senate proposal is tailored to create a 3 percent tuition reduction.
House leaders hope have their budget passed by Friday or Saturday to then begin negotiations with Senate leaders, who passed their budget last Friday.
"This budget sends a very clear message: Educating our children is more important than preserving tax breaks," Inslee said.
"It's a responsible, honest and sustainable budget. ... We do it without using unidentified cuts," said House Majority Leader Pat Sullivan, D-Covington in a dig at the Senate targeting $157 million in "administrative efficiencies." In general, Democrats have criticized the Senate proposals for various funding shifts, which they contend are questionable.
The Senate's chief budget writer, Sen. Andy Hill, R-Redmond, defended his chamber's proposal as solid, declining to get into specific criticisms by the Democrats because he had only a few minutes to talk to reporters. He countered that the Democrats had some vaguely defined cuts in the House budget.
The House's Republicans' budget guru Rep. Gary Alexander, R-Olympia, criticized the Democrats' budget proposal, especially the tax measures and draining the "rainy day fund" and shrinking the reserves.
"With various scenarios yet to play out on the national and international stage, it doesn’t take much to imagine our economic recovery being blindsided by events beyond our control. It would be prudent to prepare now and leave sufficient reserves to help buffer against unforeseen, yet very real, possibilities in the future," Alexander said.
Alexander later added: "The House Democrat’s budget looks very much like what we’ve seen the last few years from the majority party in Olympia: a budget created in the vacuum of Seattle-centric special interests with little to no regard for the voters of this state who have said time and time again that they want state government to live within its means without raising taxes. My hope is the bipartisan Majority Coalition Caucus in the Senate stays strong and committed to not raising taxes.
The House Democrats and Senate Republicans are squaring off over the constitutionality of the Senate wanting help fund $1 billion earmarked for its Supreme-Court-ordered education improvements with $166 million from state Department of Natural Resources trust land. That has timber sales money normally provided for school construction, dubbed "the common schools fund."
Democrats say that is unconstitutional and the House's budget attorney backs that position. The Senate Majority Coalition Caucus, 23 Republicans and two Democrats, says that move is constitutional, with the Senate's Ways & Means Committee attorneys backing that stance.The Washington Attorney General's Office has not offered a formal opinion on the matters, and normally does not do so while legislation is being crafted.
Rep. Ross Hunter, D-Medina and chairman of the House Appropriations Committee, argued Wednesday that the $166 million shift is unconstitutional, pointing to Article 9, Section 3 of the Washington Constitution. That segment includes a sentences saying: "There is hereby established the common school construction fund to be used exclusively for the purpose of financing the construction of facilities for the common schools. The sources of said fund shall be: (1) Those proceeds derived from the sale or appropriation of timber and other crops from school and state lands subsequent to June 30, 1965, other than those granted for specific purposes. ... "
Hunter said: "That money is provided exclusively for school construction."
Meanwhile, Carlyle criticized the Republicans' blanket defense of all tax exemptions. "They go through unnatural contortions to preserve every single tax exemption," he said.
Carlyle noted that Washington has roughly 640 tax exemptions "worth tens of billions of dollars." He has been pushing for rigorous analyses of exemptions to see if they are still serving their original purposes, with many installed decades ago in conditions not duplicated today. "We're proposing closing only 2 percent out of 640 exemptions," Carlyle said.
Here are the exemptions that the House leaders want to get rid of, and how much those moves would raise for 2013-2015.
- Repeal the sales tax exemption for non-residents: $63.7 million. Auto sales would remain exempt.
- Repeal the sales tax exemption on bottled water: $51.5 million.
- Repeal the sales tax exemption for residential landline phone service: $109.9 million.
- Eliminate estate tax exemption for married couples: $160.3 million.
- Repeal a 1949-enacted extract fuel exemption: $40.8 million.
- Repeal 1930s-era handling-loss fuel tax deduction: $5.2 million.
- Repeal exemption for high-tech research-and-development sales-and-use taxes: $55.5 million. This will clash with Inslee's push to increase exemptions in this arena. And a study concluded it costs the study more than the gain from new jobs.
- Narrow the high-tech R&D B&O credit: $23.2 million. A study concluded this costs more than the gain from new jobs.
- Repeal the exemption on a public utility tax on the in-state portion of interstate transport: $63.2 million.
- Repeal the exemption on sales tax for janitorial services: $36.2 million.
- Narrow B&O and sales tax exemptions for import commerce: $24.1 million
- Repeal a preferential B&O tax rate for stevedoring: $27.7 million.
- Repeal a preferential B&O tax rate for resellers of prescription drugs: $29 million.
- Repeal a preferential B&O tax rate for insurance agents: $46.1 million.
- Repeal a preferential B&O tax rate for travel agents and tour operators: $14.6 million.
For exclusive coverage of the state Legislature, check out Crosscut's Olympia 2013 page.