Editorial: With plans on table, time to start budget talks

By The Herald Editorial Board

We know now where each side stands.

Republicans in the state Senate have passed their budget, albeit by a narrow 25-24 vote. House Democrats also have released their budget and approved it Friday.

But as of last week, Republicans were balking at starting negotiations on the state’s two-year operating budget, whose main focus has been resolving a state Supreme Court mandate to amply fund K-12 education and end the state’s reliance on local school district property tax levies.

Republicans, whose budget imposes no new taxes, have insisted that Democrats in the House pass their proposed package of tax increases before moving forward with negotiations, calling the Democratic proposal a “hollow budget” without those votes.

That process for the tax package is underway in the House, but it’s hard to understand why talks have to wait until then, especially considering that the regular session is scheduled to wrap up before the end of this month. There’s agreement on many overall goals, but there’s also some ground to cover between the two budgets, and talks need to start soon.

Senate Republicans have proposed adding $1.8 billion over the next two years for K-12 education, but to get there, they’ve proposed a budget that cuts social programs and some early education programs, makes significant changes to property taxes and rejects negotiated raises for state employees and lays off other state employees.

Beyond K-12 education, the Senate budget makes important investments in mental health, foster care and higher education. It seeks to add beds throughout the state to locate some patients closer to their families, expands and better supports the foster care system and increases enrollment at universities, particularly in STEM fields.

While the Senate budget does provide for increases in some programs it often funds those with cuts elsewhere.

In higher education, for example, it preserves at current levels both the State Need Grant and the Opportunity Scholarship programs that provide financial assistance to students, but does so at the expense of funding to the state’s Temporary Assistance for Needy Families and WorkFirst programs.

And while providing funds for the Early Childhood Education Assistance Program, including an increase for enrollment of more 4-year-olds, it seeks deeper cuts by phasing out regular funding for enrollment of 3-year-olds.

House Democrats aren’t far from their Republican counterparts in how much they allocate for K-12 education, putting another $1.87 billion in their budget. But their plan preserves or increases social program spending, skips the levy swap proposed by the Senate, and instead relies on tax increases for their $44.6 billion budget, compared to the Senate’s $43 billion plan.

The House budget preserves the higher education tuition freeze and backfills funding to colleges, increases public health funding, expands early childhood education and increases funding for behavioral health, homeless assistance, long-term care, state employee raises, higher education scholarships and more.

The heavy lift for Democrats will be in persuading other lawmakers and the public on its proposed tax increases, including an increase in the business and occupation tax for professional services, a 7 percent excise tax on capital gains and adjustments to the real estate excise tax.

A selling point for the tax package will be its effect in beginning to pull back on the regressive nature of the state’s current tax system, considered one of the most regressive in the nation because it taxes lower income families at a higher percentage of their income than more affluent families.

Each of the tax increases makes provisions that shift the burden off lower-income taxpayers and small businesses.

The capital gains tax, which will apply to profits from stocks, bonds and investment properties in excess of $25,000 for individuals and $50,000 for joint filers, includes provisions to exclude retirement accounts and the sale of farmland. The B&O tax changes would exempt gross annual receipts under $250,000 — helpful to small businesses; provides some discounts for those with receipts between $250,000 to $500,000; and increases rates for those with receipts above $500,000. Real estate excise taxes would decrease for properties valued under $250,000 and would increase for those assessed at $1 million or more.

There are worthy proposals in both budgets; ample funding for education, programs that help families and provide for healthy communities, find savings and seek the wise use of taxpayer resources.