No new taxes in Senate budget proposal

: No new taxes in Senate budget proposal
The Senate’s proposed supplemental budget contains no new taxes, and key ranking members of the Senate Ways and Means Committee say they aren’t likely to be in the final package. That is likely due in part to more than $1 billion in unexpected state revenue over the next four years. Created by Makyzz - Freepik.com

The state legislative session is likely to end on exactly the opposite note as last year’s: on time and without new taxes. That is the message coming from key ranking members of a Senate fiscal committee after releasing the proposed 2018 supplemental operating budget that calls for no new revenue sources.

The announcement, bolstered by news from the state Economic and Revenue Forest Council (ERFC) puts a damper on efforts by other legislators in both chambers to impose a variety of new taxes – including a carbon tax and a capital gains income tax.

Sen. Christine Rofles (D-23) is chair of the Senate Ways and Means Committee, which is responsible for writing the Senate’s proposed budget. She is also a member of ERFC. In a statement she wrote: “I am confident that the House and Senate can deliver a balanced budget — one that does not rely on new taxes — on time and set the state on solid ground entering the 2019-20 biennium.”

Echoing that optimism is Sen. John Braun (R-20), former chair of Ways and Means and also a member of ERFC. “While we may have differences of opinion on a range of issues, this plan demonstrates a serious commitment toward responsible budgeting. Protection of our historic education investments and respect for the critically important four-year balanced budget requirement are positive signs.”

The proposed supplement budget via SB 6032 would increase spending during the 2017-19 biennium by more than $1 billion.

That includes new teacher salary increases as part of the State Supreme Court’s November order, as well as further spending on mental health and developmental disabilities.

Over $400 million would be taken from the budget stabilization account, a.k.a. the “rainy day fund,” to pay for a $0.31 state property tax reduction in calendar year 2019. That proposal is also contained in HB 2993, set for a Feb. 22 public hearing. Another $22 million would be removed from the account to pay for wildfire fighting costs.

That would leave $1.48 billion in the rainy-day fund at the end of the 2017-19 biennium and $1.8 billion at the end of the 2019-21 biennium.

While adhering to the state’s four-year balanced budget requirement, the Senate proposal adds $350 million more in new spending than what Governor Jay Inslee proposed in his budget released in December. The nonpartisan Washington Research Council notes that this is due to a combination of spending differences for the Department of Social and Health Services (DSHS) and Health Care Authority (HCA) and the apportionment scheduled for new teacher salaries.

New education spending requires reform in how the money is spent, Braun wrote. “Out of everything, my biggest concern remains prioritization of the court and other adults in the education system over children. Adding $1 billion to our school system one year sooner without any accompanying structural changes will create significant long-term problems for school districts, the state and taxpayers, while doing nothing to directly help school children.”

The Senate budget proposal drew praise from Inslee, who wrote on Twitter that it “makes crucial investments in urgent public needs such as the opioid crisis and mental health, while providing people across the state some relief from property taxes.”

However, not included in the Senate proposal but initially included in the 2017-19 operating is a reduction of the state’s business and occupation (B&O) manufacturing tax rate. Lawmakers approved the reduced rate, but it was vetoed by Inslee. This session Sen. Michael Baumgartner (R-6) introduced SB 6542 in January, but it failed to garner a public hearing in Ways and Means. Over in the House, Rep. Brandon Vick’s (R-18) HB 2393 also failed to get a public hearing in the Finance Committee before the Feb. 14 cutoff date.

Braun wrote that “we should also respect the bipartisan agreement to provide tax parity for manufacturing businesses to help create jobs in this struggling sector.”

In a recent op-ed, the Kitsap Sun’s editorial board noted the potential positive economic impacts the tax code change could have in their region. “More than 50,000 jobs have been lost in the manufacturing sector since 2000, according to the Association of Washington Business. We won’t claim that a change in B&O rates alone would affect that trend, because decisions on opening or growing an industrial facility involve other factors. And here’s where equality in the state should also include Kitsap — or at least what we produce.”

Action on SB 6032 is expected Feb. 21.

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