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Editorial: Fix funding for innovative college grant program

The tax on the state’s largest employers benefits them by assuring educated and trained employees.

By The Herald Editorial Board

The Legislature’s creation last year of the Workforce Education Investment Act — meant to ensure that more than 100,000 low- and medium-income state residents could attend college without having to take out burdensome student loans — was hailed nationwide for its innovative approach to increasing access to higher education and workforce training.

The act’s concept was simple: Rely on the state’s largest technology businesses — such as Microsoft and Amazon — and other employers to provide funding through a business and occupation tax increase to increase grant funding, while targeting the aid to those who need it most.

Forbes magazine’s Michael Nietzel called it “one of the smartest financial aid packages in the country” because it was structured so the financial responsibility would fall on businesses benefiting from an educated workforce. William Zumeta, a professor for the University of Washington’s Evans School of Public Policy and Governance, writing for The Conversation, said the act could fill the “skills gap” that made it difficult for companies to find workers locally. And, Zumeta said, it provided a broader and more generous benefit that allowed students to reserve Pell Grants and other aid for books, room and board and made aid available not just to those in universities and colleges, but those enrolled in registered apprenticeship programs.

Last year’s legislation also allocated $11.5 million during the next two years for the new Career Connect Washington program, which is pairing employers, community colleges, universities and groups such as Workforce Snohomish to design training programs. Another $17 million was allocated to increase enrollment in college programs for high-demand fields, such as information technology and nursing.

Word got out. As of late last month, nearly 300 more students had filed the Free Application for Federal Student Aid in Washington state, than the 30,628 who filed last year at this time, The Seattle Times reported. And nearly 102,500 were expected to take advantage of the State Need Grant for the 2020-21 school year.

Word also got back to lawmakers from the Department of Revenue, that, while the concept was simple, the tax scheme that was adopted might prove too complicated to implement.

The combination of higher demand and lowered expectations for revenue collection resulted in an estimated $220 million less for the program over four years than anticipated. As passed, the B&O tax increases were expected to generate about $945 million over the next four years.

While the tax took effect as of Jan. 1, lawmakers are attempting to make changes to the tax increase that would increase the overall four-year revenue to about $1 billion, while taking the opportunity to simplify the tax and exempt more small businesses from it altogether. Senate legislation, sponsored by Sen. Jamie Pedersen, D-Seattle, passed the Senate last Thursday and is now before the House, and had a public hearing before the House Finance Committee on Monday.

Senate Bill 6492 increases the B&O surcharge for about 4,400 of the largest companies in the state, those earning more than $1 million, while exempting about 35,000 small businesses that would have paid under the current plan. The bill would repeal the original tax structure, retroactive to Jan. 1, and implement the new tax on April 1.

Among those generally supportive of the proposed changes, as well as the original legislation, is Microsoft President Brad Smith, who told Olympia reporters last week, that “We’re glad they’re working through the details to make sure it all works well,” The Spokesman-Review reported.

Republicans in the Senate, the Spokane paper noted, objected to the legislation and suggested instead using some of a $1 billion expected windfall in general tax revenue to bolster the program.

But higher education grant funding — and the businesses in the state that will benefit in the end — need a dedicated, sustainable and predictable revenue source. That commitment to the State Need Grant hasn’t always been there. Zumeta noted that in 2018, more than a quarter of those eligible for the state grant — about 22,600 — were turned away.

We’ve repeatedly pointed to the estimate that nearly three-quarters of a million workers will be needed by the state’s employers in coming years. But of those 740,000 jobs, only 1 in 5 will be available to those with only a high school diploma. The remaining 590,000 jobs will require some level of post-secondary education, from technical training and certification programs to two- and four-year degrees and beyond. Yet, only 30 percent of current high school students will go on to attain post-secondary credentials or degrees. To reach a level of 70 percent necessary to provide the skilled and educated workers needed for those jobs, a greater investment in post-secondary and higher education is necessary.

The Legislature last year made great progress in making that investment. The House now needs to follow the Senate’s lead to make sure that promised investment continues.

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