No surprise: There’s a carbon tax in there.
Gov. Jay Inslee rolled out his 2018 supplemental budget proposal last week – what is supposed to be the mid-course correction in the two-year budget cycle. Shocking no one, Inslee’s proposal includes his most-desired tax increase, a carbon tax.
Senator Mark Schoesler (R-Ritzville), now the Senate minority leader after Republicans lost a seat in the November election, responded that Inslee’s “as-yet-unveiled ‘carbon pricing plan’ would affect family jobs in Washington. If he can’t explain the difference between a carbon tax and a carbon pricing plan, then it’s a tax. It IS an energy tax.”
Not included in in the proposal was another Inslee goal of late, a capital gains income tax. Its exclusion was a surprise to many. Perhaps, despite the new one-seat Democratic majority in the state Senate, there still aren’t enough votes to pass one. Or maybe the total defeat of Seattle’s local income tax in court has some Olympia insiders thinking a similar legal fate awaits a capital gains income tax.
Inslee’s budget proposal – which newspaper editorial boards invariably describe as a “starting point,” yet legislators never seem to start from it – calls for an additional $1 billion in spending above the current budget. It books some savings from budgeted funds not actually spent, but mostly represents new spending.
Teacher salary increases
The biggest chunk of that spending – $950 million – would go to higher salaries for teachers and other public school employees. The state teachers union happens to be one of Jay Inslee’s biggest campaign donors over the years, pouring millions into the governor’s 2012 and 2016 campaigns. The union knows a good thing when it sees it: Inslee is a loyal benefactor to them, with taxpayer dollars.
How necessary is the timing of that salary increase? That’s a matter of debate. The state Supreme Court did frown on the Legislature’s timing for increasing that spending, saying that all McCleary conditions have to be met by Sept. 2018, not a year later.
But the court is already testing the limits of what it can make the Legislature do. Some legislators favor sticking to the current timetable and essentially running out the clock on the court’s order.
Also included in Inslee’s budget is $162 million for higher Medicaid spending and $106 million additional for state mental hospitals. Western State Hospital in Steilacoom is the subject of numerous lawsuits and federal oversight.
Budget reserves tapped
Inslee’s proposal actually calls for spending some of the state’s Rainy Day fund and budget reserves to pay for his accelerated teacher pay increases. The fund would then be backfilled by Inslee’s hoped-for carbon tax. After that, revenues from the carbon tax would go toward Inslee’s environmental agenda.
State Treasurer Duane Davidson offered a word of caution on that approach, writing that “with a robustly growing economy we should be adding to our reserves now – not pulling from them.” Lowered reserves during strong economic times could hurt the state’s credit rating, making bonds more costly.
Balanced over four years – will it stay that way?
Republicans offered reserved praise for the fact that Inslee’s budget proposal balanced over four years, as state law requires. Previous budget proposals of his have not. But there are no guarantees the final product will balance. Republican budget lead Sen. John Braun (R-Centralia) said in a statement, “I’m glad he is finally adhering to the four-year balanced budget law in crafting his budget… I ask that the governor veto any budget that isn’t balanced over four years.”
Schoesler echoed those comments: “While it’s promising that the governor finally proposed a budget that balances over four years, I call on him to publicly commit to veto any budget that doesn’t.”
Those concerns aren’t out of left field. Democratic budget leaders, while thanking Inslee for his proposal, didn’t endorse his spending priorities or the chosen tax methods. The House Democrats’ budget lead’s reaction was as tough to nail down as Jell-O:
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.”
As to the carbon tax’s chances, the Spokesman-Review asked Inslee why he thinks it could pass when the House, which has been controlled by Democrats during his entire gubernatorial tenure, hasn’t advanced it. He told the paper:
“The world changes over time. It took us years to pass gay marriage, and years to pass closing the gun show loopholes. Sometimes these things take years and that’s not surprising on something of this dimension. In previous years we had a state Senate that was locked up against doing anything on climate change and that made the House reluctant to take action that they knew was going nowhere.”