OLYMPIA, Wash. - Democratic leaders in Washington’s House and Senate are moving forward with a $391 million plan for modest property tax cuts in 2019 following projections of a surge in unexpected revenue from state tax collections.
The proposal has drawn opposition from minority Republicans who wanted to give a bigger cut and reduce the taxes in 2018 — when property taxes for many spike to pay for court-ordered public school reforms approved in 2017.
The Democratic plan also has drawn fury from the GOP lawmakers who accuse Democrats of skirting rules on tapping the state’s constitutionally protected reserve account for economic stability and emergencies, known in Olympia as the rainy day fund.
Democrats maintain the move is run-of-the-mill creative budgeting that will pave the way to one-time property-tax relief for people in Washington.
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Senate Bill 6614 would reduce property taxes in 2019 by 30 cents from $2.70 per $1,000 in assessed property value to $2.40.
The latest version was proposed by Sen. Christine Rolfes, D-Bainbridge Island, on Tuesday evening. It did not receive a public hearing, but passed the Senate 25-23 on Wednesday.
The measure is also part of a larger 2018 supplemental budget plan agreed to by House and Senate Democrats announced Wednesday. The 60-day legislative session ends on Thursday.
“It was unprecedented that we raised the property taxes so high last year, and I think all of us regret that,” Rolfes said on the Senate floor Wednesday while lawmakers were debating amendments to SB 6614. “What is also unprecedented in this underlying bill is that we’re giving some of it back.”
Last year, lawmakers hiked the property-tax rate for 2018 by about 81 cents per $1,000 in assessed value to pay for reforms aimed at complying with a long-running state Supreme Court order to fix how Washington pays for K-12 schools.
As part of the education ruling, known as McCleary, the court required the state to take on the full cost of teacher and other school staff salaries that have been paid for in part by local property tax levies in recent years.
The teacher salary plan also will cap the amount of local tax collections by school districts at $1.50 per $1,000 in assessed property value or $2,500 per student, whichever is lower.
Reductions on local school levies don’t begin until 2019, meaning most people in Washington will see an increase in property taxes in 2018. After that, most residents will get a tax decrease — even without Rolfes’ plan.
Still, given the rise in 2018 taxes, lawmakers from both parties have been pushing to offer relief.
Those efforts gained steam after a February projection showed the state will bring in $1.3 billion more in taxes than expected through 2021 — largely thanks to a strong economy.
Republicans have proposed hefty tax cuts.
One plan proposed by Republican Sen. Doug Ericksen of Ferndale would effectively cut taxes in 2018 by 81 cents per $1,000 of assessed value.
Rolfes said Democrats are aiming for tax relief in 2019 because some local and state officials have told them the administrative and logistical task of cutting 2018 taxes would be too complex. Some people have already begun paying 2018 property taxes, adding to the complication.
Republicans this week strongly opposed how Democrats intend to pay for their plan.
SB 6614 would redirect $935 million in property-tax revenue from the state’s general fund to a separate account set aside for spending on education.
That move shields the money from rules requiring that certain revenue be socked away in the rainy day fund during good economic times, effectively lowering the reserve account by about $700 million.
Freeing up the money allows Democrats to cut property taxes and spend money on education and more without having to tap the rainy day fund, the use of which generally requires approval from 60 percent of the Legislature. Democrats hold a slim majority in the House and Senate.
Republicans have argued that by reducing spending elsewhere the state could reduce property taxes without dipping into money headed to the rainy day account. Democrats say the tax breaks then would come at the expense of paying for other important government priorities.
“It’s flat out the worst budget trick in the history of budget tricks,” state Sen. John Braun, a Centralia Republican, said in a Tuesday interview with The News Tribune and The Olympian.
Braun is the top Republican on the Senate Ways and Means fiscal committee.
Republican state Treasurer Duane Davidson said the move to direct money away from the rainy day fund could negatively impact the state’s bond rating, ability to pay down debt and flexibility to weather economic downturns.
“Choosing to not save today when we’re experiencing extraordinary revenue growth guarantees that our budget problems will be much greater when the next recession hits,” Davidson said in a statement Wednesday.
Rolfes told the two news outlets on Tuesday the plan is necessary because the GOP “indicated” they didn’t support an earlier proposal to pay for the property tax cuts with money from the rainy day fund.
“We can give that money back directly to the people before it goes to the rainy day fund,” Rolfes said.
The strategy “allows it to be a simple majority vote so we don’t have to fight about it,” she said.
Democrats also said the rainy day fund would remain at healthy levels despite their tax cut.
When accounting for the 2018 supplemental budget plan agreed to by House and Senate Democrats, the rainy day fund would have about $1.7 billion at the end of the four-year budget cycle in 2021, according to Senate Democratic staff.
The budget deal spends $776 million through 2019 and another $194 million through 2021 on a one-time effort speed up the court-ordered overhaul of teacher and staff salaries, which the Supreme Court said was fully phased in one year behind a Sept. 2018 deadline.
The budget does not rely on new taxes, including Democratic priorities such as a tax on capital gains.
It also has more than $170 million in new state spending over the next two years on the state’s lagging mental-health system.
In all, the budget plan would add roughly $700 million in spending to the current $43.7 billion two-year budget approved last year.