Attorney General Rob McKenna and former Senate Majority Leader Dan McDonald outline the no-tax plan at a Tacoma news conference.

TACOMA, Aug. 1—Critics scoffed a year ago when Republican gubernatorial candidate Rob McKenna said he could beef up education spending without raising taxes. On Tuesday, he unveiled a plan to do just that.

The state attorney general, meeting with reporters in Tacoma, said there’s a way to at least partially restore the shrinking share of the state budget that goes to higher education and K-12 schools. The plan just might satisfy a recent Supreme Court decision that held the state isn’t spending enough on basic education. And it wouldn’t raise a dime in taxes. But it would require the state to put the lid on everything else – a prospect unlikely to delight state employees and other interests when the economy rebounds. McKenna is saying you just have to draw the line somewhere.

“We have to decide whether we are going to fund education or we don’t,” he said. “The court is telling us we have to. And I’m saying we need to improve our public education in a context of reform.”

You might say McKenna is calling the bluff issued by critics when he first suggested the idea during his campaign kickoff in June 2011. No tax increase? They said it couldn’t be done. But armed with spreadsheets and projections, McKenna showed how it just might work. There’s plenty of detail, but the basic idea is easy to explain. As the economy grows in the years ahead and existing taxes begin generating more money, the growth would be directed to education. So education would grow twice as fast as anything else in the state budget. When it’s time to write a budget next year, McKenna said he can find enough to satisfy the $1.2 billion demand of the so-called McCleary decision for K-12 schools, and another $437 million for higher education. In 2019-21, there would be $3.7 billion more for schools. And no new taxes.

Key Issue in Race

It’s a plan that is likely to become a central issue in the race ahead, because it encompasses not just education but the width and breadth of state government. By holding the line on spending in other areas of the budget, McKenna ensures that he will be butting heads with labor and the social-service lobby. Essentially he is proposing that their share of the pie ought to shrink.

It is worth noting that McKenna’s all-but-certain Democratic opponent, Jay Inslee, made a similar but smaller promise during the first debate of the gubernatorial campaign, June 12 in Spokane. Inslee didn’t promise to hold the line on taxes in general. But he did say he could find a way to pay for the McCleary decision during the 2013-15 biennium without raising taxes. Inslee still hasn’t explained how he would do it.

For now, the Inslee campaign is saying simply that McKenna’s plan won’t work. “The formula he uses wouldn’t generate the funding he claims for years, all the while critically underfunding essential services for children,” Inslee spokeswoman Jaime Smith said in a press release. “It’s more empty promises from Rob McKenna.”

A Simple Plan

Reporters are briefed on the plan.

It might be a simple plan, but you wouldn’t know it by reading the spreadsheets. McKenna, working with former Senate majority leader and longtime budget chief Dan McDonald, bases his plan on the detailed long-term projections for school enrollment and tax revenue that come from the state Office of Financial Management. Estimates for the cost of specific school programs come from the Office of Superintendent of Public Instruction.

McKenna’s plan would cover the cost of a basic-education bill adopted by the Legislature in 2010 and which the court has said is sufficient to satisfy its requirements. It also would pay for all-day kindergarten and class-size reductions to 17 students in grades K-3. But McKenna doesn’t embrace everything on the education wish-list — for instance the idea that teacher salaries ought to increase at the rate of the Seattle consumer price index.

For another part of his plan, McKenna borrows a rather intricate property tax idea advocated by former Sen. Joe Zarelli, R-Ridgefield and House Ways and Means Chairman Ross Hunter, D-Medina, as a way to satisfy the state Supreme Court’s demand for stable state funding for K-12 schools. It’s called a “levy swap.” The state would reduce the amount of money schools collect from local levies, and make it up with the state property tax levy. It doesn’t necessarily mean more money would be collected. But the important difference is that the state levy doesn’t require a public vote, hence making the revenue more stable.

There’s also an important refinement to the idea McKenna sketched with a few sentences in his kickoff speech a year ago. Where non-education spending is concerned, McKenna says he would allow it to grow at a rate equal to population growth plus inflation. That means 6 percent growth in every two-year budget.

The thing is, state tax revenues are expected to grow somewhat faster than that. In 2013-15, the state assumes revenues will grow 7.1 percent. After that, the state projects 9.2 percent growth. So in every budget, there’s a little extra that might be spent somewhere. McKenna says education is the place. By 2019-21, when the state expects $42.4 billion in tax revenue, that means there would be $3.7 billion more for education. That’s in addition to the growth in education spending that would be required by enrollment increases and inflation.

Broad Outlines

McKenna said he’s not writing anything in stone. “We’re saying this is a policy document,” he explained. “This is a set of budget principles, because what we are trying to achieve here is a reversal of the trend we’ve seen over the last several years, where education, both K-12 and higher ed, have received less than their share of growth in the budget. That’s why they have shrunk within the budget, from a peak of close to two-thirds back in the ‘80s, to 47 percent more recently.”

The decline is sharpest in higher education, where state support has declined dramatically and schools have made it up by ratcheting tuition to nosebleed levels. When McKenna entered the University of Washington in 1980, tuition was $687 a year; today it is $12,383.

By redirecting growth to education, the share of the budget going to higher ed would increase from 8 percent currently to 10 percent in 2019-21. The share going to K-12 schools would rise from 44 percent to 48 percent.

Will Have to Say No

What it all means, of course, is that a fight may be brewing with those will resist any shrinkage in their share of the budget. McKenna noted that state health care spending, for Medicaid and state-employee health benefits, has ballooned from 15 percent to 30 percent of the state budget over the last decade. That’s one of the reasons education has been squeezed. McKenna has proposed incentives to move state workers to health-savings-account plans through which they would pay higher deductibles, offset in part by a state contribution. Other cost-savings measures include efforts to boost productivity of the state workforce and the use of attrition to reduce state employment.

It’s going to take plenty of discipline to keep growth low in other areas of the budget, he said. “They’re going to continue to be able to grow, but my point is that until we decide we are going to restrain the amount of growth, not let it grow as fast, we are not going to solve the problem for education,” he said. “I mean, it is just not sustainable to double your health care spending in 10 years, because obviously that means inexorably the entire budget becomes health care. That doesn’t work. The Supreme Court is reminding us of that.

“And you know, what you hear in Olympia – you just heard the governor say it a few months ago – is that we can’t do it without more revenues. …Have you noticed great success from the Democratically controlled Legislature and governor in increasing tax rates? I haven’t. What I have seen is the voters saying no, and repealing taxes they don’t like, like the soda pop and candy tax.”

McDonald flanked McKenna at the news conference. “The Legislature has the same problem,” he said. “It’s not like it’s your problem, you fix it. It’s everybody’s problem. This is a solution, what’s yours? And I might add you might want to ask the other gubernatorial candidates.”

Print PDF