Two school levy reform proposals hit Olympia on Wednesday, bringing the total up to three such measures this week.
School levy reform is a major segment of the 2012 Washington Supreme Court ruling that includes dramatically reducing teacher-student ratios in Grades K-3 by the 2018-2019 fiscal year. The ruling calls for the costs of paying teachers to be shifted to the state rather than local tax levies, to ensure adequate funding of education statewide.
The overall ruling has led to a monster Republican-Democratic split in the Legislature over school funding. The Supreme Court has threatened some yet-to-be-defined consequences if the Legislature does not come up with a master plan by this summer to comply with the 2012 ruling.
"I'm here so I won't get fined -- by the Supreme Court," said Sen. James Hargrove, D-Hoquiam at a Wednesday morning unveiling of a levy reform plan by the Senate's minority Democratic caucus.
This dispute is intertwined with voters' 2014 passage of Initiative 1351, which calls for a parallel reduction in teacher-student ratios in Grades 4-12. So far, Gov. Jay Inslee and the House and Senate's majority caucuses have been looking for ways to punt on most of I-1351 obligations, which would require another $2 billion in the 2015-2017 state operating budget. The state government does not have that extra $2 billion.
The education issues are among the biggest battles between the Democratic-controlled House and the GOP-controlled Senate over a 2015-2017 operating budget.
The Senate Republicans staked out their initial budget negotiating stance with a $38 billion overall budget that has $1.3 billion going to the teacher-student-ratio reductions; sending I-1351 back to the voters for a do-over ballot in November; and no new taxes.
House and Senate Democrats argue that a $1.3 billion teacher-student-ratio reduction without increasing taxes or substantially cutting tax breaks is impossible. The House Democrats have proposed a $38.8 billion budget for 2015-2017 with $1.4 billion going to teacher-student ratio reductions; pulling together a two-thirds majority in each chamber to nullify I-1351; and raising $1.5 billion with a new capital gains tax, a hike in the business-and-occupation tax for service firms, and cutting seven major tax breaks.
Wednesday's first school levy reform and education budget proposal came from the minority Senate Democrats.
"The House and the Senate are $1.5 billion apart. We're trying to find some middle ground here to solve the whole thing," Hargrove said.
"We're trying to thread the needle between what needs to be done and what is politically feasible," said Sen. Kevin Ranker, D-Orcas Island.
Sens. Hargrove, Ranker and Christine Rolfes, D-Bainbridge Island, introduced three bills Wednesday to map out a plan to meet the 2012 Supreme Court obligations and to gradually phase in the I-1351 work. Rolfes said the Supreme Court wants a stable plan in place by the end of this legislative session, and the three bills would fill that requirement.
Hargrove's bill would begin trimming the local levies' support for basic education -- mostly teachers' salaries -- while increasing the state's portion of the basic-teachers-pay obligations until the shift to state funding is complete in 2023.
Rolfes' bill would phase in a new teacher basic pay system in the 2017-2018 fiscal year for Grades K-3, the focus of the 2012 Supreme Court. Once momentum has begun on that effort, a similar phase-in would begin on the I-1351 hiring and pay obligations for Grades 4-12.
Ranker's bill would install a capital gains tax of 7 percent on individuals making more than $250,000 a year or a couple making more than $500,000 a year in capital gains. Money from single-family home sales, retirement accounts, and most livestock, farm and timberlands would be excluded. He said that approach would raise $1.2 billion a biennium. It is estimated that 7,500 people would pay such a tax. Ranker provided reporters with a letter signed by roughly 100 people in the targeted capital gains income bracket who support a capital gains tax.
Hargrove, the Senate Democrats' chief budget expert, said the new capital gains revenue would lead to a property tax reduction for 98.7 percent of Washington's home and land owners. He estimated that 65 percent of the current local school levies revenue pays for basic education matters that the court wants the state to cover, predominantly pay for teachers and other employees. Forty-one other states have capital gains taxes.
Ranker also proposes a companion bill that would send a constitutional amendment to the voters to ensure the threshold for a capital gains tax never drops below the $250,000 and $500,000 levels. That would be an insurance measure against the capital gains tax being expanded in the future without the voters' approval, he said.
By comparison, House Democrats propose a 5 percent capital gains tax on individuals earning at least $25,000 from investments or on couples earning at least $50,000 from investments. Most homes, retirement accounts, agriculture and timber would be exempt. The House Democrats' capital gains tax would apply to 32,000 of Washington’s wealthiest residents. This is predicted to raise $570 million in 2015-2017 with $400 million of that to go to K-12 education and the rest to higher education.
The three senators acknowledged the Senate Republicans and House Democrats are the power players in the budget talks. But they said that the minority Senate Democrats would be needed to accomplish any goals that would require a two-thirds vote in a budget deal, giving that caucus some leverage.
Three hours after the Democrats, Sen. Bruce Dammeier, R- Puyallup and the Senate GOP point man on education, announced the Senate majority's levy reform plan.
Like the Senate Democrats' plan, it calls for a gradual phase-out of local levies paying for basic education, while phasing in the state's school levies' shares at the exact same pace -- starting in the 2017-2019 budget biennium.
The GOP plan would eliminate the Initiative 732's cost-of-living pay increases for teachers, which the Legislature has repeatedly suspended, and replace that salary-hike system with one based on the federal Implicit Price Deflator.
Also, the Republican plans would install some type of statewide salary system for teachers with adjustments for the cost-of-living in different area. Teachers would not be allowed to collectively bargain with the state for their basic salary set-up and amounts, Dammeier said.
The Republican plan for approaching basic education calls for no new taxes or tax increases, with the GOP contending adequate money is already coming into the state's coffers.
Dammeier said using a capital gains tax to fund education is a bad idea. He said such a tax is too volatile and too untested to be used for schools. He said the phase-in and phase-out approach on local and state school levies has a proven track record for this purpose.
The two proposals Wednesday followed a Tuesday plan announced by Superintendent of Public Instruction Randy Dorn. Dorn called for the Legislature to wean school districts from using local levies to pay for teachers.
Dorn also wants the state’s 2015-2017 budget to allocate $2.2 billion for reducing teacher-student ratios in Grades K-3, as required by the Supreme Court as well as last year’s Initiative 1351. Also, Dorn proposes keeping Initiative 1351's class size mandates somewhat intact in higher grades. Dorn also proposes collective bargaining between the state government and teachers, either on a statewide basis or by regions. This is because the other reforms would take local levies out of the teacher-pay picture, and put salary responsibility totally on the state.
On Thursday, Dorn and state Treasurer James McIntire plan to unveil a plan Thursday how they want to pay for Dorn's proposals.