Inslee’s budget plan calls for carbon tax

OLYMPIA – Washington would tap its financial reserves for about $950 million next year, most of it to comply with a court order on improving public schools, under a budget proposed Thursday by Gov. Jay Inslee.

“It’s the final step to complete this constitutional obligation,” Inslee said at a news conference to unveil his spending plan. “We can do this now.”

The budget proposal would replenish those reserves later through a carbon tax or fee, a controversial measure that Inslee has long supported but legislators of both parties have either opposed or ignored in the past. He said staff was still working on the details of that proposal but called it “a reasonable way” to replenish the reserves and have money for other government services in the future.

He also called for the Legislature to do something in the first week they couldn’t accomplish this year with three overtime sessions – pass a $4 billion capital construction budget, which includes about $1 billion in school construction.

“These projects have been unnecessarily delayed,” Inslee said.

Although both the House and Senate passed some version of the capital budget by overwhelming margins, the final vote was derailed over Republican demands that it be accompanied by legislation to address a controversial Supreme Court decision on water law that restricts development in some rural and suburban areas.

The difference for 2018: Democrats control both chambers, albeit by slim margins. In the 2017 session, a Republican-dominated coalition controlled the Senate by one vote. Although work is being done on water law legislation, the capital budget should pass on its own, the governor said.

Inslee released his proposal for the 2017-19 supplemental budget, an update of the $43.7 billion two-year general fund budget passed after three overtime sessions in July. The state always makes adjustments in the second year of a budget to cover increased costs and unexpected expenses.

This fall the state Supreme Court said the changes that the Legislature had passed, and Inslee had signed, were good policies to improve the public school system after several years of struggling with solutions. But some of those improvements would be coming a year late, and the court said that wasn’t acceptable.

One reason for the delay was the money for some improvements, including higher teacher and school staff salaries, is dependent on changes to the complicated state and local property tax system. The taxes are difficult to readjust quickly because of differences in fiscal years for the state, the school districts and tax collections.

Inslee’s supplemental budget doesn’t try to readjust the property tax changes approved as part of the main budget. Instead it pulls money from the reserve fund in 2018, then proposes a tax or fee on carbon emissions that would replace it by the end of the 2019-21 budget cycle to comply with a state law that budgets must balance over four years.

Details of what Inslee referred to as a “carbon pricing” system will be announced in early January, probably before the 2018 session starts on Jan. 8.

Other proposed increases in the supplemental budget include $106 million for increased staffing and expanded facilities for the state’s mental health system, $50 million to cover emergency wildfire costs, and $20 million to fight opioid addiction. It also would spend more on affordable housing to reduce homelessness, prepare plans for evacuations in case of earthquake or tsunami, and a special effort to save the declining orca population in Puget Sound.

The release of a governor’s spending proposal signals the beginning of legislative budget talks. The House and Senate will each develop their own budget plans, and typically negotiate a compromise that has elements of all three proposals.

House Appropriations Committee Chairman Timm Ormsby, D-Spokane, complimented Inslee’s effort and agreed the Legislature needed to do “a little more work” on education spending, but didn’t commit to the proposal.

“I appreciate the governor’s efforts to find a possible solution,” Ormsby said in a news release. “There will be many discussions of his proposal and other ideas over the next few months.”

Senate Ways and Means Committee Chairwoman Christine Rolfes, D-Kitsap County, called it a blueprint to finish the session on time – something lawmakers have been unable to do in seven of the last eight years.

Senate Minority Leader Mark Schoesler, R-Ritzville, said it was “promising” that the budget proposal balanced over four years but questioned the fiscal responsibility of “raiding” the reserves.

“I also worry how the governor’s as-yet-unveiled ‘carbon pricing plan’ would affect family jobs in Washington,” Schoesler said in a news release.