Washington’s legislative session begins

Washington’s legislative session kicked off Monday. Lawmakers are working on the state’s budget, as Washington faces a multibillion-dollar budget gap. Governor-elect Bob Ferguson will be sworn in on Wednesday. He released his budget priorities last week. He said lawmakers should focus on cuts and efficiency.

Jeanie Lindsay is the Olympia correspondent for partner station KUOW and has reported on these issues. She joins us with details of what officials have planned as they navigate the budget gap.

Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Washington’s legislative session starts today. Lawmakers have a lot on their plates, but in this odd-numbered year, their top concern is to pass a budget. It could be a struggle, given the multi-billion dollar budget gap the state is facing for the coming two-year budget cycle and the following years. Governor-elect Bob Ferguson will be sworn in on Wednesday. He released his budget priorities last week, saying he’d like lawmakers to focus on cuts and efficiencies as opposed to new revenue.

Jeanie Lindsay is the Olympia correspondent for our partner station KUOW. We called her up on Friday to talk about all of this. I started by asking her just how big the budget hole is for the coming years.

Jeanie Lindsay: Over the next four years, the estimates are somewhere upwards of $10 billion. It ranges between $10 to $12 billion right now, but this also could depend on how much new spending that lawmakers and the new governor want to chase down. There’s also some new state employee contracts that are supposed to go into effect, so it could even be a few billion dollars higher. It’s just one of those things that fluctuate a bit. But, like I said, this $10 billion to $12 billion dollar range is the sweet spot – or I guess not so sweet spot – over the next four years, so it’s spread out a little bit.

Miller: OK, so $10 billion – maybe more, maybe less – for four years, but what about just the coming two-year cycle, the coming biennium?

Lindsay: The most recent numbers that I’ve seen, I think the latest estimate is a little more than $4 billion over the next two years. And then it gets a little bit bigger the two years after that.

Miller: What are the reasons for this shortfall?

Lindsay: Officials have used the phrase “a perfect storm” of factors to describe how we got to this point. Part of that storm is rising costs, and also rising demand for state services. Another factor here is just that revenue isn’t coming in as quickly as lawmakers had hoped. I mean, when lawmakers draft a budget, it has to be balanced when they approve it.

Back when they initially promised these programs and promised that they were going to spend this money, at that point there was some worry that maybe it could get more expensive. But they had a lot of hope that it would work out and the numbers were numbering properly when they passed it. But the revenue just hasn’t kept up with inflation, and like I said, the demand for state services. This is all happening as COVID-19 emergency funding has dried up. Needs are still really high in some pretty critical areas, including housing, behavioral health and schools.

Miller: I have to say, Oregon listeners might be surprised to hear of a state to the north where the budget forecasts are wrong in the opposite way. For five biennia in a row now, the former state economist underestimated how much revenue was coming in. But in Washington, at least in this most recent biennium, it was in the other direction.

Under Washington law, the outgoing governor had to put forward a proposed budget, even though he’s not going to be around to sign or veto whatever lawmakers end up passing. It’s a weird requirement. In any case, what did Jay Inslee say he wanted to see after he’s gone?

Lindsay: He comes out with this big line item, very detailed budget. And his proposal includes some cuts. It proposes closing a women’s prison, making some other reductions and just like the Department of Corrections space. There are some cuts in the education area, particularly around bonuses for highly qualified teachers, those that get their national board certification. His budget would pause those bonuses. Teachers really didn’t love that. And part of his budget proposal would also be a delay in the expansion for state child care subsidies – more people are supposed to be eligible for that in the next couple of years. So there’s some reductions there, and just delaying that expansion.

The top line, honestly, was an endorsement of creating a new wealth tax. He endorsed this idea of a 1% tax on folks’ worldwide wealth above the $100 million mark. So if you have $101 million of wealth, that $1 million over would be that 1% tax. And his office and budget officials estimate that it would affect around 3,400 people – so not a lot of people affected. But he did say that, according to the data, over the next four years this wealth tax proposal could generate more than $10 billion, which is a pretty sizable chunk of that $10 billion to $12 billion, or maybe a little bit higher, budget gap. So that was really the top line, in addition to some business tax increases as well.

Miller: It’s striking there, that you’re not talking about an income tax for income over $100 million a year, but this is a wealth tax. Is this wealth tax a new idea in Washington?

Lindsay: It is not a brand new idea. There was actually a bill that has appeared in the legislature before, from a state senator that would have done something similar. I think the threshold for worldwide wealth was a little bit higher before that tax would kick in, but it’s not a brand new concept.

Now, the bill that was in the legislature previously didn’t really go anywhere. But given that that bill was being talked about ahead of a really significant election, lawmakers, particularly Democrats, were already fending off some tax repeal efforts that were heading to the ballot. Not really shocking that this wealth tax didn’t go anywhere last year, but it did get more people familiar with this concept.

Miller: What have Democratic leaders said about this idea?

Lindsay: So far they’re pretty noncommittal, honestly. They’ve said it’s not the only idea they want to look at. Democratic leadership is talking about revenue pretty openly, that they’re interested in looking at taxes, particularly looking at how to tax more wealthier folks in the state. They’ve talked a lot about  Washington’s reliance on sales and use taxes. It hits people with less income a little more acutely than those who have a lot more income.

So they’re really interested in making changes to the structure in some way, and talking about new revenue.  But the wealth tax right now, the way that they’re talking about it, it’s one piece of a suite of options that they’re going to weigh. So they really aren’t putting all of their budget eggs in the wealth tax basket, if you will.

Miller: What about Republicans?

Lindsay: As expected, Republicans are pretty adamant about this budget gap not really being an issue where new taxes are needed. On the wealth tax in particular, they see it as something that will quash innovation, or drive job creators or big contributors to the churn of the economy out of the state, which is something they’re really worried about.

Republicans, when they talk about this budget gap, they think that there are plenty of ways to cut or make delays to programs in order to eliminate that shortfall. It sounds like they want to roll back some policies that they see as money cost drivers. They’ve talked about a juvenile rehabilitation policy that they think is expensive. They’ve criticized or questioned whether state employees really should be getting record pay increases which are expected to come down, which could also drive this gap up.

They really want to focus on where the money is going. They’ve talked a lot about efficiency and seeing flaws in the way that schools are funded, and wanting to fix that. They’ve talked about “administrative bloat,” or ineffective programs that they want to cut or reduce. So, their main message is no new taxes, we can cut, trim and streamline our way out of this.

Miller: We talked about the outgoing Washington governor’s proposed budget and plans for a new tax. Meanwhile, Governor-elect Ferguson recently announced his own budget priorities, which notably focused much more on spending cuts than tax increases. What did he put forward?

Lindsay: It sounded a lot more like the Republican message, just overall in the tone. He shared this document outlining priorities. It’s not a comprehensive proposal with a bunch of line items and a lot of detail, like what outgoing Governor Inslee put out. But it really gives us a sense of his philosophy around how he wants to approach this budget cycle and this gap. It was definitely striking because he’s skeptical of the wealth tax idea. He called it “untested” and in this document, he wrote that new taxes or tax raises really should be considered as a last resort.

So his priorities focus on some of those same things that I was talking about with Republicans – looking at efficiencies, cutting ineffective programs, reducing administrative or business costs on the government side. He wants to direct state agencies to reduce spending by an average of 6%. Some might cut a little bit more, some might cut a little bit less. But the overall idea was just less new spending than what Inslee pitched, and really no conversation right now about new taxes, and a really big emphasis on reductions.

Miller: What kinds of responses to Bob Ferguson’s newly unveiled budget priorities have you seen?

Lindsay: It’s kind of a mix at this point, but as far as the partisan reaction, Ferguson’s plan is kind of a mix of what both Democrats and Republicans have been saying. Though, I do think there’s a bit more alignment with what the Republican message has been when it comes to Ferguson’s take on taxation. Some Republicans are really optimistic about this proposal, they think it’s a good starting point. Democrats agree with some of Ferguson’s priorities in terms of places to protect or preserve funding, around education and things like that.

Some groups have issued statements in response to this. There’s a group that advocates for education funding in Washington state, and they aren’t really happy with it. They want to see more money for education, not just preservation of money. In the education realm right now, there’s a lot of calls for multi-billion dollars of new spending, including from the state superintendent of public instruction. They’re not totally in love with this idea of not adding more money for schools.

Ferguson’s pitch also talks a little bit about child care subsidies for employees of small businesses. And notably, he doesn’t propose raising taxes on businesses, which Inslee did. So business folks are liking that a lot. But I’ll say, this is all still really early, so we’re gonna hear more people weigh in on this or comment on Ferguson’s ideas, and digest those as we get further into the process.

Miller: Are you expecting any kind of bipartisan agreement about spending priorities?

Lindsay: I think some, specifically around schools. I don’t know that there’s going to be a ton of interest in spending a lot of new money, but there is conversation when lawmakers are asked about where they want to protect funding or or keep it more intact. There is conversation that gravitates around the education space, and then also some public safety issues, I think that there’s going to be some agreement.

Incoming Governor Ferguson, as part of his campaign, promised that he was going to work on getting $100 million in the state’s next budget to help local law enforcement hire more officers. And that’s something we’re hearing coming from lawmakers, too. I think there’s actually a bill that’s already been filed on this. So there is some general agreement on overall topic areas that they want to prioritize.

But I also say there’s some unity on the fact that spending cuts will be needed. Even if there’s differences on what those specifics look like, even if there’s differences on whether the state will pursue new revenue or what that will look like, everyone has talked really hard … they’ve used this phrase “scrubbing the budget.” And everyone is in agreement that they’re going to have to do some of that.

Miller: Well, what sorts of things are folks talking about in terms of cuts?

Lindsay: There seems to be some consensus already about delaying the implementation of those child care subsidies that I talked about earlier. It’s not really clear what form those will take at this point. But even the legislatures’ most vocal advocates for child care access and expansion are saying that delaying the expansion of these child care subsidies makes a lot of sense to them, because it’s not necessarily a cut to an active program. It’s just a delay in an expansion, it’s a pause. So they’re looking at things like that.

Ferguson’s budget priorities, he called out programs that are new, programs that are smaller, maybe those that aren’t really measuring their results or those that aren’t tracking results. So I think that some of the programs that are costing money and maybe haven’t proven their worth per se at this point could be on the chopping block. And even some of those that maybe aren’t at their full capacity – if they’re underutilized, they could also be reduced or eliminated. That could cover a broad area of topics, other than some of those that I already mentioned about education and safety that they’re trying to preserve.

I think right now, the overall message I’m getting is, lawmakers are really trying to keep their options as open as possible. And it’s really gonna be fascinating to see how these negotiations play out, especially with the new governor that’s right now in the middle of these two partisan sides of the legislature. Ultimately, Ferguson’s going to be the one with the veto pen, so that’s going to be a really important dynamic to watch.

Miller: We have focused essentially exclusively on budget questions, because this budget is going to be the biggest single issue, or set of issues, that lawmakers deal with. But what about policy bills? Are there any policy issues that you think are likely to get the most attention in this session?

Lindsay: Yeah, there’s one that people have already been talking about and that I’ve been asking a lot about. It’s this rent stabilization bill. We saw it fizzle out in the Senate last year after not enough Democrats got on board to approve it. But after the election, and just with some of the turnover, some people who have been in the legislature have been appointed to different positions in the Ferguson administration, or they ran for Congress and things like that. There’s just been a lot of churn in the legislature and the expectation now is that this rent stabilization proposal is coming back.

It’s already been filed and already being talked about. The expectation by a lot of people who support it is that it has a really good chance of passing this year. So, that’s going to be a pretty significant policy to watch. This rent stabilization bill, the concept there is to basically cap the amount that a landlord can raise a tenant’s rent each year for tenants who want to stay in their homes. It’s basically an effort to slow rising rental costs, and housing advocates are really, really interested in that. And that bill already passed the House in a previous session. It just didn’t make it through the Senate. So, it already has quite a bit of momentum. There’s a lot of expectation there.

There’s another piece of legislation, it’s kind of budget related but in the transportation world, that’s going to be pretty interesting. There’s some lawmakers who are going to be talking about creating a road usage charge in the state, so people pay per mile instead of paying for transportation through the gas tax, like they have been for forever. The concept there is, essentially replacing the gas tax with this road usage charge, because gas tax revenues have just been on the decline, as more people buy electric vehicles or really fuel efficient vehicles. So they’re trying to address this transportation budget question by still having people pay to use the road but in a different way, because the gas tax really isn’t functioning that way as much anymore.

Miller: Jeanie, thanks very much.

Lindsay: You’re welcome.

Miller: Jeanie Lindsay is the Olympia correspondent for our partner station KUOW. She joined us on Friday.

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