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Sen. Hill: ‘Myth’ Washington State Has Large Budget Deficit

Gov. Jay Inslee took four days last month to roll out his $39 billion spending plan for the upcoming budget cycle, and the response from the Republican-held Senate has come in drips and drabs since then via press releases, op-eds and other statements.

But on Wednesday, Republican Senators issued a full-court press against the governor’s case that the state has to raise taxes to invest in schools and transportation projects, with implementing a cap-and-trade program and a capital gains tax as the centerpiece of his budget proposal.

Several key Senators spoke at the Washington Policy Center’s Solutions Summit Conference in Bellevue, including budget writer Andy Hill of Redmond, Transportation Committee Chair Sen. Curtis King, R-Yakima, and Energy Committee Chair Sen. Doug Ericksen, R-Ferndale.

Sen. Hill attacked Inslee’s plans as relying on scare tactics and a myth that the state was facing a massive budget deficit in his argument for new taxes. King said a cap-and-trade program was too punitive economically, while noting that the state amounts to three-tenths of 1 percent of global carbon emissions.

“You could wipe the state of Washington off the map, and it wouldn’t make a tinker’s ding,” King said. “It’s a moral issue. So what does that say if you don’t agree? There are ways we can address our carbon pollution. His proposal wants to punish us.”

Senate Ways and Means Chair Andy Hill, R-Redmond.

Senate Ways and Means Chair Andy Hill, R-Redmond.

Hill, who will get the second crack at the state budget following House Democrats, who have to unveil their plan first, said Inslee is leading Washington state residents to believe “there’s some kind of Armageddon when it comes to the state budget.”

Hill said it’s a myth to believe the state is facing a massive budget deficit in the coming years, and contended the governor is using that to push for new taxes. Washington state expects to take in $3 billion in revenue above its current budget of $33.8 billion. It’s forecasted to have $37.2 billion available without the tax increases, and he put the state’s 2015-17 costs at $36.2 billion.

“If we want to make additional investments, that’s part of the legislative process,” Hill said. “We do not have a brutal deficit. It’s a false choice to say you raise taxes or make cuts. New taxes should be the last resort.”

The increase in the upcoming budget cycle covers pension cost increases, added caseloads, debt service as well as mental health funding required by a state Supreme Court ruling, paying to fight forest fires last summer, and others.

With the $1 billion left over, Hill said the state could address the $750 million in McCleary costs that the Legislature has to address this session. Money would be left over to address the pay increases for state teachers, which is statutorily required under a voter-approved initiative and would cost $235 million. Those pay increases have been suspended over the last several budget cycles.

So how does that differ from Inslee’s plan? Notably, that wouldn’t address fully implementing an all-day kindergarten program statewide, which would cost $107 million, and doesn’t touch class-size reductions for grades kindergarten through third-grade, which requires a $448 million expense. Further, Inslee included additional pay increases for teachers in future school years, costing $150 million.

He also included $156 million for expanding early-learning programs. That’s not to mention the almost $600 million in pay raises for state employees, which were negotiated in the most recent collective-bargaining sessions between the governor’s office and various unions.

The McCleary ruling will require the state to fully implement all-day kindergarten and reduce K-3 class sizes, but not in the time table the governor has proposed. A key part of his education plan pitch was that the state would be paying off these obligations a year ahead of schedule.

But, addressing the K-3 class size reductions allows the governor to say he’s taking a first step toward fulfilling Initiative 1351, the recent ballot measure that requires shrinking the class size in all grades. Fully paying for the initiative could cost upwards of $4 billion.

As to the other investments Inslee is pushing for, Hill said the Legislature will have to debate their merits and decide if tax increases are the right way to pay for them.

Hill’s comments were balanced by those of Rep. Reuven Carlyle, D-Seattle and chair of the House Finance Committee, during Wednesday’s debate. Carlyle, while not endorsing Inslee’s plans, said the status quo is preserving an unfair and imbalanced tax system.

He attacked the exemptions it maintains, and said lawmakers need to spend more time examining fixes. The state needs to move to lower tax rates that are broadly applied, rather than protecting a system that features higher rates on a narrower tax base. He said he would favor a low-rate capital gains tax as part of a broader reform package.

“It is unethical,” Carlyle said. “We need the same level of rigor on the tax side of the ledger as we do on the spending side.”

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