OLYMPIA — The leader of the state public schools system on Tuesday called for enacting a capital gains tax to provide hundreds of millions of additional dollars for education and shave hundreds of dollars from state property tax bills.
Superintendent of Public Instruction Chris Reykdal also wants laws revamped for school districts to collect more money from local levies and pass construction bonds more easily.
“We’ve come a long ways,” Reykdal said, referring to investments and changes made in the course of the McCleary legal battle. “Our work is not done.”
To that end, he submitted a budget request to Gov. Jay Inslee for $647 million of new spending for the 2019-21 operating budget.
Of the total, $142 million is for special education to cover the cost of individual student needs and promote efforts at inclusion of students with special needs in regular classes.
He wants $60 million for more school counselors, nurses, and staff to reach out to families and local communities. There’s money sought to expand dual language programs, increase access to career and technical education, and defray the cost of dual credit programs for low-income students.
The thrust of the budget request is to reduce the achievement gap facing students of color, students of poverty, students with disabilities and students learning the English language, he said.
“We are doing good things in the state of Washington. But nothing transformative in the way of closing learning gaps — and that’s what this budget proposal will do,” he said. “Right now is the time for the Legislature to double down … and to finish the job on equity, closing gaps, and getting every kid graduated.”
To pay for the new investments and ongoing McCleary-related expenses, Reykdal is pushing the old idea of a capital gains tax. It would be 8 percent on the sale of stocks and bonds, he said. It would not apply to the sale of homes, agricultural lands or timber lands, he said.
It would raise an estimated $2 billion for the biennium. Reykdal wants half of those dollars to go into education and the other half used to buy down the state’s property tax rate by about 35 cents per $1,000 of assessed value.
The first-term schools chief said if it’s passed it would lower property taxes for 4 million while putting the capital gains tax on 53,000 people.
It will make the state’s tax system “more progressive, more fair and more equitable,” said Reykdal, a Democrat and former state lawmaker.
Inslee and a few Democratic lawmakers have tried unsuccessfully in recent years to push through some form of a capital gains tax. Reykdal’s embrace of its use to help fund public schools may offer the political cover needed to get it passed.
If it gets introduced, it will incite fierce debate on whether it is an income tax, which is barred under the state Constitution.
Reykdal said it is not but opponents say the Internal Revenue Service and state revenue departments across the country conclude the opposite.
“Proponents of a capital gains tax need to be honest and call it what it is, an income tax,” said Jason Mercier, director of the Center for Government Reform of the Washington Policy Center. “If you want an income tax in Washington stop playing games to try to evade the state’s prohibition on graduated income taxes and propose a constitutional amendment.”
On the policy side, Reykdal is seeking two significant changes.
The first involves the rules surrounding local property tax levies collected by school districts.
As part of the final McCleary legislative package, lawmakers set a cap on those levies. Districts can collect no more than $1.50 per $1,000 assessed valuation or $2,500 per student, whichever is less.
Reykdal wants to simplify the rules to allow a local voter-approved levy to bring in a sum equal to 22 percent of the total of state and federal funds. Under this scenario, the new cap would be $3,500 per student. There would be levy equalization dollars to ensure property-poor districts are able to receive up to $3,500 per student.
Reforming levy rules is of significant interest to school district administrators and teachers around the state.
Many districts are forecasting program cuts and layoffs as early as 2020. District leaders fret over whether there will be enough revenue coming in from the state to pay operating costs, including the higher teacher salaries awarded this year.
“We strongly support Superintendent Reykdal’s efforts to redesign the levy cap to a more equitable and stable model,” said Jeff Moore, executive director of finance and business services for the Everett School District. “We further appreciate that he is emphasizing the immediate need to do so to mitigate significant layoffs across the state.”
Another change sought by Reykdal would allow school construction bonds to be passed with a simple majority rather than 60 percent as now required.
Inslee will release his budget proposal in December. The House and Senate will each write their own budgets as well when the 2019 session gets underway in January.