Democratic Sens. Christine Rolfes and David Frockt speak to the media about a supplemental budget proposal in Olympia on Monday. The proposal looks to use a projected state revenue increase to pay for the final component of an education spending plan. (AP Photo/Rachel La Corte)

Democratic Sens. Christine Rolfes and David Frockt speak to the media about a supplemental budget proposal in Olympia on Monday. The proposal looks to use a projected state revenue increase to pay for the final component of an education spending plan. (AP Photo/Rachel La Corte)

Senate Democrats propose property tax cut with surge in revenue

The latest revenue forecast predicted $1.3 billion more in the next three years than anticipated.

OLYMPIA —Majority Democrats in the state Senate laid out a path Monday to amply fund public schools by a looming deadline, bolster the mental health system and cut property taxes across Washington in 2019.

They proposed a supplemental budget they said capitalizes on the latest revenue forecast predicting the state will bring in $1.3 billion more in tax receipts in the next three years than previously anticipated.

It pledges $972 million for public schools to ensure the state is committed to paying its share of basic education costs by September, as demanded by the state Supreme Court in the McCleary case.

Their plan also sets aside $103.8 million to pay penalties that have piled up in the case since August 2015 when the court found the Legislature in contempt for not meeting its milestones.

And it pours roughly $163 million into improvements at the state’s two psychiatric hospitals, complying with federal court decrees regarding evaluation and treatment for people accused of crimes, and battling a crisis of opioid abuse disorder.

“This is a budget our state can be proud of,” said Sen. Christine Rolfes, D-Kitsap County, at a news conference. Rolfes is chairwoman of the Senate Ways and Means Committee and lead budget writer for the chamber.

“We’re funding our public schools and addressing mental illness,” she said. “We’re living within our means and we’re returning taxes to Washingtonians at a time when economic growth is extraordinarily good.”

The political centerpiece of the Democrat proposal uses the revenue windfall to buy down part of the property tax increase that lawmakers enacted last year to meet its McCleary obligations.

At that time, the Legislature and Gov. Jay Inslee hiked the statewide tax rate by 81 cents to $2.70 per $1,000 assessed value. It marked the single-largest hike in state history and is a contributing factor to the startling increases homeowners are finding on their tax bills this month.

Senate Democrats want to reduce the rate by 31 cents, to $2.39 per $1,000 of assessed value in 2019. They tap the state’s restricted reserves, also known as the “rainy day” fund, to cover the estimated $403 million in lost revenue.

Under Senate Bill 6614, nothing would change this year. In 2019, the statewide rate would drop, coinciding with a reduction in levy rates imposed by local school districts to give property owners greater relief. In 2020, the state rate would go back up to $2.70.

“This proposal is thoughtful,” Rolfes said. “It’s fiscally responsible and it provides middle class tax relief while we search for more permanent ways to fix our state’s unfair tax code.”

In all, Senate Democrats are seeking to spend an additional $1.2 billion on top of the two-year $43.7 billion budget passed in June. Once reductions and adjustments in some programs are factored in, the net increase in spending is about $900 million, according to budget documents.

Sen. John Braun, R-Centralia, the ranking Republican on the Senate budget committee, offered measured criticism of the Democrat blueprint.

“While we may have differences of opinion on a range of issues, this plan demonstrates a serious commitment toward responsible budgeting,” he said in a statement.

“I also appreciate that Senate and House Democrats have started to come around on offering property-tax relief after the negative response I received when proposing this in September,” he said. “However, I do not think the Senate proposal goes far enough.”

The biggest chunk of new spending in the Democrat plan is to comply with the court-imposed deadline in the McCleary case.

Justices gave the state until September 2018 to amply fund public schools. The plan lawmakers passed last year steered billions of additional dollars into schools but did not complete the task until September 2019. The major unfinished piece dealt with salaries.

In the fall, justices faulted lawmakers for their timeline and gave them this session to figure it out or face additional fines.

Democrats earmark $778 million for salaries of school teachers, staff and administrators in this budget cycle plus another $194 million in the 2019-21 budget to complete the task.

Their budget also puts in $46.4 million to cover higher operating costs at the two state psychiatric hospitals plus changes required at Western State Hospital to continue receiving federal funding. There’s also money to add capacity at both hospitals.

Another $46 million is budgeted to pay for an anticipated accumulation of fines, attorney fees and other costs associated with the Trueblood case, which aims to eliminate long waits for evaluation and treatment for people accused of crimes. Democratic senators said the added capacity will help the state satisfy demands of the court in that case.

And, of interest to Snohomish County, there is $800,000 for a 40-bed residential criminal justice diversion center pilot project at the former work release site in Everett, an undertaking aimed at better addressing street-level drug addiction and mental illness. That’s $300,000 more than Gov. Jay Inslee requested in the budget proposal he released in December.

The Senate Ways and Means Committee is slated to hold hearings Tuesday on the Democrats budget and the tax cut bill. A vote on the budget could be held by the Senate by the end of the week.

A vote on the tax-cut bill could take longer because a supermajority of 60 percent is required to spend money out of the rainy day fund.

Meanwhile, majority House Democrats intend to release their budget plan Tuesday and could act on it later this week.

At least one significant difference may emerge. Some House Democrats are pushing for a capital gains tax to pay for schools, thus allowing repeal of last year’s property tax increase.

When asked how she felt about that, Rolfes said she’d wait to see if the House actually approves the new tax as part of its spending plan.

Similarly, the Senate budget does not include a carbon tax that the governor proposed in his budget. At that time he counted on revenue from the tax paying the additional expenses of the McCleary case.

The latest revenue forecast erased the need for the tax and enables the Legislature to “take the final step” in fulfilling its constitutional obligation “to our kids and to the court,” Rolfes said.

“Our work on public education in this state will never be done but this feels to me like a huge milestone,” she said.

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

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