Washington lawmakers are considering a sweeping bill that would raise taxes on businesses to create a dedicated fund for higher education.
The bill, the Workforce Education Investment Act (HB 2158), would raise supplemental education money for a wide range of purposes: a big boost in college financial aid, salary raises for community college faculty who teach high-demand classes, a state-sponsored student loan program for middle-class students and money to overhaul community college course pathways, to name a few.
But even though state revenue is benefiting from a robust economy, the Legislature is juggling many priorities this year — and it’s not clear that higher ed will rise to the top. Lawmakers must increase K-12 school funding under a 2017 court-ordered plan, and both parties agree they must spend more on the mental-health system and special-education funding.
Republicans say there’s no need for additional new taxes, and have called for lawmakers to find ways to fund everything with existing tax revenue.
In the 2008 recession, the state’s colleges took a big funding hit when lawmakers slashed the budget. So the workforce bill would put about a billion dollars over the next four years into a workforce education account that aims to recession-proof higher education.
The bill’s most controversial feature is how the state would pay for it: with a surcharge on the business and occupation (B&O) tax, the state’s major business tax, which is imposed on the gross receipts of business activities conducted within the state. During a public hearing last week in Olympia, small business leaders and independent physician clinics lined up to testify against it, saying it would hurt their bottom line and make it difficult for rural doctors running small clinics to stay in business.
Its sponsor, state Rep. Drew Hansen (D-Bainbridge), shrugged off those concerns, saying the bill is designed to ask those who benefit the most from higher education to contribute to its cost.
“We want everyone in Washington state to have the opportunity to go to college or have an apprenticeship, get a decent job and be able to support their family, and it seems totally reasonable to ask the businesses that depend on higher education to help families reach that goal,” he said.
But state Rep. Ed Orcutt (R-Kalama) said the tax increase is a non-starter, noting that the Legislature is projected to have about $50.6 billion in revenue to fund the upcoming 2019-21 operating budget, a 16 percent increase from the last biennium even with no new tax increases.
“The taxes kill it for me,” he said. Orcutt is the ranking minority member of the House Finance Committee, where the bill was heard last week.
The bill would replace the State Need Grant with a similar program called the Washington College Grant, but that money would now come with a promise: Students whose families meet a certain income threshold would be entitled to a grant. By making it an entitlement, the money is guaranteed, and the state would budget for it every biennium. The bill would appropriate an additional $218 million for the grant in 2019-21.
The State Need Grant — one of the most generous state-funded college grants in the country — runs out of money every year. In 2018, 68,205 students received an award, and 22,600 students who were eligible did not receive any money. This year, the maximum award is $9,745; the amount is based on the type of school the student is attending.
The Senate has already given its blessing to a similar proposal, the Washington College Scholarship Promise, that guarantees grants for students attending eligible colleges and universities in Washington if the student’s family income is less than 50% of the state’s median family income, and a prorated amount for students whose families make between 50% and 70%. The bill, requested by Gov. Jay Inslee and sponsored by Sen. Guy Palumbo (D-Maltby) passed 27-18.
Hansen’s workforce bill offers more, giving the maximum award to students with family incomes up to 70% of the state’s median family income, and a prorated amount for students whose families make up to 100% percent of the median family income. Currently, the median family income for a Washington family of four is $88,000.
Palumbo said he’s intrigued by the breadth of the House bill’s approach. Hansen has “a really vocal group … saying, ‘Let’s do this, let’s invest in higher education for once,'” Palumbo said.
But small business leaders — including the Washington Retail Association and the Independent Business Association of Washington — spoke out against it last week. The bill “will undoubtedly lead to an increase in the cost of doing business,” said Mark Johnson, vice president of government affairs for the Washington Retail Association during public testimony.
But not all business leaders are opposed. Microsoft, for one, supports it. The Washington Roundtable, a policy group of state business leaders, has not taken a formal position, but says that a significant portion of the bill aligns with its priorities on higher education. The tax increase has three tiers of surcharges, and are structured to require the state’s largest tech companies — Microsoft and Amazon — to pay more of the cost.
In an Op-Ed in The Seattle Times earlier this year, Microsoft President Brad Smith, University of Washington President Ana Mari Cauce and State Board for Community and Technical Colleges vice chairman Wayne Martin outlined their vision for the idea.
The bill would also:
- Start a pilot project offering students from families who make up to 140 percent of the median family income a state-sponsored student loan with a 1% interest rate. Currently, the interest rate on federal student loans for undergraduates is 5.05%.
- Allow municipalities and Indian tribes to contribute money to the Washington State Opportunity Scholarship, which provides money to low- and middle-class students who want to study science, engineering, technology, math and health care. Any contributions would be matched by the state and earmarked for students living in the municipality, or members of the tribe, that contributed.
- Appropriate $55 million for Guided Pathways, the name for a restructuring of class offerings in community and technical colleges aimed at helping students finish a degree without wasting time on courses that aren’t relevant.
- Appropriate $60 million to increase the salaries of instructors who teach high-demand programs, such as nurse education.
The bill would also create a 16-member oversight board to make sure the money is being used well, Hansen said. “It’s a structural way for both labor and business to provide continuous insights, ideas and oversight to this new fund,” he said.