Washington Democrats release budget proposal

Highlights from the $38.8 billion state operating budget for 2016-17 unveiled by Democratic leaders of Washington’s House of Representatives on Friday:

• K-12 EDUCATION: The proposed budget would increase K-12 education funding by $3.2 billion, which is split between new education spending and the amount to cover policy decisions from the previous budget in 2013. New spending items in education include $412 million to reduce class sizes in kindergarten through third grade; $741 million to cover the cost of textbooks, supplies and other costs of running schools; $180 million for all-day kindergarten for children statewide; and $70 million to help make students college- and career-ready via programs including guidance counseling and support for bilingual students.

• MENTAL HEALTH: Partly in response to a Supreme Court decision, House Democrats propose to increase mental health system spending by $103 million, most of which will go to adding more beds in community mental health facilities ($35.1 million) and in competency restoration wards at state hospitals ($23.1 million).

• COLLEGES, UNIVERSITIES: A two-year tuition freeze at the state’s public colleges and universities would cost $106 million, which is the largest single slice of Democrats’ proposed $257 million increase in higher-education spending. Two scholarship programs, the Opportunity Scholarship for low- and middle-income students majoring in science, engineering, math or technology, and the State Need Grant, which currently is not paid to more than 30,000 students who qualify for it, get a combined $113 million in new spending. Starting the new Washington State University Medical School costs another $8 million.

• EARLY LEARNING: The proposed budget spends $227 million more on pre-kindergarten programs, with $89.1 million going to preschool for low-income families and families with disabled children, and another $47.4 million to the Early Achievers program that ties reimbursements for child care providers to the state’s quality rating and improvement system.

• TEACHER PAY: The proposed budget allocates $385 million to restore cost-of-living-adjustments for teacher pay, which have been suspended for six years, and $203 million to bring teachers’ health benefit funding to the same level as the state employee system.

• STATE EMPLOYEE PAY: Pay raises and arbitration awards for state employees draw $256.2 million in increased spending from the state’s general fund.

• INTERNET TRANSACTIONS: In addition to several larger-ticket revenue measures in the budget, the Democrats’ proposal also includes an equalizer for Internet transactions that charge customers sales tax for in-state transactions only — a setup the Democrats say puts Washington businesses at a competitive disadvantage. For a Washington resident, buying from Amazon means paying sales tax, while buying from Overstock.com does not. The Democrats say SHB 1678, which would establish several ways to charge sales tax on such transactions — if a credit card from a company with a Washington presence is used, or if a transaction middleman, such as a transaction referrer, has a Washington presence — would increase state revenues by $30 million in 2015-17 and $54.7 million in 2017-19.

While unveiling their budget Friday, House Democrats’ key budget writer was asked what makes him think Republicans would approve the tax increases included in his proposal.

His answer: “What makes (Republicans) think we’re going to accept cuts in human services?”

Let the jockeying begin.

Rep. Ross Hunter, D-Medina, unveiled the Democrats’ $39 billion proposed two-year operating budget. It adds $3.2 billion to K-12 education and kicks off the budget battle.

Democrats said the budget reflects their priorities: boosting the state’s safety nets, restoring a cost-of-living adjustment to teachers and satisfying the order of the state’s top court to fully fund basic education.

“Now is the time for us to fix the unfair tax structure and finally start building a Washington we want to leave for our children,” Rep. Jim Moeller, D-Vancouver, said in a statement.

But Republicans were quick to counter the state is expecting to see more revenue and raising taxes isn’t necessary.

“I think we’re projected to receive an additional $3 billion in new revenue from economic growth, so I’m questioning the rush to get on with new tax revenue,” said Sen. Ann Rivers, R-La Center.

Rivers also blasted the plan for relying on a source of revenue she called unstable. The House Democrats’ budget proposes a 5 percent capital gains tax that would affect about 31,500 taxpayers. It would be applied to earnings from the sale of stocks, bonds and other assets above $25,000 for individuals and $50,000 for those who file jointly. Exemptions would be made for retirement accounts, most agricultural and timber lands, personal property used in a business, and sales of most primary residences.

Rep. Lynda Wilson, R-Vancouver, said in a statement she’s looking forward to a “healthy debate” over the budget. She hopes the focus can be on “prioritizing spending before asking for more money from hard-working taxpayers in Washington state.”

Rep. Sharon Wylie, D-Vancouver, said the budget proposal will be good for Southwest Washington.

“Thankfully, there’s something in it that everyone is uncomfortable with, but there’s enough positive that reflects our priorities,” Wylie said.

The budget includes one of Wylie’s top priorities: to eliminate the state business and occupation tax on adjusted gross income that is less than $100,000 a year.

“You’re scrambling, trying to get a business off the ground, raise a family, grow your business and be strategic and the (business and occupation tax) is on top of everything … It’s just always rubbed me the wrong way,” Wylie said.

Doctors, lawyers and architects, however, would see a slight increase in the tax, raising an additional $532 million for the state. Another $300 million would come from ending seven tax exemptions, including ones for oil refineries and for residents who live in states without a sales tax, such as Oregon.

Not included in the budget proposal was Gov. Jay Inslee’s push to raise revenue through a carbon charge. The governor called it “disappointing” in a statement, but said the overall budget proposal was “solid.”

“Most importantly, it makes a bold commitment to education. For example, in addition to taking a big step toward meeting our constitutional basic education obligations, the House makes a significant investment in early learning and freezes tuition at our colleges and universities,” Inslee said in a statement.

The GOP-controlled Senate is expected to release its budget next week.

House Democrats and Senate Republicans will each pass a version of the budget and will then negotiate. Lawmakers have until April 26 before the legislative session is scheduled to end.

The Associated Press contributed to this report.