Earlier this week, when Josh asked Washington governor-elect Jay Inslee to respond to Gov. Chris Gregoire's assessment that there was no way to balance the budget without new revenue (i.e., taxes), Inslee said he had no intention of backing off on his campaign promise not to raise taxes. Instead, Inslee has said "economic development" will lead to higher state revenues, allowing the state to fulfill its obligation to fully fund K–12 education, as mandated by the McCleary case.
Throughout his campaign, Inslee opposed his Republican opponent Rob McKenna's proposal for a "levy swap"—replacing local property tax revenues, which help fund schools now, with state property taxes, redistributing taxes from richer communities (like Seattle) to poorer communities in Eastern Washington, on the grounds that it constituted a tax increase on cities like Seattle. The implication, of course, was that the levy swap would force Democratic counties, which generally support taxes, to subsidize Republican counties, which generally oppose them. (That's certainly a bit off base given that $2 billion in local levies are already on the books, including in Eastern Washington.)
Ross Hunter (D-48), the state house budget committee chair, who also proposed a levy swap (and was told to put a gag on it during Inslee's campaing), believes Inslee's plan to forgo new revenue, is unworkable.
"You either raise revenue, either by cutting something else or by raising taxes, or you do what I've suggested, which would be less of a hit on almost all districts, and is more progressive than raising the sales tax."—Ross Hunter
"I can't come up with a financial scheme that is legally workable" that fulfills the McCleary mandate without raising revenues, Hunter said. "The court was pretty clear that we cannot ask local districts to rely on local taxes to fund basic education, so we're going to have to come up with a solution that pays for education at the state level."
So our One (okay, two) Questions for Hunter today are: How do you respond to critics in Seattle who oppose the levy swap, saying they shouldn't have to spend more in taxes to subsidize schools in antitax red Eastern Washington counties? And what's your alternative?
On the swap, when I talked to the Inslee campaign, they told me they were reacting to the McKenna proposal, which takes money out of school districts over time. I can’t come up with a financial scheme that raises more money from Eastern Washington to fund Yakima schools. If you use the [state] sales tax, the bulk of it comes out of King County. If you use the B&O tax, the bulk of it comes out of King County, If you use the property tax, the bulk of it comes out of King County.
The alternatives are, you either raise revenue at the state level, either by cutting something else or by raising taxes, and you spend it on public education, or you do something like what I've suggested, which would be less of a financial hit on almost all districts, and is more progressive than raising the sales tax. [And it] gets rid of some of these pernicious problems from 30 years ago, where different districts have different tax rates and where different districts are able to raise vastly different amounts of money from their local voters.
I fix that by rewriting how the levies work. My proposal would get rid of I-747 (which limits local property tax increases to 1 percent a year) and let it grow at the same rate as the state property tax, 9.5 percent. McKenna's budget proposed taking money out of local levies, which grow at about 4 percent a year, and moving it into state property taxes, which grow at 9.5 percent. That's a bad trade. So if you're going to do this trade, you absolutely need to let that money grow at the rate of the economy.
We probably need some Republican votes in the senate. [So the question is], can we put together a package of votes that works in both the house and the senate?
Two footnotes: 1) Hunter's plan has elements that will disappoint Republicans and Democrats. Conservative Republicans aren't likely to go for eliminating the 747 cap. And liberal Democrats, like Inslee, are likely to oppose the levy swap on the grounds that it disadvantages Seattle and other cities in King County that vote for Democrats.
And 2) Hunter's plan needs support in the senate. Currently, the balance of power in the state senate remains in limbo, with the key race—between Republican state Sen. Don Benton, R-17, and Democratic state Rep. Tim Probst, D-17, who's challenging Benton—in flux. A Probst win would give the Democrats a solid 27-22 majority; a Benton win would give them a nominal 26-23 majority, with two of those seats held by conservative Democrats Rodney Tom (D-48) and Tim Sheldon (D-35), who frequently vote with Republicans, giving the Republicans an effective majority.