This Washington

Report: State Needs New Revenue to Backfill $2.3 Billion Shortfall

A new report from the lefty Washington State Budget and Policy Center suggests new revenues to pay for an estimated $2.3 billion state funding shortfall.

By Erica C. Barnett February 6, 2013

This morning, the lefty Washington State Budget and Policy Center rolled out a new report showing what they say will be the implications if the state fails to fully fund education, as mandated by the state supreme court's McCleary decision—a mandate the center estimates will cost the state $1.4 billion over the next biennial budget cycle (and $4.5 billion between 2017 and 2019, when the full McCleary mandate goes into effect. 

That bill is on top of another $900 million to close the state's current budget gap without cutting existing funds for higher education, health care, and other services—a total of $2.3 billion. In one hypothetical scenario (since no one has proposed specific cuts yet), an all-cuts, no-revenue budget could mean the elimination of all funding for state universities and four-year colleges, the elimination of all student aid, and the suspension of voter-mandated pay increases for teachers.

"Without [new] revenue, it’s inconceivable that we can make enough investments in education."—Kim Justice, Washington Budget & Policy Center"Without [new] revenue, it’s inconceivable that we can make enough investments in education" to satisfy the mandate, Budget and Policy Center lobbyist Kim Justice said in a conference call with reporters this morning. "Schools rely too much on local funding to pay for things the state should be paying for." 

The group is suggesting three new revenue sources: A capital gains tax like the one proposed by state Sen. Ed Murray (for $700 million); extending a 50-cent-per-gallon tax on beer and a business and occupation tax on certain professionals, both set to expire this year ($635 million); and expanding the sales tax to consumer services, like haircuts, auto repair, attorney services, and cable TV ($220 million). 

(Editorializing here: While I understand the logic of taxing luxuries like spa services and massages, "consumer services" is a broader category than the Budget and Policy Center's cherry-picked list suggests, and it includes services that everyone, including the low-income folks for whom the group advocates, use from time to time.

When I asked about this, WSBPC state policy fellow Mike Mitchell pointed out that the state is moving toward a "service economy," with services making up more and more of the state's GDP; "When you look at our sales tax over time, we want to make sure it tracks with the economy," Mitchell said.) 

With the shakeup in the state senate, which is now controlled by the Republicans-plus-two Majority Coalition Caucus, a major tax overhaul this year seems unlikely, as Justice readily acknowledged. "We really think the best option to make true reform to our revenue system would be to adopt a capital gains tax," she said, but "in terms of what's feasible, extending [the B&O and beer] taxes is something that makes the most sense." 

She added: "Looking at the makeup of the senate and the politics there, it's sometimes hard to imagine how we can raise revenue. But ... the choices are very clear, and once legislators start going through the budget, hopefully those choices will be even clearer."

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