Legislature faces big divides in special session

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The Washington State Capitol

The Washington Legislature will begin a 30-day special session Wednesday to negotiate a 2015-2017 budget.

Will one special session be enough? Will two?

On Thursday, with no hope remaining for a state general fund budget to be produced by Sunday's deadline for the end of the regular session, Gov. Jay Inslee said he will call lawmakers back for a special session beginning the middle of next week.

At least in some ways, the Republican-controlled Senate and the Democratic-controlled House are further apart today than they were in May 2013, when they began the first of two special sessions. Then, they finally compromised on a budget three days before the state government was to partly shut down.

In 2013, the two sides were $1.1 billion apart on their proposed budgets. And the Democrats wanted to raise $1.17 billion for education by closing tax exemptions. The GOP wanted those tax exemptions kept intact. It took almost two months to resolve the 2013 differences, and only the looming arrival of a government shutdown accomplished that.

Today, 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 closing tax breaks, 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.

The negotiations between the two sides' budget leaders have already stalled for a week solely because the two sides cannot agree on how to approach the talks.

Republican leaders told the Democrats that the GOP will oppose the entire $1.5 billion tax-revenue proposal, but will require the House Democrats to pass it prior to the Republicans agreeing to formal talks. Meanwhile, the Democrats want to go through each section of spending and compromise on each segment to come up with a total amount of appropriations, and then negotiate on revenue sources. Senate Minority Leader Sharon Nelson, D-Maury Island, said that was how the 2013 negotiations were conducted.

On Thursday, Gov. Jay Inslee told the lead negotiators to meet on Monday, in advance of the special session on Wednesday.

"It is time for all of us to compromise. All of us have to give up something," Inslee said. House Majority Leader Pat Sullivan, D-Covington, said: "We have to compromise and we'll have to come down in areas."

So far, however, the Republicans have not hinted at any compromises, and Inslee and the Democrats have been mum on what they are willing to concede.

In 2013, the deadlock mostly focused on how much to pay for extra education funding to meet the Washington Supreme Court's 2012 ruling. This year's budget negotiations face several other issues or dilemmas.

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

A major plank of the 2012 Supreme Court ruling to fix educations is to overhaul Washington's school revenue system to increase it and to make it more stable. The GOP wants to do this with a property tax reform package -- phasing up the amount of state property taxes paid while phasing down the amount of local property taxes paid. The idea is to provide a uniform funding source for the state's richest and poorest school districts. The News Tribune of Tacoma took an in-depth look at this plan and found that it would raise property taxes in roughly 40 percent to the state's school districts while shrinking that rate in roughly 60 percent.

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 last week to install a 7 percent capital gains tax on the wealthiest 7,000 Washingtonians.

The Democrats hate the property tax reform proposal. The Republicans hate the capital gains tax concept.

"Why is it fair to have property tax increases on people on fixed incomes ... because we want to protect multimillionaires?" Inslee said.

However, Sen. Bruce Dammeier, R-Puyallup and architect of the property tax reform proposal, countered that the GOP plan addresses the Supreme Court's wishes for an improved fundamental structure for funding basic education, while the capital gains proposals do not. Republicans have questioned whether capital gains taxes would meet the court's call for relatively stable funding.

There's one other potentially important factor lurking in the debates about how to raise more revenue. That's Inslee’s proposal to tax the state’s biggest carbon emissions polluters. The plan never got out of the House Democratic caucus because its leaders could not line up the 50 votes needed to guarantee passage. However, Democratic leaders are still trying to get the votes for the special session.

It is difficult to guess whether this proposal will emerge from the House. “It is clearly not a ‘Hail Mary.’ It is a solid ground game,” Inslee said.

If the House Democrats were to get solidly behind the Democratic governor's concept, it could change the dynamics of the revenue portions of the budget negotiations.

On the spending side, the Republicans want to 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.

Democrats oppose those proposals.

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 to do.

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.

Even as legislators try to resolve their differences on the budget for general state spending, they also face big financial issues in negotiations on a massive package of transportation construction and improvement projects. The first moves occurred in May 2013, but only now, two years later, are those talks seriously underway.

The two sides are still split on some issues, including GOP reforms and transportation-related budget shifts. Meanwhile, the Republicans want a so-called “poison pill,” which declares that if Inslee installs any low-carbon fuel standards in Washington, a huge amount of mass transit, bicycle and pedestrian money will be automatically shifted to road projects. Democrats hate the poison pill. And they are asking for more taxing authority for Sound Transit projects that go before voters.

While technically separate, the transportation and main budget talks are occurring simultaneously. Consequently, the deal making can conceivably crisscross between the two sets of negotiations – when lawmakers begin reaching common ground.

  

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