by John Stafford
This article evaluates the 2017 Washington State Legislative Session. There are five sections: overview, McCleary agreement, three budgets; other bills; and summary.
The Washington State Legislature alternates between odd-year, full sessions (105 days) in which it develops three, two-year budgets (operating, transportation and capital); and even-year, short sessions (60 days) in which it makes minor adjustments to these budgets. Thus, the 2017 session was a full session charged with creating the new budgets, and it was notable for several reasons.
It became the longest legislative session in state history, lasting for 195 days (the regular 105 day session plus three 30 day special sessions). Despite the length of the session, the Legislature passed only two of its three required budgets (operating and transportation, but not capital), and the operating budget was finished on the final day of the session, leaving no time for public review or commentary.
This lack of transparency led State Senator Reuven Carlyle (Democrat, 36th District) to claim: “This is outside the bounds of acceptability and I think we owe the people of this state an apology.”1 In addition, the Legislature was far less productive than normal, passing 1.9 bills per day, far lower than the historic average of 4.0 bills per day since 1991. In short, it was a prolonged, unproductive, non-transparent session. The primary reason for all of this was the need to pass legislation to comply with the McCleary Decision, which calls for the state to increase funding for K-12 education.
Over the past two decades, Washington State has decreased the amount in spends on K-12 education as a percentage of its personal income by 30% (see Exhibit One). By 2014, Washington State was ranked 40th in the nation in K-12 spending as a percentage of personal income. This is the direct result of Washington State’s decline in total taxation (state plus local) as a percentage of personal income over the same period.
Between 1995 and 2014, Washington State went from being the 11th highest taxed state in the country to the 36th lowest taxed state in the country in this measure – a drop of 25 ranks in two decades.2 This is, of course, the root cause of the decline in K-12 spending – a precipitous drop in taxation has led to a precipitous drop in educational spending (as well as spending in other areas such as mental health and foster care). As I’ve said many times, the McCleary decision is not primarily an indictment of the State’s educational financial system; but rather an indictment of its taxation system.
There are four areas to consider when evaluating the State’s efforts to comply with McCleary: increasing K-12 spending; transferring responsibility for K-12 spending from local school districts to the State so that local districts do not have to bear the burden of funding public education; creating a source for the new state funding; and improving the level of equity in spending between school district. Each area is covered below.
The 2017 State Legislature did significantly increase spending on K-12 education. It did this primarily via a property tax “levy swap.” That is, it increased the state property tax levy while decreasing the local property tax levy. The state levy increase is larger than the local levy decrease, and thus there is a net increase in taxation. The magnitude of this net increase varies considerably by district. King County was the “recipient” of the largest tax increases, with the average King County homeowner facing a roughly $550/year increase in property taxes. In addition to the levy swap, additional K-12 revenue was obtained from several other sources, including a new tax on the internet sales of out-of-state retailers to Washington consumers.
Thus, spending has increased via a net property tax increase that shifts responsibility for educational funding from local districts to the state. However, the magnitude of this increase in spending has been greatly exaggerated. The Seattle Times, for example, writes: “New Washington state budget would provide $7.3 billion more to public schools over four years.”3 This figure is highly misleading, for two reasons. First, it includes the increase in state property taxes but does not net out the decrease in local property taxes. In addition, it is a four year figure instead of the normal two year reporting figure that coincides with the state budgeting cycle.4
After adjusting for these two factors, the actual increase is roughly $2.1 billion per biennium.5 Many analysts believe that the necessary increase to adequately comply with McCleary should be about $3.5 billion per biennium. Thus, it appears that the additional revenue raised for K-12 education by the State Legislature, while significant, is insufficient to meet the requirements of the McCleary Decision. Thomas Ahearne, the plaintiff attorney for McCleary, writes: “This does not even come close to what the state assured the Supreme Court that the State was going to be doing…The question is, will the Court say it’s enough to give them a pass?”6 Both sides – the McCleary plaintiffs (arguing that funding is inadequate) and the State defendants (arguing that the funding is adequate) have filed briefs with the State Supreme Court, which will rule on whether adequate compliance has been achieved later this fall.
Many liberal analysts (including myself) are concerned with the financing mechanism (the “levy swap”) used to raise the educational funds. As is commonly known, Washington State has the most regressive tax system in the nation – requiring its poorest 20% of residents to pay 17% of their income in state and local taxes; while requiring its richest 1% of residents to pay just over 2% of theirs.7 Washington State is thus a low tax state relative to its personal income (as noted above), and a highly regressive state. This is illustrated in Exhibit Two, which plots every state based on its state and local taxes as a percentage of personal income (horizontal axis) and its regressivity (vertical axis).
The two grid lines, which divide the graph into four quadrants, represent the median for each of these two measures. The dots for each state are colored based on presidential election voting in 2016 (red = Trump; blue = Clinton). Thus, Washington State is an outlier in the low left quadrant of the graph: it is a low tax, highly regressive, blue state. It is important to note that Washington State’s tax policy delivers a double-blow to the poor: by taxing at a low level, the state underprovides services to those in need (which regularly leads to lawsuits, such as McCleary, which assert that the state is not meeting its basic responsibilities); and for those services it does provide, it requires the poor to pay an inordinately high amount to fund them. For these (and other) reasons, many commentators refer to Washington State’s tax system as being the worst in the country.
The three lines emanating from the Washington State data point connect to California, Oregon and the national median – all of which are higher tax and lower regressivity than Washington State. Indeed, if Washington State moved to the median position, it would generate roughly $4.5 billion per biennium in additional taxes – far more than enough to comply with McCleary. Restated: if Washington taxed at the median level of all states, no-one would have ever heard of the McCleary Decision.
In light of Washington’s regressive tax structure, it would be seem obvious to fund McCleary with new progressive taxation. Indeed, Governor Inslee’s start-of-the-year proposed (but not enacted) budget called for several new sources of progressive taxation, including a capital gains tax on high income earners and an extension of the business tax (the business and occupancy, or “B&O” tax) to services.8 These ideas were rejected by the GOP in favor of their proposal for the aforementioned “levy swap” which raises net property taxes. For this reason, many liberals are greatly disappointed with the funding plan. Senator Rebecca Saldana (D, 37), who voted against the bill, writes: “In the end, it is a Democratic bill with GOP funding.”9
Finally, some steps have been made to increase equity in funding between school districts. For example, a new $500 million fund has been established to support lower income school districts. However, some analysts believe that the measures to address equity are insufficient. For example, Zahava Stadler of EdBuild, a non-profit organization focused on educational equity, claims, “This system will still send more money to districts that serve fewer students living in poverty.”10
A new approach for basing teacher compensation levels on cost-of-living differences has also been implemented. It is based on regional housing costs – with teachers in districts with higher (lower) housing costs receiving higher (lower) salaries. Two concerns have been expressed about this approach. The first is whether this approach will create self-perpetuating cycles: high housing cost areas will receive higher teacher salaries, which will in turn contribute to even higher housing costs; and vice-versa.
The second concern is whether low housing cost (and thus low teacher salary) districts will have a difficult time attracting teachers when they are adjacent to high-housing cost (and thus high teacher salary) districts. In light of these concerns, some analysts believe that linking teacher compensation levels to regional housing costs is illogical. For example, Georgetown University Professor Marguerite Roza writes: “This is a bad idea all around.”11
In summary: the Legislature did raise funding for K-12 funding, although not by as much as most analysts deem necessary to fully comply with McCleary; it did transfer responsibility for funding K-12 education from local districts to the state (via the “levy swap”); it did make efforts to better equalize funding across districts (although it is unclear whether the mechanisms to do so are desirable or sufficient); but it did not address the state’s tax regressivity problem by introducing new progressive taxation.12 Thus, it is a decidedly mixed (and in my view, mostly negative) performance. JoLynn Berge, assistant superintendent for business and finance with Seattle Public Schools, states: “They [state legislators] think they did this really hard, really wonderful thing. I’m not saying it wasn’t hard. I’m just not convinced that it was that wonderful.”13
THE THREE BUDGETS
The operating budget is by far the most significant of the three budgets that the State is required to complete. The 2017-2019 operating budget is $43.7 billion, and this represents an 11% increase over the 2015-2017 operating budget. The magnitude of this increase is misleading, however, because much of the increase reflects the increase in the state property tax, but the figure does not net out the decrease in local property taxes.
The transportation budget of $8.6 billion for the 2017-2019 biennium was passed with little fanfare in April.
The $4.2 billion capital budget, however, passed the House (with overwhelming bipartisan support in a 92-1 vote), but was not passed in the Senate due to GOP opposition. Senate Republicans adopted the stance that they would refuse to pass the capital budget unless Democrats agreed to pass legislation to relax water usage restrictions in order to support development in rural Washington (by revising the 2016 State Supreme Court Hirst Decision). Democrats, to their credit, did not capitulate to this nefarious scheme to use the capital budget as a de-facto hostage for the unrelated GOP economic development agenda. The GOP then backed up their threat by shamefully refusing to pass the capital budget. Thus, the $4.2 billion capital budget, which would support school construction, housing, Puget Sound restoration and many other needs, has not been approved.
There is a special State Senate election in the 45th Legislative District (Kirkland, Duvall, Sammamish, etc.) in November. If the Democratic candidate, Manka Dhingra, prevails (which appears likely as she won the primary election by roughly 10%), the Democratic Party will regain control of the State Senate, and will then control the House, Senate and Governorship. It is widely believed that if this happens, Governor Inslee will reconvene the State Legislature for a fourth special session (perhaps lasting for just one day) for the express purpose of passing the capital budget.
This section summarizes other major progressive legislation from the 2017 Session. It covers bills that passed, and equally revealing, those that did not pass.15
Significant progressive legislation that passed:
- Paid Sick and Family Leave – 12 Weeks (SB 5975)
- Washington becomes the fifth state with paid family leave
- Creation of a New Department of Children, Youth and Families (HB 1661)
- Consolidates a variety of Early Learning, Foster Care and Juvenile Justice departments into One Agency
- Multiple Bills to improve Foster Care (e.g., SB 5241, HB 1867)
- Extension of Solar Tax Credits (SB 5939)
- A new Plan to Comply with the Federal Real ID program, Calling for Enhanced Drivers Licenses as a Requirement for Boarding Flights (SB 5008)
- Delaying the Biology Standardized Test as a High School Graduation Requirement until 2021 (HB 2224)
- Distracted Driving (e.g., texting, etc.) made Illegal (SB 5289)
- A Fourth DUI Conviction is now a Felony (SB 5037)
- Prostitution Charges Against the Provider of Services can be Vacated, as the Prosecution Emphasis Shifts from Sellers to Buyers (SB 5272)
- Mandatory Reporting of Individuals who Fail a Background Check when attempting to Purchase a Firearm (HB 1501)
- The Ban on Providing College Courses in Prison has been Lifted (SB 5069)
Significant progressive bills that did not pass:
- Four Bills to Enact a Carbon Tax in Washington State
- From Jay Inslee (HB 1555); The Alliance for Jobs and Clean Energy via Joe Fitzgibbon; Steve Hobbs (SB 5385); and Guy Palumbo (SB 5930)
- The Voting Rights Act (for the Fifth Straight Session) which would Enact District Voting instead of At-Large Voting Statewide, thereby Helping Minority Candidates (SB 5067)
- A Multi-Faceted Bill to Increase the Supply of K-12 Teachers (HB 1828)
- Change the Standard for Police Lethal Use of Force (SB 5073)
- Bills to require Safe Gun Storage (SB 5468) and the Licensure of Assault Weapons (SB 5444)
- Change the Legal Age for Purchasing Tobacco from 18 to 21 (SB 5025)
- Repeal the Death Penalty (SB 5354)
- Ban the Box, which would Assist ex-Felons in the Job Application Process (SB 5312)
The 2017 State Legislative session was long, frustrating, non-transparent and unproductive. It failed in its basic task of passing one of the three primary state budgets and reached a poor McCleary agreement. It also did not pass a bill to put a price on carbon – one of the critical needs of our era. The Province of British Columbia and the State of California both have meaningful carbon pricing plans; it is high-time for Washington State to join their ranks. There were several progressive legislative victories, perhaps most notably the Paid Family Leave bill, but many progressive priorities (e.g., the Voting Rights Act) did not pass. Overall, I would give the session low marks.
In liberal circles, it is common to blame the GOP for the inability of the State to enact new progressive taxation (and other progressive legislation). While to some extent I share this sentiment, I believe that it is only a part of the story. In my view, Democratic elected officials are often overly tepid in their willingness to support bold but necessary progressive legislation (e.g., a capital gains tax on high income earners, a price on carbon, etc.). Until the Democratic Party is willing to go to the mat for the things it claims to believe in – and I believe this applies at both the state and the national level – I think it is likely that progressives will continue to be disappointed by the legislative results.
John Stafford is an educator. He currently works for Mercer Island High School; prior to this, he worked for Seattle Public Schools. In a prior career, he was a management consultant in corporate strategy for Strategic Planning Associates in Washington, D.C. Mr. Stafford is involved with the Democratic Party in South Seattle, and writes periodic articles for the South Seattle Emerald.
- David Gutman, Washington State budget secrecy: I don’t think any of us knows what is truly in this. The Seattle Times, June 30, 2017. It is important to note that mistakes were made in the budget, such as the inadvertent reduction in mental health spending in King County, despite the fact that legislators believed that the spending had been increased.
- Source: Washington State Office of Financial Management (OFM).
- Joseph O’Sullivan and Neal Morton, New Washington state budget would provide $7.3 billion more to public schools over four years. The Seattle Times, June 29, 2017.
- I believe there are two reasons for this inflated figure: to make the figure seem larger (which is not legitimate); and to account for the fact that the figure increases in the out years, thus making a two-year figure somewhat misleading (which is legitimate).
- This is an estimate based on preliminary estimates of the local levy that must be subtracted from the gross figure, from Chris Reykdal, State Superintendent of Public Instruction.
- Greg Copeland, McCleary plaintiffs say budget for education falls short, King 5 online, July 7, 2017.
- Source: Institute for Taxation and Economic Policy.
- Governor Inslee also proposed a carbon tax, which is ideologically (but not necessarily fiscally) progressive.
- Rebecca Saldana Newsroom [Legislative Newsletter], 37th District Values Reflected in Budget, June 30, 2017.
- Neal Morton, In sprawling McCleary fix, lawmakers may resurrect inequities in Washington schools. The Seattle Times, July 8, 2017.
- Neal Morton, In sprawling McCleary fix, lawmakers may resurrect inequities in Washington schools. The Seattle Times, July 8, 2017.
- It is also worth noting the complexity of the McCleary agreement: there are 290 school districts in Washington State working through the implications of the legislation on state funding, local funding, ongoing local levies, teacher compensation, special education funding, and so on.
- Neal Morton, Seattle-area education officials question adequacy, equity of state’s new school funding plan. The Seattle Times, August 7, 2017.
- It is important to note that this list is a subjective selection of 19 of the hundreds of bills that were passed and thousands that were considered during the session.
Featured image is a cc licensed image attributed to AdamChandler 86