Ben Mitchell
Director of Advocacy & Policy, Foundation for Tacoma Students
Normally at this point in the legislative session we’re beginning our descent for a comfortable landing. But this year it feels like we’re a mile from the airport, still cruising at 40,000 feet, and heading for a crash.
It all has to do with the big budget deficit that we’re facing in Washington. The House and the Senate released budget proposals that differ in meaningful ways – most notably for us, around higher education spending – but that share an overall approach of a roughly 50/50 split between spending cuts and new taxes to close the deficit.
But Governor Ferguson has said in no uncertain terms that the budget proposals from the House and Senate do not come close to something he could sign. This seems to have taken people aback, given that the Governor is also a Democrat, and that there’s 12 years of muscle memory of working with former Governor Inslee, who didn’t assert himself as much among his fellow Democrats when it came to the state budget.
Legislators and the Governor have about three weeks to work out their differences and find common ground on how to address the deficit. And while it must be said that all of this is being made worse by the unhinged decision by the Trump administration to create a recession, the low-simmering dysfunction between Democrats in the legislature and the Governor isn’t helping.
How the state budget comes together
Before getting into policy and politics around the next two-year state operating budget, let’s do little bit of orientation to the process.
The first thing to keep in mind is that there are three distinct budgets that comprise the overall taxing and spending plan for our state:
The capital budget, which covers buildings, facilities, and construction projects that are not related to transportation.
The transportation budget, which covers all the stuff related to how people and goods move around the state, including road construction, transit, and ferries.
The operating budget, which covers everything else, including early learning, K-12 and higher education.
The operating budget is roughly the size of the capital and transportation budgets put together, and it receives by far the most attention among advocates and the media. Ninety-nine percent of the time when someone is talking to you about the “state budget” or you’re reading an article about the “state budget,” they’re talking about the operating budget.
All three budgets are in the form of very long bills. The House operating budget proposal is House Bill 1198, and the Senate operating budget proposal is Senate Bill 5167. And just like all other legislation they have to flow through the official video game process, but with a distinct secret level:
Level 1: Governor releases their budget proposal
Level 2: Majority caucuses in the House and Senate release their budget bills
Level 3: House and Senate hold budget hearings and incorporate amendments
Level 4: House and Senate vote to pass their respective budget proposals
Level 5: In a secret level that takes place behind closed doors, representatives from the House and Senate form a conference committee to negotiate the final budget
Level 6: House and Senate vote to pass final budget
Level 7: Governor signs the final budget
The house and senate budget proposals
We’re pretty far along in the budget video game having just passed Level 4 on March 31. But as we covered before, the situation this year is very challenging because of a large budget deficit. With their sizable majorities in the House and Senate, Democrats control the budget process in Olympia. And at a high level, both chambers’ budget proposals would increase biennial spending levels and make ends meet through a combination of about $3 billion in spending cuts, and between $5 to $6 billion in new revenue over next biennium. But drilling down from there, the details of the House and Senate budget proposals plot fairly divergent taxing and spending paths.
The Senate’s budget saves money by pushing out planned expansion of childcare subsidies for poor parents, furloughing state workers for 13 days per year, and draining our state reserves – the “rainy day fund” – from $1.6 billion to $95 million. The largest spending increases in the Senate budget are to new collective bargaining agreements for state employees and to K-12 education, mostly to provide more funding for special education.
The House put forward what is probably the less controversial budget proposal, as they do not propose tapping the rainy fund or furloughing state employees. The House proposal relies on cuts to childcare subsidies that are similar to the Senate, just a bit less. And they also don’t propose anywhere close to the same level of funding for K-12 special education and operating costs. On the spending side, far and away the largest increase is to collective bargaining agreements for state workers.
Democratic budget writers in both chambers also proposed a package of new taxes to help square the budget circle:
The revenue package from Senate Democrats includes a wealth tax and a payroll tax that are targeted at rich households and large businesses. They also propose an increase to local property taxing authority, and a reduction to the state sales tax.
The House revenue package includes narrower versions of the wealth tax and a property tax lift with guardrails that will keep it smaller than the Senate’s. House budget writers did not put forward a payroll tax, but they did propose another way to tax big businesses in the form of a business and occupations tax.
The Washington Research Council published a helpful operating budget comparison for the two Democratic proposals, as well as the budget proposal from Senate Republicans. (The Research Council is a more fiscally conservative organization, and you’ll pick up on that in their commentary. But their accounting is accurate and fair):
The League of Education Voters has a good side-by-side comparison of the education spending plans in the two budget proposals, and here’s a quick rundown of what we like and don’t like between the two plans:
The House operating budget proposal
What we like:
The better approach to preserving college financial aid and tuition
First among our priorities this year are two big items in the higher education spending plan that directly affect students: financial aid and tuition. The House budget proposal does not change state policy on tuition – maintaining the current cap of increases of 3.3 percent – and while it cuts back on eligibility for our nation-leading financial aid program, the Washington College Grant, the cut is not too bad given the overall budget context.
Invests in improving the CTE dual credit system
House Bill 1273 is a high priority piece of legislation for us. It addresses a persistent issue where a lot of students in our state enroll in CTE dual credit courses in high school (73 percent), but a very low percentage (2 percent) of those students actually apply that dual credit to a college. The bill will continue a promising pilot project in the Northwest ESD that is trying to work out kinks between the K-12 and community and technical college systems.
Provides a funding boost to poorer K-12 school districts
House Bill 2049 has a lot of different K-12 funding provisions in it, and it would be very surprising if it passed in its entirety. But one little provision in the bill that’s in the House budget is to increase funding to the Local Effort Assistance program, which helps out property-poor school districts that have a hard time passing levies. We unpacked this in a previous post.
What we don’t like:
Cuts the financial aid outreach and completion initiative
House Bill 1136 and Senate Bill 5164 were our top legislative priorities this session and would have expanded a promising pilot program in which staff at community and technical colleges help high school seniors in their region complete financial aid applications and navigate enrollment processes. The bills are dead, but the House budget proposal goes further and includes a cut to the existing pilot program.
Very little new funding for special education
Increasing state funding for special education in the K-12 system is the biggest funding priority this year for K-12 interest groups, and the House budget adds just a small amount of new funding.
The Senate operating budget proposal
What we like:
Robust new funding for K-12 education
The single biggest standout item in the Senate budget proposal is more than $1 billion in new funding for K-12 education. The vast majority of that funding is an increase for special education through Senate Bill 5263, about $970 million. And then there’s another $175 million to increase funding to school districts for materials supplies and operating costs though Senate Bill 5192.
Expansion of the financial aid outreach and completion initiative
Whereas the House budget proposal put forward an $850,000 cut to the program that is our top priority, the Senate budget proposal includes a $520,000 expansion to the program to the north central part of the state. Through this more students will be supported by skilled professionals in navigating college financial aid and enrollment processes.
What we don’t like
Increases to college tuition
The Senate budget will lift the cap on annual tuition increases at public colleges and universities from 3.3 percent to 8.3 percent.
Cuts to college financial aid
The Senate budget combines higher tuition with less financial aid through cuts to the Washington College Grant.
Higher education is a second tier priority in the budget
At the Foundation for Tacoma Students we believe that College is worth it. That earning a 2-year or 4-year degree puts young adults on a path to a good earning wage job and upward mobility. While “college for all” doesn’t have the same appeal among adults that it once did, the data does not paint a picture of waning interest in college among actual students:
FAFSA submission are up 16 percent in Washington compared to this time last year
Undergraduate enrollment in Washington for the fall of 2024 was up 5.8 percent compared to last year.
While we need to do more to improve graduation rates and make sure that students actually end up with valuable degrees, the data shows that there is growing demand for college. This is a fantastic problem to have, not a curve that needs to be bent. According to the National College Attainment Network (NCAN), for every additional postsecondary graduate in Washington, our annual state GDP will increase by more than $160,000 and an additional eight jobs will be created.
For having such a solid ROI case, higher education is a relatively small spending area in the state budget, garnering less than 8 percent of total spending.
And that might be a high-water mark based on the budget proposals from the House and Senate. Both chambers proposed overall cuts to higher education that will directly impact students and potentially suppress the positive trends in college-going.
Most worrying to us is a potential combination of a cut to financial aid, and an increase in college tuition. There are a lot of urgent public problems that need policy attention in Washington, but one problem we have effectively solved is how to make tuition affordable for middle-class and lower-income students. Last year we were recognized for being first in the nation for need-based financial aid, and NCAN’s analysis shows that we actually have a positive college affordability gap.
The Senate budget proposal is the real worry. Right now, the Washington College Grant covers 100 percent of tuition at public colleges and universities for students with incomes at or below 65 percent of median family income (MFI). Then there’s a sliding scale of financial aid support for students who make between 66 percent – 100 percent of the MFI. The Senate budget would eliminate need-based financial aid entirely for students who make more than 70 percent of the MFI. That’s about $49,000 for a one-person household, and $94,000 for a four person household. If you make more than that, no financial aid.
On top of that is a lift to the 3.3 percent cap on annual tuition increases. Schools would retain discretion as to how much to raise tuition, and they have every incentive to keep tuition as low as possible. But in the context of cuts to higher education funding overall, and commitments to providing college and university staff with COLAs, it would be very likely that schools would have to balance their budgets on the backs of students through exponentially higher tuition. After a period of predictable and modest annual tuition increases, a one-year spike could be extremely disruptive to college going.
Our view is that higher education is already not a major cost driver in the state budget, and the modest savings achieved by shifting cost burdens from the state to students would be penny-wise and pound foolish.
We have the building blocks in place already in Washington to set people up for stable and upwardly mobile futures, and foster a dynamic and high growth economy. And if we want to realize this abundant future, all we need to do is decide to not un-solve a problem, and preserve the most effective and high-value investments in our higher education system.
Legislators and the Governor are not on the same page
While the House and Senate laid out divergent spending and taxing paths, the Governor seems to be working off of a different map altogether.
Governor Ferguson has yet to come out in favor of any particular tax increase, and has said that a wealth tax in particular is something he doesn’t support. At the same time, he’s said that he does not want to compromise core government services and programs, that he supports increasing the share of the state budget for K-12 education, and that he has a bottom-line commitment to a new $100 million investment to help local governments hire more police officers.
While Governor Ferguson released a set of recommendations for spending cuts, they weren’t enough to close the entire deficit, and he never put forward a full proposal to get us there. That created a vacuum in the legislative session, and Democratic budget writers in the House and Senate apparently drew the conclusion that they could force a budget proposal on the Governor that violated many of his imperatives:
They went ahead with a wealth tax in both chamber budget proposals.
The Senate proposal drains the rainy day fund.
The House proposal assumes very optimistic revenue growth beyond what state economists forecast.
Neither chamber includes the $100 million for law enforcement.
Governor Ferguson held a press conference on April 1 where he made it clear that the gambit by Democratic legislators to roll over him when it comes to the state budget is not going to fly. The Governor said that neither budget proposal comes close to something he would sign, and he said that budget writers in the House and Senate must “immediately move budget discussions in a different direction.” Governor Ferguson also said that an all-cuts budget is not a realistic option, but he is clearly more tax averse than Democrats in the legislature.
He listed five things that he said he must see in a final negotiated budget:
The rainy day fund cannot be drained. He cited the insanity in Washington D.C. as presenting too much risk for us to not have a cushion in Washington.
The budget must be based on realistic revenue projections. This is a dig at Democratic budget writers who used overly optimistic revenue assumptions in their budgets for the last ew years, which the Governor largely blames for getting us in this budget mess in the first place.
He wants to minimize new spending, but did not give an overall figure.
He wants to find yet more savings in the budget, but did not give an overall figure.
He does not want to mess around with new taxes that stand on shaky legal ground, i.e. the wealth tax.
From here budget writers from the legislature and presumably members of the Governor’s team are going to disappear into a black box for the next few weeks and then emerge with some sort of negotiated agreement in late April. There is a lot that needs to get worked out among the Democrats across the two chambers and the Governor’s office through the next few weeks before the end of the legislative session on April 27.
It looks like a mess from the outside, and has been quite frustrating for us as an advocate. Yes there are a lot of differences between Democrats in the legislature, but this game of chicken between the legislature and the Governor makes it seem as though nobody has been talking to each other.
We said coming in that the legislative session would be a test to see if Democrats in Washington can not just maintain stability through budget cuts and new revenue, but make Washington into a model for blue-state governance. It’s too early for a verdict on that question, but it hasn’t looked great so far.
