Democrats target tax breaks to fund schools

Ending 4 exemptions would raise $100 million in 2014

Staff writerFebruary 26, 2014 

Senate Democratic leaders proposed Tuesday to close four tax exemptions, including one used by oil refiners, in order to raise an extra $100.6 million for K-12 public schools this year.

Cost-of-living pay raises for teachers would take half of the new dollars.

The minority Democrats’ proposal is less ambitious than that of Gov. Jay Inslee, who targeted seven tax breaks to produce upward of $200 million in new money each year and $400 million over a biennium.

But the Senate plan — which is projected to raise $202.9 million in the next two-year budget – does foreshadow what House Democrats may propose Wednesday when they outline their supplemental budget and tax plan.

“We just felt this is a proposal that is realistic and has support,” Sen. David Frockt of Seattle said about why Senate Democrats chose a smaller array of tax breaks than Inslee did.

Republicans who dominate the Senate Majority Coalition Caucus have not shown interest in closing tax breaks or raising new revenue this year, and Senate Ways and Means Committee chairman Andy Hill, R-Redmond, reiterated Monday that 2014 is a supplemental year that should be focused on a budget that addresses emergent needs.

Even so, the bipartisan Senate budget plan Hill and two Senate Democrats unveiled Monday earmarks about $38 million in new money for materials, supplies and operating costs borne by K-12 school districts.

Democratic Sens. Jim Hargrove and Kevin Ranker had stood with Hill at the Senate budget unveiling Monday, embracing the bipartisan Senate supplemental budget proposal that avoided closing tax exemptions while adding or extending several tax breaks worth about $10.3 million.

But Hargrove and Ranker said they would like to see more revenue, and what they meant became clearer Tuesday.

The tax incentives Democrats are targeting for closure are:

 • An extracted fuel exemption worth $31.7 million this year and $59.1 million in the next biennium. The exemption was meant for pulp mills in 1949 but used by oil refineries once they moved into the state starting in the 1950s.

 • A sales tax on bottled water that voters repealed a few years ago in an initiative that also repealed a pop tax. It would raise $24.3 million this year and $48.2 million over two years.

 • A sales tax exemption for out-of-state shoppers from states with low or no sales taxes. It would be worth $29 million this year and $61.3 million over two years.

 • A preferential tax rate for re-sellers of prescription drugs, which Democrats say would require out-of-state firms warehousing medications in Washington to pay the same rate others pay. This could raise $15.6 million this year and $34.3 million over the next biennium.

Besides spending $51.7 million on a 1.3 percent cost-of-living increase for teachers in the coming school year, the Democrats’ plan would put $27.9 million toward a small increase in the percentage of schools offering all-day kindergarten. It spends another $21.5 million for reducing second-grade class sizes in high-poverty schools to 20.85 students, down from 24.1.

The half-dozen Senate Democrats attending a press conference to announce their revenue proposal touted it as a piece of a larger plan that outlines how the state can meet its obligations to fund K-12 public schools fully by 2018, which is the state Supreme Court’s deadline. The court has ordered the Legislature to submit a funding plan by April 30.

The Democrats’ proposal is tied to past legislation that outlined how the Legislature could ramp up its funding for K-12 schools. It includes a schedule for reducing class sizes and expanding all-day kindergarten offerings, but it does not say where revenues would come from. Senate Democratic leader Sharon Nelson of Maury Island said lawmakers ultimately need to identify ways to invest up to $5 billion of new money into K-12 schools over the next four years.

Brad Shannon: 360-753-1688 bshannon@theolympian.com

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