OLYMPIA — Washington Gov. Jay Inslee Thursday unveiled his proposed state budget plan with new taxes on capital gains and health insurers to fund government through the coronavirus pandemic without reducing services.
The governor’s new proposed 2021-23 state operating budget would spend $57.6 billion, with a focus on boosting public health spending amid a pandemic and the ensuing restrictions that have shuttered businesses and schools and caused an economic downturn.
“This is for our state to attack the multiple crises that we have, associated with the COVID pandemic,” said Inslee in a news conference. “And this is a budget that is built on giving Washington state relief and recovery and resilience.”
The proposal includes $397 million to pay for testing supplies, personal
protective equipment, lab costs, epidemiology work, vaccine distribution and funding for Washington’s public health system.
There’s $400 million in new education funding to address learning loss and educational opportunity gaps amid the pandemic. That component comes as 15% of Washington’s K-12 students are getting any in-person schooling right now, and the governor Wednesday announced new, less-stringent public health metrics intended to spur more school districts to reopen with in-person instruction.
Inslee’s proposal would, among other things, include additional funding for Washington’s mental health system as part of a broader overhaul.
While the overall plan aims to begin funding tax-credit payments to low-income families — a program created in 2008 shortly before the Great Recession but never funded — in the near future, those payments wouldn’t start in the 2021-23 budget cycle.
The governor’s spending blueprint would also accelerate projects in the state’s capital construction budget — such as at community colleges and for court-ordered fixes of fish passages under roadways — in an effort to boost the economy.
Sen. David Frockt, D-Seattle, praised that approach in a statement as “a bold framework.”
“Investing in construction, infrastructure, and much-needed housing and behavioral health can provide a crucial tool for our recovery from the COVID-19 recession and help create a more equitable Washington,” Frockt, lead Democratic senator working on the capital budget, said in prepared remarks.
Republicans, who are in the minority in the state House and Senate, took a dim view of the budget package.
“I think by and large this budget doesn’t do as much as it should for working families, who are struggling through this year and really anxious about what the future holds,” said Rep. Drew Stokesbary, R-Auburn.
Stokesbary called on Democratic lawmakers to fund the Working Families Tax Rebate program in this coming budget cycle.
The state’s budget picture has brightened since June, when early estimates of the economic slowdown showed a massive shortfall in tax collections that fund everything from schools and mental health services to parks, prisons and foster care.
In June, state budget forecasters projected the hit to tax collections would cause an $8.8 billion revenue shortfall over the next three years.
Since then, the improving economic picture has greatly reduced that shortfall, but revenue projections are still $2.4 billion below what they were before the pandemic hit, officials have said.
So Inslee and lawmakers — who convene the 2021 legislative session next month — still must grapple with a budget shortfall in the coming two years and hard decisions on taxes and spending.
To that end, Inslee’s budget plan includes a proposed 9% tax on capital gains earnings above $25,000 for individuals or $50,000 for joint filers. That proposal — which wouldn’t begin bringing in money until fiscal year 2023 — would exempt sole-proprietor businesses, homes, retirement accounts, farms and forestry, and income from salaries.
The governor and Democrats have proposed a version of the tax in recent years, and House Democratic lawmakers have insisted they have the votes for a plan. But neither chamber has voted on such a tax, and a handful of moderate Democratic senators have previously opposed it.
The governor is also proposing to raise revenue through an assessment on health insurers, limited health-services contractors and Medicaid managed-care organizations, among others. That monthly, per-member fee would be overseen and adjusted by the state office of the insurance commissioner.
In a statement, Sen. Lynda Wilson, R-Vancouver, took aim at that proposal, among others.
“Senate Republicans have been listening to the families and employers across Washington who are still struggling to deal with the economic fallout from the pandemic and government restrictions on workers,” said Wilson, the highest ranking Republican on the Senate Budget Committee. “The last thing they need is a new tax on health care — during a pandemic, no less …”
Earlier in the week, the governor announced new plans around diversity and equity, which includes a proposed independent office to investigate uses of deadly force by law enforcement, as well as his latest push for climate-change legislation.
Democratic House and Senate lawmakers are each expected to release their own proposed budgets next year during the 105-day regularly scheduled legislative session, which will primarily be held remotely.