Olympia watching the budget clock
Washington Senate Republicans have lined up a bill to extend the current fiscal year's budget to July 31 in case the deadlocked 2015-2017 budget negotiations fail to meet a fast-approaching June 30 deadline.
The GOP held public hearings Thursday on this bill as well as its latest main budget proposal, which would have Republicans conceding to the Democrats on $126 million worth of tax-break closures. The hearings also covered a bill to nullify much of voter-approved Initiative 1351, which calls for reduced teacher-student ratios.
But other than holding the hearings, the Senate Ways & Means Committee took no action on any of those bills.
Sen. Andy Hill, R-Redmond and the Senate GOP’s budget chief, characterized the one-month extension bill as an emergency backup in case a main budget is not signed into law by June 30, when the current budget ends. Without the Legislature passing and Gov Jay Inslee signing a 2015-2017 main budget, the state government partly shuts down on July 1.
As of Friday morning, that deadline is five days away.
Hill voiced confidence that the budget impasse will be resolved by next Tuesday, but said the bill is needed in case a worst-case scenario arrives. He compared it to the executive branch's preparation of partial shutdown implementation plans with the hope of not using them. Warning notices of budget-related suspensions have already gone out to 26,000 of the state’s roughly 50,000 employees.
“We want to make it clear that we won’t shut down the government,” Hill said.
The bill would fund the state’s July spending at the same rate as the 2013-2015 main budget.
However, House Democratic budget negotiators expressed dislike for the idea of extending fiscal 2013-2015 into July. They cited worries about the state existing on month-by-month extensions of the 2013-2015 budget, which would put local-level education planning in limbo while leaving legislators under less pressure to resolve the impasse quickly.
“It’s a potential distraction that would hinder the [negotiating] process,” said Rep. Ross Hunter, D-Medina and a House Democratic budget negotiator.
Another budget negotiator, Rep. Reuven Carlyle, D-Seattle, said it is just as easy to reach budget deal in one day as it would be in a new 30-day session, especially since the two sides have been discussing their differences for six months. He described the current talks as on “exponential time,” in which one hour of talking accomplishing as much as one week of negotiations did several weeks ago.
Meanwhile, Hill introduced another bill Thursday that would fund I-1351 obligations for Grades K-3, but would eliminate the Grade 4-12 obligations. Neither Republicans nor Democrats like implementing I-1351 because of the cost of about $2 billion per biennium. Until Thursday, the Republicans wanted to send I-1351 back to the voters for a do-over ballot in November, gambling it would fail on a second try.
Democrats originally wanted to collect two-thirds of the votes each in the House and Senate to eliminate I-1351. The Democrats changed their stance with a proposal to push the initiative’s requirements from the 2015-2017 budget biennium to the 2017-2019 biennium. The Republicans and Democrats’ latest proposals will need two-thirds of the votes in each chamber to pass.
The Legislature has already agreed to allocate $1.3 billion to $1.4 billion in 2015-2017 to help reduce teacher-student ratios in Grades K-3 because of a 2012 Washington Supreme Court ruling. But the Washington Education Association last year won voter approval of I-1351 to expand those teacher-student ratio reductions to cover Grades K-12.
In another two bills, Hill unveiled a $38.2 billion spending proposal for 2015-2017 with $126 million coming from eliminating three tax breaks — an exemption for royalty payments, including chain restaurant franchise payments; an exemption involving manufacturing machinery for software firms; and a complex exemption on Internet sales with the idea of making companies with a physical presence in Washington liable for sales taxes.
On Thursday, various business lobbyists opposed closing one or all of those tax breaks.
Two of the three Republicans’ proposed tax-break closures echo a larger Democratic list of exemptions to eliminate. The Democratic list of targeted exemptions is worth $356 million per budget biennium.
The overall Republican proposal includes a 25 percent cut in college tuition, which needs $354 million to accomplish. And the GOP proposal has a companion Republican bill that would require currently closed state union contract negotiations to be open to the public. Meanwhile, the Democrats want to freeze tuition at current levels, saying the extra money for a cut is not available without significant new revenue.
The House Democrats have proposed a budget of $37.75 billion budget for 2015-2017, which appears at first glance lower than the GOP’s latest $38.2 billion. But figures change almost hourly in Olympia. Plus budget figures are frequently added up differently, which make apples-to-apples comparisons difficult, if not impossible. It is extremely likely that the last two public GOP and Democratic figures tackle the budget math differently.
Plus the Democrats’ $37.75 billion is merely a no-growth scenario in which both sides don’t get a significant extra spending. Its main intent is to be the Democrats’ backup proposal in case no budget resolution is reached by June 30.
Also, Democrats contend that $356 million in extra revenue — outlined in a separate bill — is needed above the $37.75 billion no-new-revenue proposition to make either side’s extra spending feasible without awkward accounting “gimmicks” and $65 million in undefined GOP cuts, said Hunter and Carlyle.
Republicans defend their budget's accounting methodology.
“I would ask them what these gimmicks are, and if they have used them in the past,” Hill said. Democrats have used accounting shifts in previous state budgets when they were in control of both the House and Senate.
Originally, the Democrats sought $1.5 billion in new revenue and the Republicans vehemently said no new revenue is needed. In May, the state government learned it could expect an extra $480 million in unanticipated revenue for 2015-2017, which led to Inslee and the House Democrats trimming their revenue wishes.
Out of the remaining slightly more than $1 billion difference between the two sides’ revenue desires, the Democrats eliminated another $660 million of their new revenue stance on top of the $480 million. The GOP made its first move on agreeing to new revenue Thursday, which was $126 million.
A few days ago, the House Appropriations Committee held hearings on the Democrats’ latest proposed budget bills — and voted them out of committee.
But the actual bottom line is that each side has now held recent public budget hearings, which means they won’t have to hold hearings again on the final budget compromise. That will likely trim one day between a handshake agreement and the governor signing the bills — bumping the process from a likely three days to two.
With only five days left before a partial government shutdown, that one day really counts.