Washington Gov. Jay Inslee, center, shakes hands after he signed a new two-year state operating budget Friday, June 30, 2017, at the Capitol in Olympia, Wash. The budget was approved by the Legislature earlier in the day, just in time to avert a partial government shutdown. Ted S. Warren AP
Washington Gov. Jay Inslee, center, shakes hands after he signed a new two-year state operating budget Friday, June 30, 2017, at the Capitol in Olympia, Wash. The budget was approved by the Legislature earlier in the day, just in time to avert a partial government shutdown. Ted S. Warren AP

Politics & Government

Inslee signs ‘a truly historic budget’ to stop government shutdown, put money into schools

By Melissa Santos

msantos@thenewstribune.com

And Walker Orenstein

worenstein@thenewstribune.com

June 30, 2017 07:41 AM

UPDATED July 02, 2017 03:46 PM

Washington lawmakers pushed a new $43.7 billion budget through the Legislature in less than a day on Friday, working to avoid a partial shutdown of state government that was scheduled to occur at midnight.

Gov. Jay Inslee signed the new two-year budget into law at 11:15 p.m., less than an hour before the deadline to avoid the closure of many state agencies and temporary layoffs of thousands of state employees.

The Democratic governor said he was proud to sign “a truly historic budget” he praised for finally addressing a court order to fix how the state pays for schools.

“I believe this budget at long last will meet our constitutional obligations to fully and fairly fund basic education,” Inslee said.

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The roughly 600-page budget document cleared both chambers of the Legislature on Friday afternoon, just hours after it became public earlier that morning. Lawmakers also passed a long-awaited plan to overhaul the state’s public school system, along with several tax measures needed to pay for the budget.

Sen. John Braun of Centralia, the GOP budget writer, said he was happy that lawmakers’ long months of negotiations produced a plan that he said dramatically increases state spending on education. More than half of the budget will go toward K-12 education, bringing total spending on schools to $22 billion in the next two years.

“When we talk about budget and negotiations, we often say what comes out reflects our values,” Braun said. “And I think it’s pretty obvious from this budget that we share a commitment to public education.”

The influx of new state money for K-12 schools — $1.8 billion over two years — is designed to comply with a 2012 court ruling that found Washington state is failing to fully fund the state’s school system. In the McCleary case, the state Supreme Court said Washington state needs to stop using school districts’ local levy money to pay for basic education costs, such as teacher salaries.

The school-funding plan lawmakers approved this week overhauls the state’s method of paying teachers, while adding new money to help the state take on salary costs that are being paid unconstitutionally by school districts. The state is in contempt of court over the Legislature’s slow progress on that issue.

House Majority Leader Pat Sullivan, D-Covington, said he think the budget and school-policy changes go a long way toward complying with the Supreme Court’s order in the McCleary case.

“Does it mean we’re done with education funding? No,” Sullivan said. “But for today, this is a big step in actually meeting the state’s obligation.”

Ultimately, the court will decide whether lawmakers have done enough.

The two-year budget plan raises about $1.6 billion over two years by increasing the state’s property tax. Starting in 2018, the state tax will go up by about 82 cents per $1,000 in assessed value, bringing the state property tax rate to $2.70 per $1,000.

At the same time, the plan will lower school district property taxes for many in Washington state. A new cap on local levies taking effect in 2019 will mean that most people’s property taxes would decline overall, Braun said.

Yet the plan will cause property taxes to rise in some areas with high-property values, like Seattle, Bellevue, Gig Harbor and Mercer Island.

The tax plan was widely supported by the GOP, who applauded that it lowered taxes in many places outside of the Seattle metro area.

“We need to make sure the homeowner in SeaTac has the same and a fair property tax compared to the person down the street in Seattle,” Braun said.

The taxes also drew criticism from Democrats who said they would rather have implemented taxes on capital gains or carbon emissions to pay for the budget.

State Sen. Kevin Ranker, D-Orcas Island, said he has concerns about how the plan will affect homeowners who will see their taxes go up.

“In Seattle, a $440 property tax increase next year is an impact, a very real impact,” said Ranker, who is a budget negotiator for Senate Democrats. Ranker said homeowners in his district will see similar increases.

Still, Ranker voted for the budget, saying he supports how it will increase spending on education, social services and in other areas.

“In the end, I think we’re doing the right thing but paying for it in the wrong way,” Ranker said Friday on the floor.

An analysis from the nonpartisan Office of Program Research found that taxes will go down in several local school districts once the plan is fully phased in.

In Tacoma, for instance, the plan is expected to reduce property taxes for the average homeowner by $220 in 2019. Several other districts in Pierce County — including University Place, Clover Park, Bethel, Franklin Pierce and Carbonado — should also see property tax decreases.

Others, like the Peninsula and Dieringer school districts, will see their taxes rise.

The largest school districts in Thurston County — Olympia and North Thurston — essentially break even on the plan. Nearly every other Thurston County district will see tax decreases, except for the tiny Griffin School District, where taxes will go up.

Across the state, every school districts’ property taxes will spike in 2018, the first year of the plan, until the reduction in school district levies kicks in a year later.

Budget negotiators said the plan will put $7.3 billion of new state funding into public schools in the next four years. But it wasn’t clear Friday how much total new funding school districts can expect, after factoring the decrease in their local levies.

State Superintendent Chris Reykdal, a former Democratic lawmaker, pegged the total amount of net new spending on education at about $5 billion over the next four years, when accounting for the cuts to local levies.

The two-year budget also relies on about $456 million in revenue from ending tax exemptions.

Most of that money comes from collecting taxes from online shoppers by imposing new rules on internet retailers such as eBay. The plan also ends a sales-tax break on bottled water and get rid of an exemption that benefits oil companies.

On the spending side, the budget also includes $618 million to pay for labor contracts for state workers, along with about $102 million to improve the state’s mental health system.

That $102 million includes $60 million for upgrades at the state’s psychiatric hospitals. The state’s largest mental health facility, Western State Hospital in Lakewood, has faced federal scrutiny for safety and capacity issues.

Much of the other mental health money is geared toward helping ease the burden on the psychiatric hospitals through more services elsewhere.

The budget deal also will spend $3 million on testing for lead in water at public schools and screening for children at high risk of having elevated levels of lead in their blood.

Lead testing is currently up to individual school districts to complete, and many small districts don’t test their water.

Housing and homeless services will get an extra $9 million in the plan. About $25 million will add 1,800 slots in state preschool programs over the next two years.

The budget plan drew some “no” votes, but it passed both chambers with large, bipartisan margins.

Sen. Joe Fain, R-Auburn and the Senate majority floor leader, said the budget reflects bipartisan compromises that ultimately made for a better two-year spending plan.

Earlier in the year, Republicans who control the Senate had proposed a much higher increase in the state property tax, while Democratic House leaders had proposed not raising property tax rates at all.

Fain said in the future, however, he’d like to see entire process go faster, instead of having to rush complicated bills through the Legislature hours before the deadline to avoid the closure of state agencies.

“It’s not good for legislators, and it’s not good for the public who don’t have access to the information that they need,” Fain said.

Though the Legislature avoided a government shutdown, it still has a little work left to do.

The House and Senate couldn’t agree on a new two-year capital budget that pays for construction projects. The $4-billion capital budget was caught up in a dispute over another bill addressing the Hirst decision, a court ruling related to water rights.

Lawmakers approved a partial capital budget to avoid delays to current building projects. They adjourned for the weekend, and are expected to be back later in July.

Melissa Santos: 360-357-0209, @melissasantos1

Walker Orenstein: 360-786-1826, @walkerorenstein