A $3.5 billion tax fight appears to be brewing in Olympia for 2016 or 2017 over how to overhaul Washington’s school levy system.
The overhaul is expected to increase the burden for school costs on the state, while decreasing the burden on local school districts.
On Thursday, Senate Republican leaders said shifting property taxes from local districts to the state will be enough to provide the extra $3.5 billion over the four years staring in 2018.
As the 2015 session came to an end Friday, however, Democratic leaders described such a property tax shift as increasing taxes on roughly half of Washington’s households, something they said they are not keen about. There is a chance that a capital gains tax on Washington’s wealthiest or a carbon emissions tax — both which died behind the scenes this year — could be revived to chip away at the potential $3.5 billion obligation, speculated Gov. Jay Inslee, a Democrat.
Republican and Democratic senators introduced a bipartisan Senate bill in June to shift the school funding burden — mostly for salaries — from local school districts to the state. They want it to be studied and modified through the end of the year and into January, in order to provide a better version to tackle in the 2016 legislative session.
The bill aims to help meet the mandates of a 2012 Washington Supreme Court decision — the so-called “McCleary” ruling — that ordered a drastic improvement in teacher-student ratios in Grades K-3. The ruling also called for the Legislature to improve how education funding is handled, to ensure that an overhaul’s effects are permanent and provide equity of funding for students statewide. This bill primarily aims to tackle the mandate for equity.
In broad strokes, the bill would start a four-year, $3.5 billion shift in 2018 from local school districts’ tab for paying for basic education to the responsibility of the state government. A key concept is reducing local property taxes for schools in the state’s 295 school districts while ramping up state educational funding. That is meant to end the inequity of richer school districts spending more for teachers and smaller class sizes than poorer districts can.
The bill’s language also says that if not enough money is found to take care of the $3.5 billion obligation, the law would automatically become void. This is one reason Democrats and Republicans might find themselves in a new revenue source battle in 2016 and 2017.
On Thursday, Sen. Bruce Dammeier, R-Puyallup, one of the bill’s co-authors, and Senate Majority Leader Mark Schoesler, R-Ritzville, said decreasing local property taxes while raising state property taxes by a corresponding amount would easily provide the entire $3.5 billion.
The Senate Republicans have stuck to a no-tax-increase stance — or at least to no new net taxes — since taking over the Senate in late 2012. While contending that closing tax breaks is the same as hiking taxes, the GOP has conceded to the Democrats on ending some tax exemptions in budget talks in both 2013 and 2015.
At a Friday end-of-session press conference, Inslee, House Speaker Frank Chopp, D-Seattle, and Sen. Christine Rolfes, D-Bainbridge Island and another co-author of the bill, contended that totally relying on a property tax shift is not a good idea.
Inslee said the increase in property taxes for roughly half of Washington’s households would be significant. “I fundamentally don’t believe that is the way to go,” he said.
Rolfes said the Democrats never agreed to pay the $3.5 billion from state property tax increases, indicating the funding source issue is up in the air and that a combination of several revenue sources would be her preferred approach.
“To take the $3.5 billion in property taxes increases is a big tax increase for a lot of Washingtonians,” she said.
Inslee said: “Both sides agreed that it will take additional revenue. … The question is, what will that be?”
This story was originally posted on Friday, July 9.
