A Budget Forged Of Brinksmanship, Then Compromise Awaits Ultimate Test



Jun 30, 2017

It took three overtime sessions and the threat of a government shutdown, but in the end a divided Washington Legislature found the will and the pathway to a compromise, passing a two-year, $43.7 billion budget, and the taxes to support it, that some lawmakers say will solve a generational problem—the ample funding of public schools. 



“We all came here to take care of our state and we can only do this by coming together,” said Senate budget chair John Braun, a Republican. “And I believe this budget does that.”



The budget was quickly signed into law by Gov. Jay Inslee averting nearly 32,000 layoffs, the closure of state parks and the suspension of myriad other state services starting July 1. 



“This is a historic budget that I believe fully funds our schools for the first time in decades and will meet our constitutional obligations,” Inslee said in a statement. “As I have said, a split Legislature means compromises are necessary and neither side will get everything it wants.”



Big wins for both sides

In the final deal, Democrats got the spending levels they wanted—especially on social services—and Republicans got the funding mechanism they desired, a property tax levy swap. It's a concept that's been batted around Olympia--by both parties--for nearly a decade and was embraced in 2012 by then-Republican candidate for governor Rob McKenna. The plan involves raising the state property tax levy while smoothing out a patchwork of local school levies that leave people across the state paying many different rates.

McKenna may have lost the governor’s race to Inslee in 2012, but his endorsement of the levy swap stuck with his party—resurrected this year by a Republican-led state Senate that rejected Inslee’s call for a new carbon tax and capital gains tax. 



Inslee’s vision for an environmentally-minded, less regressive tax policy may not have carried the day. But he does get to chalk up several policy wins. There’s $600 million for state worker contracts, more than $100 million for mental health and $6 million for a Department of Children, Youth and Families. Inslee’s Department of Ecology even gets $4.6 million to implement his controversial, and currently being litigated, carbon-capping Clean Air Rule. 



But the big win that all sides will claim is education funding. For the first time since 1984, K-12 spending will amount to half or more of the state budget, according to Senate Republicans. 



“It heals a wound that’s been festering for about 30 years,” said Republican state Sen. Ann Rivers, a member of the K-12 funding negotiating team. “No longer will a child’s education be determined by their zip code and that’s very exciting.”



Who picks up the tab?

Over the next four years, the budget is designed to plow $7.3 billion more in state funds into public schools through an 81-cent hike per $1,000 of assessed value in the state property tax. Most of that money will be dedicated to paying teacher and staff salaries—a burden currently borne by local levies.

Starting in 2019, those local levies will reset to a new rate of $1.50 per $1,000 of assessed value or $2,500 per student, whichever is less. 

State schools superintendent Chris Reykdal, in a preliminary analysis, said that will result in a $3 billion loss of local levy funds, partially offsetting the gains in state funding.  

Republican lawmakers tout the benefit to taxpayers. They say the levy swap means in more than two-thirds of school districts, property owners will end up paying less, not more, in property taxes. Democrats counter that homeowners in central Puget Sound—where property values are high and current levy rates are low—will shoulder the brunt of funding schools statewide. 



“In the end I believe we are doing the right thing and we’re paying for it in the wrong way,” said Sen. Kevin Ranker, the top Democrat on the Senate Ways and Means Committee, who ultimately voted for the budget. 



But in something of a political party role reversal, Democrats claim credit for forcing Republicans to cut by more than half their original proposal for a $1.80 increase in the state property tax. Seattle Democrats sent around an analysis that projects a homeowner will pay $243.48 more in property taxes for a median-valued home in Seattle of $529,300. 



While the bulk of the new money for schools, $6.6 billion over four years, will come from the new state property tax, Democrats did manage to get more than $1 billion of their preferred taxes into the final deal, including the collection of sales tax on out-of-state internet sales, the elimination of the tax exemption for bottled water and the end of a tax break on extracted fuels that has benefited oil and gas companies.  



At the same time the budget extends more than a dozen tax breaks and incentives to businesses, including granting the “Boeing” business and occupation tax rate to all manufacturing companies. 



The relief of avoiding a government shutdown, the victory of overcoming a months-long budget standoff and the infusion of billions more into schools will give Washington lawmakers—from both parties—plenty to celebrate over the Fourth of July holiday.



Back to court

But the true test of their work will come in the months and, perhaps, years ahead. 



Democratic state Senator Jamie Pedersen is warning that the school funding plan is a "ticking time bomb" because the new state property tax levy will be subject to the state's one-percent cap after 2021. Pedersen says with that cap in place, the property tax won't keep up with inflation and population. 

And the lead attorney for the plaintiffs in the McCleary school funding lawsuit, Thomas Ahearne, is already declaring the K-12 budget inadequate. 



“This idea that ‘well it’s $7.3 billion over four years.’ which is less than $2 billion a year, ‘that fully satisfies it,’ people who say that did not read the McCleary decision, did not read the McCleary court orders,” Ahearne said. 



Ahearne, who argues the state should be putting $5 billion more into schools per year, will make that case to the Washington Supreme Court later this summer. It’s the court that will have the ultimate say over whether this budget does enough. The state is currently in contempt of court and since August 2015 has been racking up a $100,000-a-day fine for failing to comply with court orders in the McCleary case. 



The justices have set a 2018 deadline for the state to amply fund schools, with a sustainable source of revenue. That includes paying enough to recruit and retain quality teachers. 



The lead plaintiff in the case, Stephanie McCleary, never imagined this legal fight would stretch on for a decade. But based on what’s she’s seen so far of the new state budget, she’s not ready for it to end just yet.

“I feel a little angst,” said McCleary, a parent and school district human resources director. “What if somebody says this is enough? Because I don’t feel that it is full compliance based on the court order.” 



This year McCleary watched her son graduate from high school and her daughter graduate from college. They were eight and 13 when the lawsuit was filed in 2007.