Politics & Government

Five drivers of the 2015 legislative session: Ed funding, transportation, new taxes, carbon, pay raises

Washington state lawmakers begin a 105-day legislative session Monday, and the biggest political fights could seem familiar to voters. The unknowns are solutions that can pass both chambers of a divided Legislature.

Even before the November election narrowed the Democratic majority in the House and created the most evenly split Legislature in more than a decade, legislators were having trouble finding consensus on tough issues.

This year’s session won’t offer any respite. Defining the session are two potential minefields: school funding and transportation-project financing. Close behind are debates over new taxes, the state response to climate change and public employee pay.

SCHOOL FUNDING

Lawmakers are under a state Supreme Court order in the McCleary case to boost basic education funding — by billions of dollars by the 2017-18 school year — or face unspecified sanctions.

“Clearly we all know we are going to make a big payment on McCleary this year … The only real question is how big is that payment,’’ incoming Senate Majority Leader Mark Schoesler, R-Ritzville, said last week.

Gov. Jay Inslee proposed spending about $2 billion — aided by two major new sources of revenue — on K-12 schools, $1.3 billion of it to answer the court’s orders in the McCleary case.

Senate Republicans argue that the Legislature could put as little as $750 million of new cash into K-12 schools to meet the terms of the school-funding schedule that the state Supreme Court is using, although their budget writer Andy Hill, R-Redmond, acknowledges more may be needed. Top House Democrats are lining up closer to Inslee.

Complicating the funding picture is Washington school districts’ growing reliance over three decades on local, voter-approved levies. These help pay for operations that include teacher pay, supplies and other basic education components that the state should be paying for, according to court decisions.

Lawmakers including House Appropriations chairman Ross Hunter, D-Medina, have explored how to shift much of the levy burden onto the state. One “swap” solution is to simply increase the property tax levy the state already collects for schools across the state, while phasing out some of the local tax. Inslee campaigned in 2012 against such a shift, saying it would raise taxes in some districts.

A second cloud hanging over the school funding discussion is Initiative 1351, approved by voters in November. It requires another $2 billion in investment in class-size reductions. That is, unless the House and Senate each musters a two-thirds vote to amend or suspend it.

“We’re going to have a hard time figuring out how to fund 1351,’’ House Appropriations Committee chairman Ross Hunter, D-Medina, said last week. Republican Sen. John Braun of Centralia says the state needs to put money first into programs that have the biggest effect, and research does not show a big return on investment for class-size reductions in classrooms above second or third grade.

House Majority Leader Pat Sullivan, D-Covington, says legislators are looking into what I-1351 changes can be made without running afoul of the court. Inslee proposed to pay for about $400 million of the I-1351 improvements, focusing his class-size reductions in K-3 grades — already a state goal.

The Washington Education Association is pressing for full funding of the measure it backed. WEA contends that because I-1351 changed the legal definition of basic education by setting new standards for class size in all grades, lawmakers cannot change it for financial reasons.

TRANSPORTATION

This year is the third in a row that legislative leaders have some hope of passing a transportation funding package. Various plans that would have raised up to 12 cents per gallon of gasoline have foundered since January 2013, and only the House has approved a tax plan since the last tax hike in 2005.

Some pressure is continuing to come from business groups like the Washington Roundtable and labor groups that want to relieve congestion, complete an important freight corridor along state Route 167 to the Port of Tacoma, and catch up to a growing backlog of bridge and road maintenance projects. Advocates for major projects include those in Spokane.

Inslee has proposed an alternative — using proceeds from his proposed carbon-pollution tax program to provide $400 million a year for transportation.

His proposal has been strongly criticized by the Republicans running the Senate Majority Caucus, whose leaders say they are still working on a proposal that might raise the gas tax by roughly a dime. A second, smaller transportation-tax proposal is also being quietly developed that might raise the gas tax by half that to provide a much smaller stream of money to pay for highway maintenance

Senate Majority Leader Schoesler said Inslee’s reliance on a carbon tax is risky because it taxes a pollutant that could decrease in the future. But gas tax revenues also are declining as cars become more fuel efficient.

TAX INCREASES

To balance the state budget, lawmakers are certain to propose higher taxes alongside cuts to programs.

So far, Republicans are rejecting Inslee’s claim that the state needs to broaden its tax base to make it fairer and help erase a deficit his office estimates is more than $2 billion in the 2015-17 budget. The governor is proposing a capital gains tax of 7 percent on distributions from stocks and bonds in excess of $25,000 a year for an individual, which could raise nearly $800 million in the first budget cycle.

Republicans such as Sen. Bruce Dammeier, R-Puyallup, say the tax would fluctuate wildly, providing an unstable source of money for schools. Inslee says the state’s tax system already is the worst in the nation at putting a heavier burden on the poor, so he can’t do what governors and legislators before him have done: raise the sales tax.

Inslee also is proposing a 50 cent increase per pack on cigarettes and taxes on electronic or vapor smokes that he sees as targeting young people. And he’s proposing to close a number of tax loopholes — such as the one letting out-of-state shoppers avoid paying sales tax at the cash register.

Sen. Hill doesn’t believe there is a shortfall. Hill said the growing economy is producing about $3 billion more revenue than in the current one, providing just enough to pay for carry-forward costs of existing programs with $1 billion left to pay for McCleary obligations, mental health and other needs.

At the same time, some Republicans are softening slightly in their hard opposition to taxes from two years ago.

“ We’re Republicans. We don’t like tax increases. But we are willing to do them when necessary,” said Sen. Joe Fain, R-Auburn. “The difference is ... what I think we are seeing out of the Governor’s Office is that taxes are the answer and then we’ll find what we’ll spend it on.’’

Inslee defends his position, pointing out that a capital gains tax might be volatile but anything it brings in is more than anything Republicans are proposing.

CARBON PRICING

Gov. Inslee has opened another debate with his proposal to reduce the state’s emission of greenhouse gases to targets set in state law by 2020.

The third-year Democratic governor wants to enact a cap on greenhouse emissions and create a carbon pollution taxation system — known as cap and trade, similar to what California adopted under a Republican governor. This requires major emitters of greenhouse gases such as utilities, refineries, pulp mills and power plant operators to pay for the emissions.

A recent poll by Elway Research showed up to 71 percent of voters accept or favor the carbon tax idea, but the Senate Republican leadership has taken a hard line against it.

In the recent elections, GOP committees hammered Democratic candidates on the topic, accusing them of backing gas-price increases of more than $1 per gallon, which they suggested Inslee’s proposals for pricing carbon might cause. Those claims were inflated, and Inslee contends his carbon pollution tax could in the worst case add 12 cents per gallon to the price of gasoline, but only if refineries and others fail to cut emissions and simply pass fees on to consumers.

Business groups such as the Association of Washington Business are pushing back, touting voluntary efforts rather than mandates to reduce emissions.A hard fight is expected.

“I would say, yes, it will be tough to pass climate legislation this year. But anything will be tough this year,’’ said Becky Kelley, deputy director for the Washington Environmental Council. “With a split Legislature and the tremendous pressure they are under, there are no easy plays.”

Some Senate and House Democrats like Inslee’s concept of using pollution penalties as incentives to cut fossil fuel use. House Speaker Frank Chopp, D-Seattle, hasn’t endorsed the exact plan laid out by Inslee but says action is needed.

“I support coming up with a plan that fully addresses climate change,” Chopp said. “We have to deal with it.”

WORKER PAY

More than two dozen labor contracts negotiated by the governor’s labor teams would provide the first general wage increase in six years for general government and higher education staffers. Contracts covering most agency workers give raises of 3 percent in July and another 1.8 percent in July 2016, and there are additional adjustments for job classes to create more equality across the system.

Teachers and other K-12 staffers are entitled to smaller inflation-based raises under Initiative 732, but Inslee has gone further by proposing K-12 raises equal to the typical raise for general government staffers. Inslee’s proposal would provide the first cost-of-living pay raise since 2008 for teachers and school staffers, who the governor says have had a loss of purchasing power while being asked to get more results for students.

The total cost for raising pay for all general agency personnel, K-12 schools, universities and home care workers is $867 million from the general fund; that includes rising costs for health care insurance. The contracts also hold state employees’ share of health premiums at 15 percent and protect them against most increases in out-of-pocket payments.

The Legislature ultimately must accept the state worker contracts, and Senate Republicans are balking at the cost. Sen. Hill said last week that when he was campaigning he did not hear from voters that pay increases for public sector workers was a high priority.

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