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Dear Friends and Neighbors,

We have entered into the final two weeks of the regularly scheduled 105-day session. For the next several days, negotiations will be centered on the operating, capital, and transportation budgets.

As we prepare to vote on these crucial policy issues, it is important that I hear directly from community members. That is why I was pleased to co-host a telephone town hall 17th Legislative District event with Sen. Lynda Wilson and Rep. Paul Harris recently. We were able to hear your comments, answer questions, and share information about our work at the Legislature.

Telephone town hall recap

I'd like to say “thank you” to everyone who participated in this community conversation. I deeply appreciate that you took time out of your busy day to talk with us. We discussed a broad range of issues including: additional funding for our schools, local levy reform, teacher compensation, and the proposed Senate and House operating budgets.

It is not surprising traffic congestion and potential transportation solutions for our region were a concern for callers. We talked about some of the policy ideas being discussed in Olympia and locally on that issue. Read about the results of my recent transportation solutions survey.

During the event, callers were asked to participate in a series of poll questions. One of those questions was about the health of our local economy. Although some callers expressed cautious optimism about the current economic outlook for our region, several others said more needs to be done. I took serious note of this feedback. It certainly needs to be addressed in order to improve our local economy and your confidence to know the future is bright for you and your family.

Ronald Reagan once famously said, “Revenues should be increased not by increasing the tax rates on the individual but by building a bigger economy for everybody.”  I agree. Healthy communities depend on a strong, diversified economy. As I discussed during the call, I do not believe the current proposal to increase the business and occupation (B&O) tax is the right way to go. Nor is a capital gains tax, which is a risky, volatile funding source for state budget planning and could lead to a state income tax. Instead of raising taxes, I will work to provide solutions which include reducing taxes and regulations to encourage economic growth in our region and state.

Read more about the volatility of capital gains income taxes

If you did not get a chance to participate in this town hall event, don't despair! At the conclusion of the legislation session, I will be conducting face-to-face town hall meetings. Event days and times will be announced in future email updates. Stay tuned.

Disabled veterans legislation approved by the House

I'm glad to announce my legislation to help disabled veterans with the costs of accessible housing was recently approved by the House. Returning home is an important aspect of the healing process for disabled veterans. Many need home modifications because of service related injuries. My bill would provide a sales tax exemption for costs associated with adapted housing. Disabled veterans qualified through the Department of Veterans Affairs Specially Adapted Housing (SAH) or Special Housing Adaption (SHA) grant programs would be eligible for the exemption. The bill now heads to the Senate for further consideration.

Watch my floor speech on House Bill 2138.

Capital budget news
As a member of the House Capital Budget Committee, I worked with the entire Southwest Washington delegation of legislators ensuring projects for our region were identified, supported, and selected for the capital budget proposal for the 2017-19 biennium. The state House will vote on the capital budget this week. I'm glad to report $3 million was allocated for the Daybreak Youth Center for Adolescent Recovery, and $500,000 for the WSU Vancouver Life Sciences Building.

See a complete list of projects in the proposed capital budget for our communities/Clark County.

Good news!
When the government starts talking about budgets, the words “good news” don't usually come to mind. But, after the state's revenue forecast was released recently, it contained some welcome information. Incoming revenues for the current 2015-17 budget cycle are up by $247 million. In addition, the Economic and Revenue Forecast Council projected an increase total of $303 million by 2017-19. It's clear our state does not have a revenue problem.

Dueling operating budgets

On March 31, House Democrats passed their operating budget plan. Just a week prior, the Senate approved their version for the state's operating budget. Both plans make large investments into basic K-12 education. However, there are major differences in how they get there.

The House Democrat's proposal would raise taxes by nearly $3 billion for the next budget cycle, and $5 billion in 2019-21. That is a total increase of $8 billion in only four years. In addition, it includes a 20 percent business and occupation (B&O) tax increase, increases to the real estate excise tax for homes, and relies on an income tax in the form of a capital gains tax. With the extra revenue outlined above, it is difficult to believe the state cannot live within its means.

Read KING 5 story on proposed B&O tax hike on day cares.
List of businesses that would be impacted by the proposed B&O tax increases.

Ready for an interesting tidbit of state history? Since 1932, with Initiative 69, voters have consistently rejected (on ten separate occasions) a state income tax. Read more about the history of income tax votes in Washington state.

Read Sen. Tim Sheldon's op-ed “The monster lurking behind school funding: an income tax.”

The House Democrats plan spends a lot of money. While I do appreciate the policy objectives for state provided services, the revenue needed would put our state's coffers in jeopardy. Here is a big picture perspective on the spending:

From 2011-13, the state spent $31 billion on its operating budget. The House Democrats proposal would increase state spending to $51 billion by the 2019-21 budget cycle. That is an increase of $20 billion in only 8 years. In fact, the proposed spending outpaces the earning rate of those obligated to pay for it. Despite the plan's massive tax increases, which rely heavily on risky economic assumptions, the ending balance in their budget for the four-year outlook would be a mere $12 million. This is a fiscally irresponsible for our state.

The proposal is also missing a key component to answering our state's education funding needs. It does not adequately address local levy reform. In order to meet the Washington State Supreme Court's mandate, we must end our reliance on local levy funds to pay for basic education. This will help more adequately support our students and fund our schools.

What are our options?

I believe we can, and should, accomplish the goal of amply funding education without raising taxes. The Senate has introduced a plan with no income tax, no carbon tax, and no B&O tax increases. Even better, a portion of the “extraordinary revenue” from new economic activity would be transferred to the Budget Stabilization Account. This leaves our state's “rainy day” fund intact and healthy at nearly $2 billion.

One of the best pieces of news about the Senate's operating budget proposal is it includes state-wide property tax reform that is equitable and fair. The general idea is to reduce inequities in how school districts are able to raise money. This change will equalize local property tax levy rates and spread the tax burden for schools across the state. Because a levy swap would result in property-rich districts paying more than property poor districts, rates would be decreased in most of our communities locally and in several others across the state.

The new revenue noted in the section above gives the budget an additional boost. With 50 percent of the total operating budget dedicated to education, the Senate plan continues to build on the $4.6 billion in additional education dollars invested over the last two budget cycles.

Where do we go from here?
Negotiators from the Senate and the House will be meeting over the next several days. The final budget will likely look very different from both of these measures. While I understand this can be a labor intensive process, I do not believe there is any advantage to dragging the Legislature into overtime. It is my hope negotiators are able to produce a viable plan within the next two weeks. We need to finish the people's work on time.

Please feel free to contact me with your comments, question or concerns. You can reach me by email at vicki.kraft@leg.wa.gov, or call my office at (360) 786-7994. Thank you for the privilege of serving you in Olympia.

Sincerely,


Vicki Kraft

State Representative Vicki Kraft, 17th Legislative District
RepresentativeVickiKraft.com
436 John L. O'Brien Building | P.O. Box 40600 | Olympia, WA 98504-0600
vicki.kraft@leg.wa.gov
360-786-7994 | Toll-free: (800) 562-6000