Details emerging on Democrats’ $52.4 billion budget deal

OLYMPIA — Democratic leaders on Friday revealed details of their budget deal and a few wrinkles they need to iron out in the session’s final weekend.

They’ve agreed on a new two-year $52.4 billion budget which aims to transform the mental health system, boost special education funding, and launch a new statewide health care coverage for educators.

The spending plan counts on roughly $670 million from new taxes on banks and vaping products, higher taxes on sellers of expensive properties, and transfers from a variety of state accounts, according to information provided by House and Senate Democrats.

And, in a bit of bookkeeping sleight of hand, the deal pours $393.3 million into a new dedicated higher education account, money that will come from another tax, this one a hike in the rate paid by professional service businesses and high-tech giants like Microsoft Corp. and Amazon. Democrats are steering these dollars into a separate fund and do not include the sum in the bottom line of the budget.

“I’m very happy. I think it’s a good strong budget for the state,” said Rep. June Robinson, D-Everett, a member of the House budget negotiating team. “It allows us to make really historic investments in higher education. We focus on giving every person in Washington a chance to get training they need to work at a job they like that pays them a living wage.”

Senate Majority Leader Andy Billig, D-Spokane, said the budget “reflects the priorities and values of our state.”

One thing it doesn’t have is a capital gains tax sought by House Democrats.

“We held firm in not using the capital gains (tax) to balance the budget,” said Sen. Christine Rolfes, D-Bainbridge Island, the Senate’s lead budget writer, adding that there was not enough support in the caucus to pass it.

Also, the deal assumes lawmakers will agree on lifting the lid on how much school districts can collect from local property taxes. But budget writers said Friday that is not a certainty.

“We built it into the budget,” Rolfes said, adding it needs to be resolved before the scheduled end of session Sunday.

Republican lawmakers are sure to blast the roughly $860 million in new tax revenues. They’ve argued new taxes are not needed because the state will start the next fiscal cycle with roughly $4.5 billion more to spend than the last budget thanks to the strong economy.

But Democratic leaders have repeatedly said those dollars are eaten up by school funding promises tied to the landmark McCleary court case — and there’s a lot more issues to be addressed.

The budget deal puts $155 million more into special education. Lawmakers are still working on how those dollars will be distributed. And there is $328 million for the educators’ new health insurance program, a byproduct of the McCleary settlement.

There’s $172 million earmarked for behavioral health investments, a large chunk for staffing and safety improvements at Western State Hospital. But there also is money in this operating budget and a capital budget — which wasn’t released Friday — to increase the number of treatment beds in local hospitals and private facilities in communities around the state.

Details, and the actual language of the budget, will be released Saturday.

Taxes will garner attention.

House Democrats put forth the business tax hike for higher education and the Senate agreed. But when Senate Democrats didn’t agree to a capital gains tax, the two caucuses set about looking for another source of money.

On Friday, they came up with one — profits of big banks. Under the plan, banks which earn at least $1 billion in net profits in a year would see their business and occupation tax rate climb from the current 1.5 percent to 3 percent with a portion, 0.3 percent, steered into the new dedicated higher education fund.

Democrats are replacing the flat excise tax rate imposed on each sale of property with a four-tier graduated rate.

A new 1.1 percent rate would be levied on sales of property worth up to $500,000. The state’s current 1.28 percent rate would continue to be imposed on sales of property valued between $500,000 and $1.5 million, a 2.75 percent on sales between $1.5 million and $3 million and 3 percent on those above $3 million.

The budget counts on revenue by repealing a sales tax break for residents who live in states that don’t have a sales tax, like Oregon. Under the measure, non-residents would be able to recoup some saving through a refund.

And they are expected to enact a new tax vapor products. The House and Senate are considering different approaches and must reconcile their differences.

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