Politics blog

Senate Democrats want to close four tax exemptions to raise $100M for K-12 schools

OlympianFebruary 25, 2014 

This is updated.

Senate Democratic leaders proposed Tuesday to close four tax-code exemptions – including one used by oil refiners – that would collectively raise $100.6 million for K-12 public schools this year and $202.9 million over the following two years.

Their move came just one day after minority Democrats’ budget writers embraced a supplemental budget plan that includes the addition or extension of several tax breaks worth about $10.3 million.

The proposal to close tax breaks is less ambitious than that of Gov. Jay Inslee, who targeted seven to produce upward of $200 million a year in new money each year and $400 million over a biennium.  But it does foreshadow what House Democrats are likely to propose formally when they outline their supplemental budget and tax plan on Wednesday at the Capitol. 

“We just felt this is a proposal that is realistic and has support,” Sen. David Frockt of Seattle said of the reason Senate Democrats chose a smaller array of tax breaks than Inslee did.

The proposal includes cost of living pay adjustments for teachers who otherwise would go six years without them in 2014-15.

Republicans who dominate the Senate Majority Coalition Caucus have not shown interest in closing tax breaks or raising new revenue this year, and Senate Ways and Means Committee chair Andy Hill, R-Redmond, reiterated Monday that 2014 is a supplemental year that should be focused on a budget that addresses emergent needs.

Hill and Democrats announced their bipartisan spending plan in a joint press conference.

But Hill and the leaders in the Senate majority coalition have said they do want to write a school funding plan that addresses the Supreme Court’s recent concern the Legislature hasn’t adequately laid out how it plans to get to full funding of K-12 schools by 2018. That plan is due to the court by April 30, and a dozen lawmakers from both houses and parties have been meeting with Inslee to talk about how to get there.

The Republicans’ approach has been to say K-12 obligations under the state Constitution should be funded first from existing revenues. 

Senate Democratic leader Sharon Nelson of Maury Island said lawmakers need to identify ways to raise up to $5 billion in new revenues for K-12 schools. She, Frockt, Sen. Rosemary McAuliffe of Bothell, Sen. Andy Billig of Spokane, Sen. Christine Rolfes of Bainbridge and Sen. Jamie Pedersen of Seattle attended the press conference, arguing their tax plan is a piece of that map toward full funding. Their proposal - which they have put in Senate Bill 6574 - builds on past legislation that outlined in a linear or year by year way that the Legislature could ramp up its funding for K-12 schools.

Although the plan raises $100.2 million in new revenue, it spends about $139.6 million over the supplemental budget year remaining. Update: The difference is roughly $38 million for school materials, supplies and operating costs of local districts, which is already contained in the Senate budget plan rolled out on Monday.

The rest of the new investment breaks down this way, Democrats said: 

  • $21.5 million would go for reducing second-grade class sizes in high-poverty schools to 20.85 students, down from 24.1; 
  • $27.9 million would be used to increase the share of schools offering all-day kindergarten to 57.5 percent, up from 43.75 percent; 
  • $51.7 million would go for cost of living pay increases for teachers.

The targeted tax breaks include:

  • An extracted fuel exemption worth $31.7 million this year and $59.1 million in the next biennium. The exemption was meant for pulp mills in 1949 but used by oil refineries once they moved into the state starting in the 1950s.
  • A sales tax on bottled water that voters rejected a few years ago in an initiative that also targeted a pop tax. It would raise $24.3 million this year and $48.2 million over two years.
  • A sales tax exemption for out of  state shoppers from states with low sales taxes. It would be worth $29 million this year and $61.3 million over two years.
  • A preferential tax rate would end for re-sellers of prescription drugs, which Democrats say would require that out of state firms warehousing medications in Washington would pay the same rate others pay. It could raise $15.6 million this year and $34.3 million over the next biennium.

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