OLYMPIA — Washington Democratic Senate leaders Friday evening announced details on a new, two-year state budget that if approved would significantly boost spending on college affordability and the state’s struggling mental-health system.
The $52.4 billion 2019-21 operating budget is to be paid for by a broad tax package that funds both that spending blueprint and an additional, brand-new account for higher-education spending. All told, it raises more than $836 million over the next two years, according to Senate Democratic staff.
“This is probably the biggest investment that the state’s made in higher education in decades,” said Sen. Christine Rolfes, D-Bainbridge Island and chief Democratic Senate budget writer.
The revenue package includes a change to the state’s real estate excise tax (REET), normally paid by people selling homes, that would raise $243.5 million over two years.
It also creates an excise tax on vapor products and rolls back a handful of tax preferences. And it increases the business-and-occupation tax for large financial institutions and boosts the hazardous substance tax, which is often paid by oil companies.
And the agreement creates a dedicated account that raises hundreds of millions more dollars to, among other things, boost college financial aid and increase high-demand degree programs, such as engineering, computer science and nursing.
That money comes on top of the $52.4 billion figure and is funded by a second type of business-and-occupation tax increase — one sought earlier this year by Microsoft.
The deal also funds an ambitious and complex proposal intended to reshape Washington’s mental-health system, which has been battered over the years by court decisions condemning its treatment of patients.
The deal includes $155 million for new K-12 special-education funding over two years.
Republicans, who broadly agreed on the mental-health proposal and the need to better fund special-education programs, have called the taxes too much to stomach.
The budget would boost state spending too quickly at a time when a new recession could appear on the horizon, Sen. John Braun, R-Centralia, said.
Braun invoked the Great Recession, after which state lawmakers had to slash budgets — and important government programs — to cope with dwindling tax revenues.
“We know the economy will turn eventually,” said Braun, ranking Republican on the Senate Ways and Means Committee. “And I don’t think there’s anything more painful than taking a service away from someone …”
The budget details come after lawmakers on Thursday announced a tentative agreement that had, as in the past, been crafted behind closed doors.
The budget itself must still be printed and made public — expected to happen Saturday — before lawmakers try to finish up Sunday, the last scheduled day of the session.
Obstacles remain. Lawmakers are still negotiating a bill to raise the cap on the amount of money school districts could raise through local levies.
Thursday night, Senate lawmakers passed several of the tax bills, including the real estate excise tax plan, Senate Bill 5998, before budget details had been released.
It was the latest example of how state budget deals can come together in secrecy and with little public review before being approved.
When Senate lawmakers passed it around 11:30 p.m. by a vote of 26-22, there was no updated legislative analysis of how much money the bill might raise, or how many home sellers would pay the different rates being created.
Democratic Senate Majority Leader Andy Billig of Spokane on Friday morning defended the late-night vote. The bill received a public hearing earlier this month, he said, and the concept was included in the Senate’s proposed budget that was made public in March.
“We are on the glide-slope to end on time on Sunday, and everything that we’re passing is part of moving our state forward and helping to get really good policies and a budget passed for the people of Washington,” Billig said.
Open-government advocates, who for years have criticized the general lack of transparency in Olympia surrounding last-minute budget deals, were not pleased with the vote.
“Nothing much surprises me anymore when it comes to the lack of transparency with single-party control in Olympia or in Washington, D.C.,” Toby Nixon, president of the Washington Coalition for Open Government, wrote in an email.
“Legislative accountability is poor even when there is mixed control, but with single-party control it is basically nonexistent,” added Nixon.
If Washingtonians were still awake around 11 p.m. Thursday night and channel-surfing, they might have stumbled across the debate on TVW, the state’s public-affairs network, about SB 5998.
The bill changes the REET from a flat 1.28% to a graduated rate, based on the idea that people with less-expensive homes would get a tax cut under a lower rate, and people with pricier homes would pay a higher share. (The overall rate ultimately paid is sometimes higher, due to a local rate added atop that.)
Democrats have hailed it as a way to raise new revenue while also addressing Washington’s regressive tax system, under which poorer households pay a larger share of their income in taxes than wealthier households do.
The version that passed the Senate on Thursday night would lower the state rate for home sales under $500,000 to 1.1%. The 1.28% would remain for homes selling between $500,000 and $1.5 million.
For houses selling between $1.5 million and $3 million, the rate would increase to 2.75%. For homes going for above $3 million, the rate would be set at 3%.
Agricultural and timber lands being sold would stay at the current 1.28%, according the amended bill.
Not included in the deal is a new tax on capital-gains earnings, sought by many Democrats. Rolfes, the Democratic Senate budget writer, acknowledged that it was difficult to get the Senate votes needed to approve it. Budget writers also worried it wouldn’t be a reliable enough revenue source to fund the budget, she added.
Democratic lawmakers, who this year have sizable majorities in the Legislature, have faced tough decisions about how much revenue in new taxes to raise — or what spending to forgo.
With Washington’s economy still strong, lawmakers are expected to have close to $50.6 billion to fund the 2019-21 operating budget from existing projected tax collections. That represents an almost 16% increase from the existing budget when Inslee first signed off on it in June 2017.
But Democrats have cited the costs of continuing to fund Washington’s recent court-ordered K-12 schools funding plan, which they contend has eaten up almost all that existing revenue.