Unusual House Budget Proposal Looks Big, but Really Isn’t That Different Than the Senate – Two Weeks of Head-Scratching Before Final Gavel

By Erik Smith, February 27, 2014, Washington State Wire

 

A rather unusual budget proposal that raises a question about the meaning of the term was released by House Democrats Wednesday — launching a debate that will carry this year’s Legislature through to the final day on March 13, and maybe beyond.

 

But most likely March 13.

 

The House proposal appears to fly in the face of legislative convention. It looks big and complicated but really isn’t. It’s not one bill but three, adding up to a jaw-dropping $280 million – nearly three times the size of the skinny budget proposed by bipartisan negotiators in the Senate earlier this week. The House proposal, crafted by Democrats alone, includes a few rather controversial ideas. It makes a few familiar proposals to whack tax breaks, uses that money to give teachers a cost-of-living salary increase, and finances an early-learning preschool program for low-income children. It also plucks lottery money out of the operating budget to pay for school construction – an idea sure to prompt disagreement.

 

If the House proposal was written the normal way, it might mean a special session for sure – months of argument in the back rooms that would keep Washington’s gang of 147 lawmakers glued to their seats in the House and Senate and staring out their office windows during a long and dull springtime, while they watch the cherry trees on the Capitol campus blossom and then shed their leaves. But the thing is, the House puts the most controversial stuff in separate bills. Those things aren’t even mentioned in what the House is calling its “base budget” bill. And really, that base budget doesn’t look much different than the spending plan the Senate presented on Monday.

 

So you have a $91 million plan in the House, a $96 million plan in the Senate. Not much to argue about – except maybe a few spending details and a few tax breaks that the Senate would like to launch or extend. The House isn’t saying the other business is designed to be ignored – far from it, they’d like it to be front-and-center when lawmakers return for their 2015 session. But maybe the most telling thing about the proposal that came from the House Wednesday is that Appropriations Chairman Ross Hunter, D-Medina, is saying that he doesn’t see any reason lawmakers will have to stay in town after the scheduled adjournment date. “I actually think we’re fine,” he told reporters at a news conference Wednesday. “I’m getting out of here.”

 

What a Way to Write a Budget

 

The unusual approach to budgeting might be called a conversation-starter. Lawmakers this year are looking to make minor tweaks to the $33.6 billion budget they passed last year. That one covers the state through June 30, 2015. It’s just that the next one is going to be a doozy. Next year lawmakers are supposed to find ways to comply with the state Supreme Court’s McCleary decision, which held that the state is not spending enough on basic education. The court is holding the Legislature to a definition that the Legislature adopted over the course of two sessions but never funded, back in 2009 and 2010. The upshot is that it will have to increase spending on K-12 by as much as $5 billion by the time it writes a budget for 2017-2019, and the bulk of the decisions will have to come when they write the 2015-17 budget next year.

 

So Democrats say they want to start that thought-process now. “I think both supplemental budgets, the Senate and the House, demonstrate that we can’t get there without some new revenue,” said House Majority Leader Pat Sullivan, D-Covington.

 

Not even what the House is proposing would get the Legislature very far toward a $5 billion target – meaning lawmakers are sure next year to debate some sort of a large general tax increase that could be required. The tax breaks it is proposing ending would generate a little over $200 million during a two-year budget cycle, and that leaves quite a bit of distance to be covered.

 

The House has a mighty unusual way of making its point – and it is one that muddies up the normally somewhat-clear process of negotiating a budget. Normally a budget bill encompasses everything – all the big ideas proposed by a legislative caucus are wrapped up in it and referenced somewhere in a single bill. Not so this time. Democrats said Wednesday they will rewrite their budget bill if they can find support in the Legislature to end the tax breaks, raise teacher salaries, and launch the early-learning program. They’ll pass all their bills off the floor of the House this week and throw the matter into negotiation with the Senate.

 

But don’t hold your breath waiting for the Senate to swallow the big-picture ideas, says state Sen. Bruce Dammeier, R-Puyallup – particularly not in the two weeks that remain of the 2014 session. And the way in which the House has gone about it – presenting those big ideas in easily-jettisonable form – demonstrates that the House plan is rather less than it appears. “They’re saying we’re not committed and you’re not a priority,” he said. “They’re saying maybe we’ll fund it if we can find the votes.”

 

Not Really That Complicated

 

It means the debate of the next 14 days is going to look rather more complicated than it really is. The Senate is expected to pass its budget bill today on the floor, following a vote in the Senate Ways and Means Committee Wednesday night. That bill, rather clean by comparison, doesn’t go after tax breaks – indeed it enacts and extends $10 million in new ones. And it doesn’t launch any ambitious new programs. It makes the normal adjustments that are made in an off-year budget, covering unexpected expenses, reducing expenditures where costs were lower than anticipated, and shunting money around. Biggest adds in the Senate budget are $25 million for college scholarships, an allocation to pay for a children’s mental-health lawsuit, money for state childcare programs that is required in part by a collective bargaining agreement, and some $38 million for school-district overhead costs – one element that would satisfy the court’s McCleary obligation.

 

The House “base budget” bill actually looks quite a bit like that one. It goes a bit further on the school-district overhead costs – it provides $60 million – and it makes up the difference by allocating just $5 million for college scholarships. Other points of dispute include proposals for tax breaks that are favored by the Senate. The biggest one is extension of a research and development tax credit that has been a point of contention for House Finance Chairman Reuven Carlyle, D-Seattle.

 

Lottery Proposal is Controversial

 

The House proposal to use lottery money for school construction is bound to be a major issue. It would take about $50 million a year from the operating budget for the next 20 years, and use the money to issue bonds. Dammeier notes a big irony. By plucking money from the operating budget, the House Democrats are arguing precisely the opposite position that they have advocated with regard to this year’s stalled debate over transportation. In that case, they have objected to a Senate proposal that would prohibit the shunting of gas tax money from the transportation budget to the operating budget. The state currently levies a sales tax on road-construction materials, one factor that drives the cost of Washington road projects higher than in other states. Though it would mean more money for road projects, House Democrats argue that the money is needed for education programs.

 

Yet by shunting lottery money from the operating budget to the capital budget, House Democrats are also are reducing money that might go to education programs. Dammeier said he is puzzled: “Hey, at least let’s be consistent.”

 

The argument from the Ds? The money still would be going to education. It would just be going to bricks-and-mortar costs, not the program costs that are the focus of the Supreme Court decision. Hans Dunshee, chairman of the House Capital Budget Committee, said it’s all connected. If the state has to provide money to reduce class sizes, it’s going to need more classrooms. “You need those classrooms before those teachers show up,” he said.

 

Spotlights Tax Breaks

 

And then there’s the evergreen element of the House proposal – the separate bill that would end a handful of tax breaks and earmark the money for a long-delayed cost-of-living tax increase for schoolteachers. The House is targeting the same four tax breaks that were outlined early this week in a plan by Senate Democrats. All have been debated for years in the Legislature. The House would largely eliminate a sales tax break for out-of-state residents with low or no sales taxes – mainly Oregon and Montana residents who do their shopping in Washington. They would also nix an exemption from taxation on oil-refinery gases consumed during manufacturing processes; a sales-tax exemption on bottled water; and a reduced tax rate for some wholesalers of prescription drugs.

 

By linking teacher salary increases to passage of a highly controversial tax measure, the House may not be offering much hope to the teachers’-union officials who have made salaries their top issue this year. Finance Chairman Carlyle said he hopes to stimulate debate on state taxation policy – a matter that will be even more important during next year’s debate. “At the end of the day that we have no choice but to acknowledge that we live in a post-McCleary era,” he said. “The old-fashioned stereotypes and clichés of yesterday, about more and more and more tax preferences versus getting smarter about education and in investing in early learning — those days are over.”

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