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Spokane, Washington  Est. May 19, 1883

Washington House Democrats float base, tax-adding budgets

OLYMPIA – With less than a week left in the special session and eight days before a budget stalemate could cause a partial state shutdown, Washington House Democrats released a budget proposal that would give raises to state workers and public school employees, spend more on mental health, freeze tuition this year at state colleges and reduce the number of students in kindergarten through third-grade classes, all without raising taxes.

A separate proposal would require the closing of some $356 million in tax preferences and exemptions to pay for an “investment package” of additional programs and expenses. Included in that package would be money for the new Washington State University medical school in Spokane and more medical residencies in the state.

That package also would allow for increases in early childhood education, an additional salary boost from the state for public school employees and a second year of a tuition freeze at public colleges.

House Appropriations Committee Chairman Ross Hunter, D-Medina, said Monday’s proposal was an attempt to separate the budget into areas where the House and Senate agree and areas where they don’t agree as the clock continues to tick toward the end of the fiscal year. It’s subject to change in the next several days as it moves through the committee and into the full House.

“We are somewhat closer than we were at this time a month ago,” Hunter said. “This is a move to keep our negotiations moving forward.”

The bill could be amended when it comes up for a committee vote today or when it comes up for debate in the full House later this week. The last day of the second special session, called primarily to pass a budget that will pay for many state programs and salaries for the next two years, is Saturday, and a new fiscal year starts July 1.

Without a budget that passes the full Legislature and is signed by Gov. Jay Inslee by July 1, the state faces a partial shutdown of services and temporary layoffs for about half of its employees.

Monday’s proposals formally drop an effort by House Democrats to impose a capital gains tax on investors who receive more than $25,000 a year from investments. The capital gains tax was a favorite of progressives and social activists, who criticize the state’s heavy dependence on sales tax as regressive, but it became a major bone of contention in budget negotiations.

Senate Republicans said the state expects to collect an extra $3 billion from its current tax system compared to the current two-year budget period, and they refused to pass such a tax if it came out of the other chamber. House Democrats acknowledged last week they dropped new taxes from negotiations over the 2015-17 operating budget.

“We’re not going to make meaningful progress on that this year,” Rep. Reuven Carlyle, D-Seattle, conceded at a hearing on the proposals Monday.

Senate Republicans said they would consider closing some tax preferences, if the House approved them first.

Among the proposed tax changes in the separate investment package would be levying the sales tax on bottled water, limiting sales tax exemptions for purchases by nonresidents, limiting the real estate excise tax exemption on foreclosure sales and repealing preferential business and occupation tax rates for resellers of prescription drugs and royalty income. Many of those tax preferences have been targeted in the past but have survived, either by not passing the Legislature or being reinstated by voters.

The base budget would give the University of Washington about $9.5 million for additional medical students in Spokane through its WWAMI program, directing the university to add 60 new first-year students in each year of the budget.

But that money is transferred and not replaced from the budget for WSU, which plans to seek accreditation for its own medical school this year, a decision that led to UW severing ties with WSU over its Spokane program. The $2.5 million WSU has requested for the accreditation process would be dependent on the passage of the separate tax preference bill.

“This puts the WSU medical school at some risk,” Jim Hedrick, a lobbyist for Greater Spokane Incorporated, told the committee.

“We would respectfully request that you reconsider,” said Chris Mulick, director of state relations for WSU.