Inslee wants to roll back property tax changes he signed into law as part of schools fix

Gov. Jay Inslee wants to change to the school-funding plan the Legislature approved this year. This clip is an excerpt from an episode of a political video series, Capitol Happy Hour, that will go online next week.
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Gov. Jay Inslee wants to change to the school-funding plan the Legislature approved this year. This clip is an excerpt from an episode of a political video series, Capitol Happy Hour, that will go online next week.
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Politics & Government

Inslee wants to scrap key part of hard-fought, bipartisan school funding plan

July 28, 2017 11:05 AM

Gov. Jay Inslee has big plans if his party takes back the Senate this fall — starting with undoing some of the tax changes he just signed into law to fix the state’s school system.

Inslee is banking on a Democrat winning a hotly contested Senate race to help him push through a revised plan to comply with the state Supreme Court’s McCleary decision. The high court’s 2012 ruling said the state was failing to fully cover the costs of basic education and must correct those funding problems by 2018.

The Democratic governor told The News Tribune on Thursday that if a member of his party wins the November special election in the 45th Legislative District, he will try and roll back at least part of the complicated property-tax shift lawmakers approved this year to respond to the court order.

“The eventual result was very good for the state of Washington, in my view,” Inslee said of the McCleary plan he signed into law last month. “Except for the property tax, which I hope that we can change in the near future, and I intend to do.

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“If we have a little different Legislature come November, there is every prospect, I hope, to reduce the property tax.”

The governor’s proposal got a cool reception from Sen. John Braun, R-Centralia and the lead Senate budget writer.

“Here we are after months and years of bipartisan work to address this,” Braun said. “Folks are finally digging in and understanding the agreement. And this just adds new drama to a challenge that hopefully was drawing to its end.”

The school-funding overhaul, which lawmakers approved after six months of deliberation and three special sessions, involves raising the statewide property tax by about 81 cents, while also lowering local school district property-tax levies in many cases.

The so-called levy swap will increase property taxes in some areas, such as Seattle, Mercer Island, Bellevue and Gig Harbor. But it ultimately will reduce property tax rates in most other school districts, compared with what homeowners there paid in 2016.

Inslee has never been a fan of the property tax swap.

On Thursday, he repeated his previous position that he would rather see the state meet its school-funding obligations using a new tax on carbon emissions or a tax on capital gains — such as the sales of stocks and bonds — rather than imposing a higher property tax.

Inslee proposed those measures in December, but they failed to advance in a divided Legislature.

The governor said he thinks those taxes would have a shot next year if the Senate switches hands.

Right now, Republicans control the Senate 25-24 with the help of conservative Democrat Tim Sheldon. The GOP could lose that advantage if Democrat Manka Dhingra defeats Republican Jinyoung Lee Englund in the 45th District.

The district, which strongly favored Democrat Hillary Clinton in the 2016 presidential election, includes suburbs east of Seattle, including Redmond, Woodinville, Sammamish, Duvall and part of Kirkland. The seat was formerly held by Andy Hill, the former GOP budget writer who died of cancer last year.

A third candidate, independent Parker Harris, is seeking election to the seat. Tuesday’s primary election will decide which two candidates advance to the November ballot.

Braun said it was “a little surprising” that Inslee is already talking about altering a compromise that lawmakers struggled for years to reach.

The state has been in contempt of court since 2014 over the Legislature’s failure to produce a plan to meet the 2018 funding deadline outlined in the McCleary case. Last year, the court threatened additional sanctions if lawmakers failed to produce a detailed plan before adjourning in 2017.

While Senate Republicans originally advocated a much larger increase in the statewide property tax, House Democrats started by suggesting no property tax changes, looking instead to other taxes on capital gains, high-end real estate and businesses. The two sides ultimately met somewhere in the middle.

Inslee said he doesn’t like the property-tax solution for McCleary because “it hit people on fixed incomes, it hit veterans, it hit senior citizens, it hit new people who were having to struggle with housing costs.” He called the statewide property tax increase “a Republican mistake.”

“If we get a change in the Legislature this November, I’m going to encourage legislators to reduce that increase, to find a different plug for that revenue source,” Inslee said.

He added: “I think that if we could tell Washingtonians that we’re going to cut your property taxes and to replace that revenue for schools, we’re going to have a small tax on polluting industries, large oil refineries ... yes, I think that will enjoy broad public support, and broad support in the Democratic caucus.”

Braun questioned whether gaining one Senate seat would enable Democrats to pass the new taxes Inslee seeks.

House Democrats, who have a 50-48 majority in the Legislature’s lower chamber, didn’t vote on the capital gains tax they proposed in their budget this year. Senate GOP leaders speculated that Democrats didn’t have the votes for their plan. Democratic leaders insisted they did but said they didn’t want to vote on the tax measures unless they were agreed to as part of a budget deal.

The partisan makeup of the House isn’t expected to change this fall, since only a few seats are up for election in relatively safe districts.

Sen. Christine Rolfes, D-Bainbridge Island, said she’s not sure a capital gains tax could clear the Senate next year, even if Democrats gain a seat. A carbon tax might have more of a chance, she said.

“It would need every single Democrat to do it,” Rolfes said. She said she could probably support one of the taxes if it meant lowering property taxes, though.

State Sen. Reuven Carlyle, D-Seattle, said while it is impossible to predict “the mechanics of the legislative process,” he thinks the governor’s idea of swapping property tax revenue for another type of tax would have ample support if Democrats regained full control of the Legislature.

“There is no question that at a philosophical level, most Democrats are in favor of a more progressive approach than the Republicans’ middle-class property-tax increase,” Carlyle said.

Still, Democrats winning the 45th district seat is far from certain, Carlyle said.

“I personally think it’s a coin toss,” he said.

So far, the two major-party candidates have been in overdrive mode when it comes to fund raising. Englund, the Republican candidate, has raised about $692,000, while Dhingra, the Democratic candidate, has raised roughly $695,000, according to the state Public Disclosure Commission.

On top of that, independent groups have spent more than $1.5 million on the race so far, shelling out about $1 million to support Englund’s campaign and about $500,000 to back Dhingra.

Harris, the independent candidate, has raised about $3,000.

Melissa Santos: 360-357-0209, @melissasantos1