When it comes to the 2015-2017 budget, Republicans and Democrats live in an apples-and-oranges universe.
They don't agree on a common set of figures to begin their budget crunching and negotiating. They don't agree on whether the state even faces a huge budget shortfall for 2015-2017. They don't agree on whether extra revenue needs to be scrounged up to make the state government work properly. They don't have a common target for the amount of money needed to comply with the 2012 Washington Supreme Court's "McCleary" ruling to improve the student-teacher ratios in Grade K-3. Neither party has any idea how to cope with Initiative 1351, which requires similar student-teacher-ratio improvements in Grades 4-12.
Gov. Jay Inslee and the four legislative caucus leaders and four caucus budget writers talked to the press at an Associated Press forum in Olympia on Jan. 8. Rep.Ross Hunter, D-Medina and the House Democrats' chief budget writer, told the forum that the two sides don't have common definitions and base numbers to begin their complicated budget negotiations. "It'd be helpful if we're talking about the same set of facts," he said. The Democrat-controlled House and the Republican-controlled Senate will likely unveil their 2015-2017 budget proposals in March.
In December, Inslee unveiled his 2015-2017 biennial budget proposal of $39 billion, which is significantly larger than the $34.1 billion 2013-2015 budget. Inslee's budget includes charging polluters by the amount of carbon pollution to funnel most of that money to education and transportation; a new capital gains tax; an extra $1 billion to comply with the 2012 Supreme Court ruling; a cigarette tax increase; and closure of some tax breaks. It also puts only a tiny dent into the state's predicted $2.24 billion obligation in the upcoming biennium for I-1351, the class-size ballot measure passed last November. Inslee wants to punt on most of the I-1351 obligation, saying the money is not there.
Meanwhile, Sen. Andy Hill, R-Redmond and chairman of the Senate Ways & Means Committee, told the forum that $36.2 billion will be needed in 2015-2017 to maintain all programs at their present levels. He added that the state expects to collect $37.2 billion in revenue for the same biennium, giving the Legislature $1 billion in surplus money. He said that $1 billion can pay for $750 million in McCleary mandates plus cover a cost-of-living raise for teachers, which has been delayed for several years.
"To say we have a multi-billion-dollar budget crisis is not a fair assessment of the situation.... To say we have a huge budget problem is just to scare people," said Hill said.
However, Hill's $37.2 billion figure does not include $2.24 billion for the I-1351 obligations nor the several hundred million extra dollars likely needed for more progress on McCleary. Hill's $750 million McCleary figure is a minimum to obtain the needed equipment and materials. Any money above $750 million for actual additional teachers would be added in the upcoming budget talks, he said. It was unclear whether Hill's $37.2 billion would include $583 million in negotiated pay raises for state employees. When court-ordered mental health improvements are added to the picture, roughly $4 billion would be needed above a don't-add-anything budget.
"The question is: 'Do we need $4 billion in new taxes?' ... I don't think we need any," Hill said.
Hunter said he does not know what Hill has included in his $36.2 billion base budget. Hunter estimated that $1.36 billion for rooms, materials and teaching hirings would be needed in 2015-2017 to meet the Supreme Court's timetable. The Supreme Court has been unhappy that the McCleary work — totaling $4 billion to $4.5 billion from 2013 to 2019 — was underfunded with only $1 billion allocated in 2013-2015. The court has threatened sanctions against the Legislature if it does not come up with an adequate catch-up plan in the 2015 session. Hunter did not have an overall 2015-2017 budget target at the forum.
Meanwhile, Inslee said: "It's hard for me to say there is no [budget] deficit when we have the [McCleary] contempt citation."
Both Hunter and Hill said the extent of state's 2015-2017 spending needs has to be figured out prior to mapping out how much new revenue is needed.
Three key factors in the upcoming budget negotiations will be the presence of I-1351 with its $2.24 billion obligation; Inslee’s proposed carbon-emissions charges on the state's 130 top polluters that is estimated will raise $1 billion a year starting in 2016, with the bulk going to education and transportation; and Inslee's proposed seven percent capital gains tax that could raise another $798 million a year.
The only way that the Legislature can legally duck its I-1351 obligation is with a two-thirds majority in both the House and Senate. House Speaker Frank Chopp, D-Seattle, said such a move would have to be closely studied before a decision can be made on whether to attempt it. Chopp said since I-1351's presence has a huge effect on the rest of the state's budget, that could lead to a two-thirds majority needed on many budget matters in order to remove I-1351 from the picture. Chopp noted that it will be difficult for a legislator whose district voted strongly for I-1351 last November to turn around and suspend it in the upcoming session.
Even without a two-thirds majority to suspend I-1351, the Legislature may not find the money to fund it anyway, which might spark a lawsuit similar to the one to created the McCleary ruling. "When you look at things that can't be funded, they won't be," Hunter said.
In a related matter, Sens. Doug Ericksen, R-Ferndale and Michael Baumgartner, R-Spokane, plan to introduce a proposal early next week to require a two-thirds majority for any Senate passage of a tax or tax increase. To nullify a 2013 Washington Supreme Court ruling that a two-thirds majority requirement on taxes is unconstitutional, the pair plan to install the two-thirds mandate as part of the Senate's internal procedures.
Senate Majority Leader Mark Schoesler, R-Ritzville, likes the two-thirds concept, but said the matter needs to be discussed internally by the Majority Coalition Caucus of 25 Republicans and one Democrat.
If the GOP attempts to install such a procedural rule, the Senate Democrats — who contend the proposal is unconstitutional due to the 2013 Supreme Court ruling — are expected to challenge it on procedural grounds, which would send the decision to Lt. Gov. Brad Owen.
Meanwhile on Inslee's proposed carbon emissions charges, Schoesler strongly opposes them, signaling a cold reception by the Senate majority coalition. He contended such a charge would eliminate jobs. Schoesler also disputed Inslee's contention that a carbon emissions charge would eliminate the need for a gas tax increase for long-stalled transportation projects. "I don't know if that completely eliminates the need for a gas tax," Schoesler said.
Schoesler also criticized Inslee's plan to funnel a large amount of the carbon-emissions revenue to education, saying "it is very precarious to rely on a revenue source that you're trying to reduce." One concept behind Inslee's carbon emission charges on polluters is to encourage them to reduce the amount of pollutants that they emit.
Inslee said: "It is not surprising when there is something new, that there are questions and doubts." Inslee pointed to some Republican senators eventually supporting the DREAM Act — allowing high school graduates with undocumented immigrant parents to apply for state college aid — after two years of stiff GOP resistance. And he said a similar Republican turnaround came in 2014 on allocating some state house sale fees to go to housing help for the poor.
Meanwhile, Hunter said: “I can be OK with a capital gains tax." But Hill and Schoesler oppose the concept, arguing that a capital gains tax's revenue swings up and down too easily with the whims of Wall Street. "A capital gains tax is one of the most volatile revenue sources," Hill said.
Inslee replied: "Whatever the volatility of a capital gains tax, its [revenue] is greater than zero. ... It's not volatile enough to discourage 43 other states from having a capital gains tax."
The apples-and-oranges Legislature clearly has its work cut out. The first order of business will be finding a common reality.
