Let the budget games begin.
Lawmakers learned Wednesday, March 20, how much the state is expected to collect in taxes during the next two-year budget cycle.
It’s a lot. A little north of $50 billion.
Next week, Democrats will reveal where they want to spend those dollars, why it’s not enough and why they need to raise more from new or higher taxes.
None of that should be a surprise.
While the economy alone will generate around $4.5 billion in new revenue for the next budget, Democratic leaders point out that most of it is already committed to covering school funding promises from the landmark McCleary court case.
There are other areas that they — and in some cases Republicans too — want to address like transforming the state’s mental health system, ending homelessness, building housing, expanding preschool education, making college tuition free, boosting special education funding, providing raises for state workers, clearing blocked fish passages and saving the Southern Resident orcas.
“Literally every dollar of new revenue that is expected to come into the state this biennium will go directly to basic education,” House Majority Leader Pat Sullivan, D-Covington, told reporters this week. “There is no money to make investments (in those other areas) unless we actually pass additional revenue.”
House Democrats will roll out their spending plan next Monday with hopes of passing it a few days later. They also will release their package of revenue-raising ideas though it’s not certain when, or if, they will vote on them. Meanwhile, majority Democrats in the Senate also will be putting together a budget and tax proposal.
Republicans don’t think new revenue is needed. They contend the combination of rising tax collections, declining demand for some public services and a large reserve will generate enough dollars to tackle many of the challenges on the Democrats’ list.
But Democrats don’t agree. So what tax changes loom?
Here are a few that might show up. (If lawmakers are hungry for other ideas, there is a buffet of alternatives posted on the Department of Revenue website.)
REET — The flat real estate excise tax rate of 1.28 percent imposed on each sale of property would be replaced with a four-tier graduated rate. It would range from 0.75 percent on properties of lesser value to 2.5 percent for those multi-million dollar homes, offices and other businesses.
B&O rate hike — Democratic Gov. Jay Inslee suggested hiking the business and occupation tax rate for services by a full point. Democratic lawmakers are eyeing an increase up to 0.3 percent. As many as 175,000 businesses are covered unless lawmakers carve any out.
Capital Gains — The notion of taxing the capital gains from the sale of stocks, bonds and other assets gets talked about annually but never voted on. Many progressives think 2019 will be different. Inslee proposed a 9 percent rate. Lawmakers may stop at 7 percent.
Taxing opioids — Some Democrats want to add a business and occupation tax surcharge of 37 percent on those who warehouse and resell prescription opioid drugs. While this could wind up bringing in $50 million a year to the budget it might also drive up the price of some medications. Others suggest reducing a tax preference that allows them to pay a lower rate.
Vapor products — A new charge of 5 cents per milliliter of solution or other consumable substance could be on the table. Revenue would be steered into cancer research and public health. It’s not had a hearing nor an analysis of how much it would bring in. But a Republican sponsored it, so it’s got to make the list.
SEBB and COLA — This idea does not raise money. It could reduce the need to raise as much. Under the McCleary fix, teachers are in line for a state-funded cost-of-living adjustment and enrollment in a new statewide health insurance program for school employees. Inslee’s budget assumed $498 million for a 2.1 percent COLA and $643 million for the School Employee Benefits Board. Some lawmakers wonder what if the COLA was suspended and those dollars were pledged to SEBB. Teachers would miss out on a state-funded raise but could wind up paying less for health insurance.
It’s a complicated equation.
Then again, budget writing is all about complicated financial and political equations.
Let the games begin.
• Jerry Cornfield is a writer for the Everett Herald.