Gov. Jay Inslee signed a supplemental budget into law Friday that boosts state spending by about $155 million over the next 15 months including $58 million more for local school district costs for supplies and materials.
But the governor did some touch-up work on the strongly bipartisan budget – vetoing a cut in emergency funds that were deemed extra last month, but which are suddenly in demand for the Snohomish County mudslide response.
In a clear disagreement with Senate budget writers, Inslee also vetoed a $20 million cut in funding for the Life Sciences Discovery Fund. The move drew criticism from both sides of the aisle.
“We concluded that there is just too good of an option here for us to let this just end prematurely,” Inslee said of the life sciences funding, which pays for research that can be commercialized in a highly competitive industry. “We thought that this is … an industry that has such great growth potential – both for our health and for job creation – it just would be a mistake to let the really productive things end right now.”
But Republican Sen. John Braun of Chehalis and Democratic Sen. Jim Hargrove of Hoquiam said the veto undid their effort to preserve funds for K-12 schools in the next budget cycle. Braun described the veto as a “surprise,” noting that no current projects would have been de-funded, and both lawmakers said the veto makes next year's budgeting slightly harder.
“This was a true supplemental budget that continued with a four-year balance and set the stage for what we all know is going to be a difficult budget next year. By punching a $20 million hole in the budget, we have a bigger problem next year,’’ Braun said.
The budget – also known as Senate Bill 6002 – also contained $25.4 million for the Opportunity Scholarship program, which is using $30 million in private money from Boeing and Microsoft for scholarships helping students from low and middle-income families into science, technology, engineering and math degree programs. Other details of the budget – including cash for a study of oil-by-rail shipping hazards – are here.
The state’s cluster of biotech companies had flooded the governor’s office with letters urging the veto cutting the life sciences grants program begun under former governor Chris Gregoire. The Biotechnology Industry Organization representing 1,100 firms and research institutions globally warned the cuts “would severely compromise the commercialization efforts of Washington state’s research institutions and small life science businesses.”
Inslee’s aides said it wasn’t any one story in the more than two dozen letters that proved persuasive in winning the veto– although budget director David Schumacher said the sheer volume of letters carried weight. Inslee said he didn’t make up his mind until a few days ago, and the Legislature’s failure to extend a research-and-development tax credit for technology firms was a factor in this thinking.
In fact, two high-tech tax breaks – one for research-and development and one for construction of data farms in Eastern Washington – are expected to expire next year. Both were victims of a disagreement between the Democrats in the House, who wanted to close tax exemptions to raise revenue for schools, and Republicans in the Senate, who wanted to create new tax breaks while protecting those on the books.
“So the Legislature kind of went 0 for 2 this year in helping the biotech industries thrive in this state,’’ Inslee said. “We thought that was not acceptable.”
The governor said it is worth looking next year at whether there is a way either to continue the science research fund beyond its sunset – when the state’s extra payments for its role in the tobacco settlement lapse – or get other support for the biotech and high-tech sectors.
Money for the life sciences fund always had a limited life, according to Braun. He said the money came from extra payments the state won for its role in securing the national tobacco settlement in 1998, and he described the budget cut as an early sunset. He also said Inslee never identified the life-sciences money as a must-have priority during budget talks.
“We don’t have a paramount duty to fund the Life Sciences Discovery Fund; we do have a paramount duty to fund education, and we need to stick to priorities,” Braun said.
By signing the budget, Inslee closed the main chapters on financing state government during 2013-15. And he threw open the door to public debate about the next biennial budget – which legislators return to Olympia to start writing in January during a 105-day regular session.
Already, it is clear that much of the debate next year will resemble talk during the past two years – with Inslee and Democrats looking for new revenue to help respond to the Supreme Court’s orders to improve K-12 school funding, while Republicans insist upon putting existing dollars towards basic education first to see what other programs are left high and dry and in need of new revenues.
Inslee said the state will need to put at least $1.5 billion more into K-12 schools next biennium in accordance with the court’s ruling in the case known as McCleary. He also is on record as wanting to address pay issues for teachers and state employees who will have gone six years without cost-of-living pay adjustments, and there are also increased costs for worker pensions, healthcare and state debt service to factor into the equation – a large list of spending that is sure to outstrip the $2.4 billion in expected revenue growth for the next biennium.
“Clearly we’ll be talking to legislators as soon as possible in hopes we can find a solution to this. It’s going to take some very, very difficult work,’’ Inslee said.
But Inslee insisted the Senate Majority Coalition’s approach won’t work – if it means a reduction in the state safety net instead of raising taxes.
“The one thing we know about next year’s budget is we have a very large hole to fill for our children, and we are not going to fill that hole by decreasing the safety net that we wrap around our children – the housing programs, the nutrition programs, or health care programs,” Inslee said.
The Senate Majority Coalition Caucus can be counted on to look at the issue quite differently – as it did in opposing Inslee’s revenue proposals last year and again this year.
Braun flatly disputed Inslee’s claims, which reflect a legislative task force's findings, about how much the state must put into K-12 school next year. Braun said he believes the real need for the McCleary decision is closer to $750 million in new money. He also said public-employee compensation is a less pressing priority and that wage growth has been at least as slow in the private sector as in the public.
“You have two different approaches to the problem, so you are going to have some differences of opinion. We are not looking for conflict, but we’re looking for solutions that stick with our principles …” Braun said. “But we feel we set the stage for success (with the supplemental budget). I think if the governor comes with the tired approach of ‘we’re going to close loopholes’ and do this without a truly cooperative process we’re probably going to have difficulty.”
Braun said the Senate majority is not talking about cutting the safety net but about containing its size until schools are paid for. He indicated that a so-called levy swap – whereby the state raises its share of the property tax in order to replace some local levy funding for K-12 schools – is one of the ideas that will be debated, but he also noted there is opposition to it.
Braun also made clear his caucus isn’t interested in looking for new revenues. But if Inslee joined in a search for ways to cap spending in programs outside education, he said, “that is something we are very interested in.”