OLYMPIA — Comfortable majorities this year in the state House and Senate doesn’t necessarily mean Democratic lawmakers are having an easy time writing a new budget.

Democratic lawmakers Wednesday were working to complete a final deal on a 2019-21 state operating budget.

And they faced hard decisions about how much money to raise through taxes — or what spending they should skip.

Without any new taxes, legislators are expected to have nearly $50.6 billion to fund the new budget. That amounts to a nearly 16% increase from the existing budget when Gov. Jay Inslee first signed it into law in 2017.

But Democratic leaders have said new revenue is necessary to adequately fund government. They cite the costs of Washington’s recent court-ordered K-12 schools funding plan and a mental-health system in need of overhaul.

With Sunday the last regularly scheduled day of the legislative session, budget writers and others say a deal likely needs to come together Thursday or Friday to finish on time.

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Sen. Christine Rolfes, the Senate Democratic budget writer.
Sen. Christine Rolfes, the Senate Democratic budget writer.

Legislators Thursday morning appeared to still be working to meet their Sunday deadline.

“I can confirm that we are still on track,” wrote Sen. Christine Rolfes, the Senate Democratic budget writer, in a text message. Rolfes has said she wants to get the budget finished on time and without a special session.

Earlier this week, when asked what obstacles remained to be resolved in negotiations, Rolfes, of Bainbridge Island, said: “Really, revenue: how to pay for things.”

When asked Thursday morning whether lawmakers have an agreement yet, Rep. Timm Ormsby, a Spokane Democrat and one of the House budget writers, said only: “No such thing as a sure thing. It’s not done till it’s done.”

Meanwhile, several tax-related bills and a key proposal to change local school-district levy caps were added Thursday morning to the House floor calendar, signaling that they could come up for changes and a final vote. 

Proposed budgets by House Democrats, Senate Democrats and Inslee each included a plan to change the state real-estate excise tax (REET), which is paid by those selling homes, from a flat 1.28% to a graduated rate.

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The proposals do it in different ways. But the idea is that people with less-expensive homes would get a lower rate, and people with pricier homes would pay a higher share. Democrats have called it a way to raise new revenue while also making the tax system more progressive.

“I think that’s likely,” said House Majority Leader Pat Sullivan, D-Covington, when asked about the REET in a final deal. But, “I think we’re still working through the details on that as well.”

Rep. Drew Stokesbary, R-Auburn, is the ranking Republican on the House Appropriations Committee. (Washington state House of Representatives)
Rep. Drew Stokesbary, R-Auburn, is the ranking Republican on the House Appropriations Committee. (Washington state House of Representatives)

In terms of spending, Sullivan said a final budget deal would wind up somewhere in between the Senate’s proposal of about $52 billion over two years, and the House proposal of $52.6 billion.

Rep. Drew Stokesbary, R-Auburn, argued that recent growth in tax collections, combined with the fact that Democrats are negotiating among themselves, should translate into a legislative session that finishes on time and without new taxes.

“We could write a budget that funds all of our priorities without raising taxes,” said Stokesbary, the ranking Republican on the House Appropriations Committee.

Stokesbary called the change to the REET “poor tax policy” and said it might place a burden on sellers of multifamily housing units right as the state experiences a housing-affordability crisis. But he said that it appeared likely to emerge in a final budget deal.

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Changing the state real-estate excise tax alone likely wouldn’t get Democrats to the spending levels they have been seeking, Stokesbary added, meaning some other tax would likely be necessary.

House Democrats and Inslee also introduced different versions of a new tax on capital gains and increases in the business-and-occupation tax, as well as ending some tax breaks.

But a capital-gains proposal has always faced an uncertain fate in the Senate, where three of the chamber’s 28 Democrats late last year said they opposed the governor’s version. It would take 25 votes to pass that legislation.

Conservatives have argued that a capital-gains tax is unconstitutional, meaning it would almost immediately face a court challenge.

A proposal to raise the cap on local levies that school districts can propose has been considered another key point in negotiations.

Lawmakers have been debating that policy all session. Thursday morning, one of those proposals, HB 2140, was added to the House floor calendar. A final and different version of that bill may still emerge before it gets a final vote.

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That bill comes after local school districts say they have struggled to adjust to life after the Legislature’s 2017 K-12 school funding plan, under which the state increased its share of funding for basic-education costs.

School districts say they need authority to raise local property-tax levies in order to be properly funded.

Sullivan this week said school-levy proposals were one piece still being negotiated as part of a final deal, since any changes would affect some spending in the operating budget.

Taxes are only half the equation in a budget deal. If Democrats can’t properly fund programs, they’ll ultimately have to pay those costs down the road, said David Schumacher, director of the Office of Financial Management.

Using budget maneuvers — like tweaking projected costs and savings to programs in future years — might delay the need for some taxes.

But lawmakers would “just be skipping a payment and having to come back” next year to fund those items in a supplemental budget, said Schumacher.

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