Olympia Democrats: "We've blinked enough in 2013-2015 budget talks. It's your turn to make some concessions."
Olympia Republicans: "We blinked way before you did. So pass our budget and all will be peachy-keen."
And that is where Washington's Legislature stood in its budget negotiations impasse Tuesday — the last day of a 30-day special session, 44 days after the regular 105-day legislative session ended, and 59 days after both chambers finished adopting their original budget proposals.
At 9 a.m. today, a second special session begins with leaders of both sides not expecting much movement in the next few days.
The busted deadlines, so far, have been chiefly cosmetic. Now, the Legislature and Inslee are entering Dr. Strangelovian territory — school districts need to pin down their teacher budget needs by Saturday, and a partial shutdown of state government on July 1 is looming if a 2013-2015 operating budget is not adopted.
"This talk of a government shutdown is nonsense." said Senate Majority Coalition Caucus Leader Rodney Tom, D-Medina. "It's not going to happen. A shutdown is not necessary."
Best anyone on the outside can tell, however, budget-versus-budget talks have been sidelined for most of the special session. House Majority Leader Pat Sullivan, D-Covington, said most of the special session has been tied up by the 23-Republican-two-Democrat Senate Majority Coalition Caucus insisting that the House pass some stalled Senate policy bills in return for the coalition moving on pure budget issues. The House Democrats and Gov. Jay Inslee insist that only budget matters be tackled in the special session, with policy bills from both sides taken off the table.
As for the Majority Coalition Caucus leader's repeated talk that a shutdown is nonsense, Sullivan said, "I believe (Tom) guaranteed at the beginning of the session (in January) that we'd be out in 105 days."
Inslee will meet with his cabinet this afternoon to figure out a contingency plan in case much of state government must close on July 1. He declined to go into any details Tuesday on what to expect. But the questions and ramifications are many.
How will public safety be affected? What do the federal government and the state Constitution require Washington to keep running in the absence of a budget? Can any contingency funds be tapped? How will furloughs and layoffs be handled? Will legislators keep their $90 per diem allowances after July 1? Will Inslee collect his salary during a shutdown?
All sides are saying they don't want a partial government shutdown. But neither is talking about giving an inch — at least in public on Tuesday.
So how did the Legislature and the governor wind up on this Highway To Hell with no visible stop signs?
First of all, there is "Olympia math."
Budget estimates and accounting maneuvers constantly change, get tweaked and reinterpreted — even when nothing substantive happens. And each side calculates its numbers differently, resulting in different dollar figures for the exact same ventures. (The figures below do not agree exactly with Democratic or Republican numbers, but they'll be close and we use them to ensure some consistency in the constantly shifting calculations.
The Senate spending proposal has grown from $33.21 billion in late April to $33.278 billion today, a $68 million increase. The Senate proposal includes one of the tax-exemption closures proposed by the House: it ends the sales tax exemption for non-residents. Closing that exemption is expected to raise an extra $47 million in 2013-2015. (Originally, the Senate's Majority Coalition Caucus opposed ending any of Washington's roughly 640 tax exemptions.)
The House spending proposal has shrunk from $34.33 billion to $33.541 billion, a $789 million decrease since April. The House originally wanted to extend the state business-and-occupation tax on service firms and close 11 tax exemptions. House members have since dropped the B&O tax extension along with four of their desired tax exemptions. The seven exemptions House members still want killed include the no-sales-tax-for-non-residents one. Bottom line for this biennium: House and Senate differ on six tax exemptions worth roughly $208 million.
Then there is the increasingly indecipherable argument over whether the Senate budget or the House budget is doing more to meet the Washington Supreme Court ruling to fix some basic education shortfalls. The Court ordered that student-teacher ratios be improved, all-day kindergartens be installed statewide and that all support measures to accomplish these two goals be implemented, along with some smaller items. The deadline for compliance is the 2017-2019 budget biennium, which means the Legislature has to map out not one, but three biennial budgets.
Estimates put the extra money needed at $4 billion to $4.5 billion over those three biennia. Democrats and Republicans have radically different ideas about how to hit those goals by 2019, which makes analyzing their proposals for this 2013-2015 budget extremely difficult.It also means the 2015-2017 and 2017-2019 budgets will have to allocate significantly more than $1 billion each in order to meet the Supreme Court's mandate.
The majority coalition wants to significantly increase Washington's high school graduation rate of 77 percent, according to Sen. Tom. The coalition had planned to do so with Republican education reform bills that have stalled in the Democratic-controlled House. Meanwhile, Democrats want to put roughly $200 million into improving teacher-student ratios in 2013-2015. The majority coalition would wait until at least the 2015-2017 biennium to tackle that matter.
The Senate majority coalition has approved roughly $1 billion toward the Supreme Court-ruled improvement, but some of that money is not going directly to the specific items noted by the Court. In its allocation, the majority coalition interprets "improving education" more broadly than the Supreme Court.
The Democrats' proposal spends roughly $850 million in this fiscal biennium, which begins July 1. That's roughly $1 billion if you use a two-year period that parallels two school years that begin in September, said Rep. Ross Hunter, D-Medina and a House's budget negotiator.
The biggest budget stumbling block is that the Senate coalition is adamant about not raising or extending taxes or closing tax exemptions — and is only reluctantly doing so in three cases. The Democrats believe that improving education — without dramatically cutting health and social services — is impossible without closing exemptions, plus a couple more tax fix-it measures.
About the only thing that the Senate coalition, Gov. Inslee and the House Democrats agree on is that education should be the top priority in the new budget. It's just that no one agrees how to do that.
While the clock is tickings, the fingers are pointing.
Inslee, House Democrats and Senate Democrats say that the Democrats have done most of the conceding in the budget talks, and the numbers appear to support their contention. "The two sides have behaved in fundamentally different ways in the past month," Inslee said.
Democrats criticize Republicans for pushing "policy bills" as major budget bargaining chips. The majority coalition says it won't agree to some tax-related concessions unless the House Democrats guarantee that some stalled Senate bills get passed. Senate leaders said they have sent roughly 30 major bills to the House, and not one has been passed.
Essentially, the majority coalition's reform agenda — inspired and enabled only by the December 2012 alliance between two Democrats and 23 Republicans — has been almost totally stopped. So far, the coalition's only significant victories have been on tax matters.
The Senate has sent the House a list of several combinations of its stalled bills, in effect saying: Pass one of these combinations and we'll start talking about other budget issues. Neither side will say how many of the Senate's stalled bills have to get passed before budget talks can get underway. But on the Senate floor and in its rules committee, the majority coalition has signaled which bills are on top of its wish list are. These include:
- Calling a November referendum on whether to limit non-education spending to an amount linked to inflation and the state's population growth. This would essentially put a cap on health, social services and corrections spending in future years while funneling most extra money to education. Sen. Rodney Tom said this ensures education will remain the Legislature's true top priority in the future. Democrats say the measure cuts off services to the sick and poor. Rep. Ross Hunter speculated that the measure could run afoul of federal mandates on health and human services.
- Calling a November referendum on a bill to require principals and teachers to mutually agree when a teacher is assigned to a new school. When asked why the public should vote on what is essentially an internal school administration policy, Tom said the public thinks this educational matter is important and it wants to be involved in that issue.
- Lowering the age, to 40, at which people are eligible to receive lump sums in workers compensation settlements, plus other tweaking of the original bill. Republicans argue that workers compensation rates are crippling businesses, and this bill would reduce them. Democrats say the current system is in good shape.
- A bill to increase the maximum amounts and interests on payday loans.
The Senate Majority Coalition Caucus has said it will also pass some budget bills that address two recent court rulings.. That could cause additional budget shortfalls. One of those bills would close a loophole in which couples don't have to pay the same estate taxes as single people. That promise comes with a Senate adjustment to the bill that would raise the top level for exemptions from $2 million to $5 million in inheritances. The other measure is a legal fix to a telecommunications tax. Without these fixes, the state would lose roughly $300 million in revenue in 2013-15.
But the majority coalition will approve those measures only if it gets some of its policy bills passed.
After the regular session ended on April 28, legislative Democrats ruled out acting on any Democratic or Republican bills in order to concentrate on the budget. Inslee said he has given up pressuring the Legislature to pass some of his favored policy bills — stiffer drunken driving laws, expanding mandatory abortion insurance coverage to any company that offers maternity insurance, and allowing children of undocumented aliens who graduate from state schools to compete for state aid for college. The majority coalition strongly opposed the latter two bills.
Pointing to the stalled budget talks, Inslee claimed that "the Senate majority is trying to leverage our school children to pass its ideological agenda."
However to be fair to the majority coalition, one could argyue that opposing a bill is an ideological stance as well.
Theoretically, both sides could wait for the 2014 session to tackle all their stalled policy bills. But the majority coalition would not have the leverage that it does now with the main budget and a potential government shutdown.
Majority coalition leaders disagree with Inslee's contention that the Democrats have conceded the most in the budget talks.
They point to the Coalition Caucus allowing a hospital beds tax to be renewed and Medicaid to be expanded as compromises with the Senate Democratic minority caucus prior to passing their original budget proposal back in April. They said they compromised with Senate Democrats on other budget matters prior to adopting their original budget proposal, and frequently point to a 30-18 budget approval vote in April that included five minority Democrats crossing caucus lines.
But those five Dems said their support depended on the Senate making changes in its budget proposal during the negotiations, Since those changes have not occurred, all five have withdrawn their support, leaving the Senate now split on its budget proposal, 25-24, along caucus lines. Sen. Tom and Deputy Republican Caucus Leader Sen. Don Benton, R- Vancouver, said the five Democrats defected from the Senate budget mainly to help the House increase political pressure on the majority coalition.
However, the House made similar concessions prior to approving its original budget proposal in April. House Democrats reduced the number of tax exemption closures they were seeking from 15 to 11 before adopting their original April budget proposal as a pre-negotiation move. During the talks, that tax exemption closure number dropped to seven, including the repeal of the exemption on non-residents' sales taxes.
And there is the majority coalition's love-hate relationship with public referendums, which depends on what issues would be sent to a November ballot.
The Democrats' education-improvements package includes closing six tax exemptions worth $208 million in 2013-2015 to help pay for the Supreme Court's requirements.
The majority coalition argues that closing those tax exemptions to pay for education runs the risk of anti-tax initiative promoter Tim Eyman sending a measure to a public ballot that would restore those exemptions. If such a measure passed, it would eliminate that money for education. Consequently, the majority coalition opposes closing exemptions to pay for education improvements.
Nevertheless, the majority coalition wants a November referendum on capping spending on health, social services and corrections — arguing that future tax measures can restore those programs later. When asked why they would risk an Eyman initiative referendum on those future tax measures, majority coalition leaders say their stance shows that education is their top priority.
And so deadlock continues. Tom argued that progress is happening behind the scenes; Sullivan and Inslee disagreed.
Both sides downplayed a scenario in which the quarterly revenue forecast on June 18 shows extra income, which all sides could then use to reach a quick compromise. House and Senate leaders, and the governor expect little, if any, extra money showing up in that forecast.
Meanwhile, everybody wants to avoid a Dr. Strangelove-kind of scenario, where negotiations blow up and lead to the disaster of a government shutdown.
For exclusive coverage of the state Legislature, check out Crosscut's Olympia 2013 page.
