GOP budget: no new taxes, gimmicks and pot revenue

By John Stang
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By John Stang

Washington Senate Republicans unveiled Tuesday, March 31 a $38 billion operating budget for the 2015-2017 biennium that features a significant drop in state university tuitions and no new taxes.

It's also a budget that House Democrats criticized as based on accounting tricks and hopes that Washingtonians smoke more marijuana.

In the big picture, the House Democrats earlier announced a $38.8 billion budget proposal with $1.4 billion earmarked for improvements in Grades K-3 ordered by the Washington Supreme Court, plus $1.5 billion in new revenue to pay for it. The Senate Republicans' $38 billion has $1.3 billion earmarked for the court-ordered work in Grades K-3 and $40 million in new revenue.

The state's current 2013-2015 budget is about $34 billion.

The House and Senate will vote on their respective budget proposals on Thursday, April 2 with the majority party in each guaranteed to win. Then the GOP and Democrats will begin hardcore budget negotiations to come up with a final budget.

"Our budget has the first tuition cut (for six state universities plus its community colleges) since the 1970s. ... With this budget, we're not just scraping by. ... Despite a consistent call for new taxes from the House of Representatives and governor, it's clear that we can fulfill our priorities, make significant investments in important programs, and do so without taking more money out of taxpayers' pockets," said the Senate GOP's chief budget writer Sen. Andy Hill, R-Redmond.

Mostly along party lines, the Senate recently passed a tuition reduction bill with the losing Democrats complaining no funding source had been identified for the $240 million in extra spending obligations. The House budget does not include this.

One reason that the Senate proposal is smaller than the House's budget is because the GOP allocated a few hundred million dollars less than the Democrats' proposal for teacher raises and already-negotiated state employee raises.

Meanwhile, House Majority Leader Pat Sullivan, D-Covington, and House Finance Committee chairman Rep. Reuven Carlyle, D-Seattle, slammed the Senate budget in a joint press release.

"Unfortunately, Senate Republicans have given us an unsustainable budget that relies on gimmicks, gambles and a lot of marijuana. It is a budget that barely provides short-term relief to long-term problems. Their proposal shifts money from one program to another to make it appear the budget has more money; hopes for unrealistic improvements in tax and fee collections; and underfunds programs like our mental health system, to name just a few budgetary maneuvers," Sullivan's and Carlyle's statement said.

Their statement also said: "Regarding revenue, the Senate Republicans' budget teeters on the hope that thousands more people will start and continue using marijuana, by assuming hundreds of millions more in pot taxes than anyone expects. We shouldn't be banking on increased drug use to fund the state's budget."

The Republicans' budget proposal calls for $325 million in marijuana tax revenue in 2015-2017. In early February, House staff calculations concluded that the current marijuana tax system would produce about $200 million in 2015-2017, with the possibility of that increasing to $214 million if some changes in a bill by Carlyle are implemented. State government economic experts have consistently cautioned that they are still on a learning curve on predicted marijuana revenues.

Gov. Jay Inslee also criticized the GOP budget proposal. "Without additional revenue, the Senate plan falls short in a number of areas. It funds $100 million less than the House for early learning, and nearly $500 million less for K-12 schools. The Senate plan does not do enough to address critical human service needs. ... And It contains nearly $50 million unallocated 'efficiency' saving that would hurt important services," Inslee said in a written statement.

In broad strokes, here are the dollar figures in the Republican plan to go from $34 billion in 2013-2015 to $38 billion in 2015-2017.

The Republicans assume $3 billion in increased revenue from Washington's normal economic growth from 2013-2015 to 2015-2017. Another $325 million would come from marijuana taxes. Fifteen small tax exemptions -- with many pertaining to alternative fuels -- would be allowed to expire to raise another $40 million. Another $381 million would be raided from non-general fund budgets not normally tapped for the operating budget. The remaining spending increases will be funded by a variety of other measures.

In contrast, the Democrats' main budget plank is raising $1.5 billion in tax increases and closing seven tax breaks -- mostly to pay for its $1.4 billion for the 2012 Washington Supreme Court ruling to dramatically reduce teacher-student ratios in Grades K-3. The Republican stance is to spend its $1.3 billion for more or less the same work, but without using new revenue.

The Democrats propose a five percent capital gains tax on individuals earning at least $25,000 from investments or on couples earning at least $50,000 from investments. This is predicted to raise $570 million in 2015-2017. Most homes, retirement accounts, agriculture and timber would be exempt from this new tax.

The Democrats also want to increase the state's business-and-occupation (B&O) tax rate on service firms from 1.5 percent to 1.8 percent, while exempting service businesses that make less than $100,000 a year. This is predicted to raise $532 million in 2015-2017. And the Democrats want to close seven tax breaks of which the exemption for bottled water and the sales tax exemption for out-of-state residents are the most prominent. Closing all seven would raise almost $385 million for the new biennium.

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. Both Republicans and Democrats want to limit the I-1351 work to Grade K-3 in 2015-2017. The Republicans' proposal also calls for sending I-1351 back to Washington's residents in November for a new public vote on the matter.

All this sets up a massive budget showdown in Olympia that will likely last for weeks, if not months.

  

About the Authors & Contributors

John Stang

John Stang is a freelance writer who often covers state government. He can be followed on Twitter: @johnstang_8