Gov. Jay Inslee Tuesday unveiled a sweeping plan to pay for K-12 teachers and other school workers to comply with the state Supreme Court’s McCleary order. It would be funded by billions in proposed new taxes.
TACOMA — Gov. Jay Inslee on Tuesday unveiled a sweeping plan to pay for K-12 teachers and other school workers, funded by more than $4 billion in proposed new taxes in the upcoming two-year budget.
By tackling teacher salaries, the governor’s plan addresses the last big piece of the state Supreme Court’s 2012 education-funding order known as the McCleary decision.
Inslee’s proposal goes further than that — it adds money intended to better recruit and retain teachers, and also funds, among other things, more positions for school nurses and counselors.
Gov. Jay Inslee’s tax plan
• Increase the business-and-occupation tax on services provided by accountants, attorneys, real estate agents and others from 1.5 percent to 2.5 percent, raising $2.3 billion in the 2017-19 budget.
• Enact a carbon tax that would charge the state’s emitters $25 per metric ton starting in 2018, raising $2 billion.
• Establish a 7.9 percent tax on capital-gains earnings above $25,000 for individuals and $50,000 for joint filers. It would raise about $821 million in fiscal year 2019. Retirement accounts, homes, farms and forestry would be exempt.
• Roll back several tax exemptions, including one on bottled water and another that benefits oil refineries.
To pay for it, Inslee is proposing new taxes on capital gains and carbon emissions, as well as increasing part of the state business-and-occupation tax. The governor also called for rolling back some tax exemptions.
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Because of the new state money, local tax levies would be cut in many school districts.
Most of the roughly $4.4 billion in proposed new revenue for the 2017-19 state operating budget would be spent on education. About $2.75 billion of that would cover teacher and other educator salaries to comply with the court’s McCleary decision.
The court ruled that the state, not local districts, must pay for teacher salaries. Currently, local districts pick up a big part of the cost.
In his announcement, Inslee called the plan “a big, bold thing that we’re proposing here.”
“We’re the state that built the Grand Coulee Dam, we’re the state that built the Boeing 747, and we’re the state that can fully fund basic education after 30 years,” he said.
Inslee’s proposal is the first major plan in what’s expected to be a tough slog of negotiations in the legislative session that starts in January. House Democrats and Senate Republicans will release their own budget plans early next year.
While tackling education, the governor and state lawmakers must also craft the state’s 2017-19 operating budget.
In 2015, the GOP-controlled Senate fought hard against a capital-gains tax and carbon cap-and-trade plan that Inslee proposed then. Both those plans died that year.
Voters this year rejected a carbon tax ballot measure that also included cuts to other taxes, though that initiative wasn’t supported by Inslee or some in the environmental community.
On Tuesday, Republicans began firing back almost immediately at the governor’s proposal. Senate Majority Leader Mark Schoesler, R-Ritzville, called the governor’s plan “far, far and away the single biggest tax increase in state history.”
Inslee’s plan “looks more like another attempt to impose a new carbon tax and a new tax on income and less like a way to thoughtfully address the K-12 funding question,” Sen. Ann Rivers, R-La Center and a member of the state’s Education Funding Task Force, said in a statement.
House Majority Leader Pat Sullivan, D-Covington, said he was still reviewing Inslee’s proposal. Sullivan, also a member of the task force, which is wrestling with the McCleary question, said he appreciated that Inslee didn’t shy away from dealing with teacher pay. The governor, added Sullivan, “shares a lot of our values.”
The plan drew support from newly-elected state Superintendent of Public Instruction Chris Reykdal, who appeared with Inslee at the announcement at Lincoln High School in Tacoma.
Inslee’s plan would impose a 7.9 percent tax on capital gains from the sale of stocks, bonds and other assets. It would exempt retirement accounts, homes, farms and forestry.
The tax, which would kick in above $25,000 in capital gains for individuals and $50,000 for joint filers, would begin in the second year of the biennium and raise about $821 million in the 2019 fiscal year.
Inslee’s proposed tax rate would be higher than nearby Idaho’s 7.4 percent but lower than Oregon’s 9.9 percent and California’s 13.3 percent, according to the Tax Foundation, a nonpartisan think tank that advocates for lower taxes.
Those states, like others that tax capital gains, also have state income taxes. Washington is one of seven states that do not impose an income tax.
Inslee’s carbon proposal would set a $25-per-ton tax on carbon emissions, raising about $2 billion in the 2018-19 budget. About $1 billion would go toward education and the rest to projects for clean energy, water infrastructure, forest health and transportation.
The package also would increase the business-and-occupation tax rate on professional services, such as lawyers and real-estate agents, raising $2.3 billion in 2018-19.
The governor also proposed rolling back several tax exemptions, including one on bottled water and another that benefits oil refineries.
Currently, school districts pay a big chunk of teacher salaries with local property-tax levies. The McCleary decision, however, said the state must pay for basic education, which includes salaries.
Under Inslee’s plan, local school tax levies would go down in 119 of the state’s 295 school districts — accounting for more than 75 percent of the state’s households and businesses. No districts would see an increase in local property tax levies.
In the Seattle School District the local property-tax bill would drop an average of $262 per taxpayer in the 2018-19 school year, while taxes in the Bellevue School District would drop an average of $297, according to the governor’s office.
Under the plan, the state’s minimum portion of a starting teacher’s salary would increase over two years to $54,587, up from the current $35,700.
Lawmakers and Inslee in recent years have boosted K-12 spending by billions to comply with the McCleary decision.
Not content with the progress, the court has held the state in contempt and ordered fines of $100,000 per day. The justices have ruled that the state must enact a full education funding plan by Sept. 1, 2018, with that plan approved by the end of the 2017 legislative session.