As state revenue surges, lawmakers vow property tax relief

A new forecast predicts nearly $1.3 billion more income in the next three years than expected.

OLYMPIA — The state budget is awash in money and lawmakers said Thursday it should be used to ease the pain of a spike in property taxes along with satisfying court mandates on school funding, mental health services and evaluation of mentally ill detainees.

The good news came in the latest revenue forecast, which predicts the state will rake in nearly $1.3 billion more in revenue in the next three years than had been previously thought.

It works out to $628 million in the current budget, which runs through mid-2019, and $660 million more for the ensuing two-year spending plan, according to numbers released by the Office of Financial Management at a meeting of the Economic and Revenue Forecast Council.

That means budget writers in the House and Senate have plenty of resources for the supplemental budget proposals they’ll release next week.

There’s enough money to ensure the state is fully funding public schools starting this fall as demanded by the Supreme Court, said Sen. Christine Rolfes, D-Kitsap County. the Senate’s chief budget writer. That’s going to cost almost a billion dollars in the next two budgets, she said.

And they want to help bring the state into compliance with federal mandates regarding the treatment of mentally ill detainees and operation of its state psychiatric hospitals, she said.

That might require setting aside a couple of hundred million dollars. Even so, the state is expected to have nearly $3.8 billion in restricted and unrestricted reserves.

“We can clearly address all of those issues and at the same time I think it shows we can provide some property tax relief,” she said after the meeting of the Economic and Revenue Forecast Council on which she serves.

“Our direction was to comply with all of our federal and state court mandates without raising taxes and I think we’re in a position now to be able to lower (property taxes) at least temporarily,” she said.

Property owners are enduring a spike in their tax bills. Increased home values is one reason. Another is the state ratcheted up the tax rate to raise money to cover costs associated with the McCleary school funding case.

It went up 81 cents to a flat rate of $2.70 cents for every $1,000 of assessed value — the largest single increase in state history.

Now lawmakers in both parties want to soften the blow by essentially buying down the increase for 2018.

House Majority Leader Pat Sullivan, D-Covington, said their caucus intended to introduce a bill Thursday to provide “temporary tax relief this year.”

Democrats are not looking to roll back the rate. Because state law doesn’t allow the state to give refunds on property taxes, they are looking at ways to allow property owners to defer a portion of their payment this year.

Meanwhile, Republicans, the architects of last year’s increase, also want the surge in revenues used to lower property taxes. They’re pushing bills to defer payments and to lower the rate.

“We recognize we did a hard thing last year,” said Sen. Joe Fain, R-Auburn, at a meeting with reporters Thursday. “My concern is (the Democrats’) plan does not go far enough. There are a lot of different ways to accomplish this. There is a solution.”

The rosy news isn’t stopping efforts by some Democrats to enact new taxes on capital gains and carbon. Rolfes and Ormsby each said they are not counting on money from either of those taxes in their spending proposals.

The increase in revenue in Thursday’s forecast compared to the last one in November marks the largest for any quarter since before the 2009 recession.

The bustling economy is creating jobs, and driving up the confidence and spending of consumers, said Steve Lerch, the state’s chief economist. And the federal tax reform is giving workers extra income which they’ll spend, he said.

While there are faint signs of a recession down the road, he said, “We believe the next two years are going to look good.”

Jerry Cornfield: 360-352-8623; jcornfield@herald Twitter: @dospueblos.

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