Ben Mitchell
Director of Advocacy & Policy, Foundation for Tacoma Students
April 21st is day 99 out of 105 for the 2025 Legislative Session. At this point it’s very unclear from the outside what is going to happen with regards to the mix of spending cuts and new taxes that will be necessary to close our state’s budget deficit.
Over the weekend Democrats advanced several major tax bills, and we should see House and Senate budget writers release a final operating budget proposal by the middle of this week. Governor Ferguson has been a bit cagey as to where he stands on the specific tax ideas that are moving through the legislature. The Governor has not said clearly in a public forum what he thinks is the right balance between spending cuts and new taxes, and it looks like this has left lawmakers wondering what they’re supposed to be bargaining around. Plus, everything is so interconnected – a tax bill in the Senate will affect a spending measure in the House, and vice versa – that it’s just hard to predict where it will all settle.
The spending plans for K-12 and higher education are ensnared in all of this. It looks like there might be consensus proposals for increasing funding for K-12 and preserving some of the key building blocks in higher education funding, but these two issues tie-back to the open questions of how much will we cut from the operating budget overall, and how much new revenue will we bring in.
Two weeks ago it seemed pretty late in the session for there to be so many balls in the air, and now we’re at a point where it seems like lawmakers and the Governor might need extra time to finish up the final budget solution. We’ve become accustomed to last-minute budget deals at the federal level over the last 20 years, but that’s usually been the product of divided government in DC. Here in Washington it’s one political party in control. And while Democrats are aligned in their talking points on the need for balanced fiscal consolidation that combines higher revenue and lower spending, while trying to shelter the most vulnerable from the impact of cuts, the differences within that consensus are meaningful.
There's a lot of uncertainty with the budget
At the beginning of April the story of this legislative session was at a cliffhanger. House and Senate Democrats had released full operating budget proposals that addressed our state’s budget deficit through a mix of spending reductions and proposals for new taxes or tax increases. On the heels of those proposals coming out, Governor Ferguson held a press conference where he said in no uncertain terms that neither budget proposal was close to something that he would sign. Ferguson said he was not comfortable with the degree to which the budget proposals relied on new taxes, especially a wealth tax that would be the first of its kind in the country, and might not hold up in a legal challenge.
After that the House and Senate passed their respective operating budgets out of their chambers, and then that set-up the penultimate phase of the budget process where lead budget writers and presumably members of the Governor’s team would huddle together and figure out the final compromise solution.
But in the last few weeks the drama around this intensified over three acts.
Act one was a remarkable public airing of grievances towards the Governor from interest groups that are traditionally allies with Democrats. The Washington Federation of State Employees held a protest against proposed furloughs for state workers, and the union’s president got into his bag of insults and called the Governor a “ratfink” for his unwillingness to embrace a wealth tax and other new revenue that could stave off those furloughs.
What’s remarkable about this is that this is a labor group that endorsed Governor Ferguson in his election last year. It’s pretty nuts that this group could be so taken aback by the Governor’s stance, which regardless of how you feel about it, speaks to some sort of communication breakdown.
Act 2 was a consensus proposal from House and Senate Democrats for a slate of new taxes to help cover our state’s large budget deficit. The new joint-proposal from the House and the Senate takes steps closer to the Governor’s position, and would bring about $12 billion in new revenue over four years, about three-quarters of the size of the budget deficit:
They dropped the wealth tax idea, and also a payroll tax idea – which all the major business interest groups were against.
They initially kept then dropped their previous idea to allow cities and counties to raise property taxes beyond the current 1% cap annual increases, to up to 3% annually.
They extended the retail sales tax to more services, such as temporary staffing, advertising, security and lobbying.
They put new taxes on nicotine products.
They repealed several niche tax breaks on things like self-storage units and precious metal and bullion.
They increased rates on existing business and occupation taxes.
They created higher tax tiers for the existing capital gains tax for people who make more than $1 million in capital gains.
And then Act 3 was another back and forth between Governor Ferguson where he released a statement on the revenue number saying that $12 billion in new taxes was too risky given the Trump chaos and national economic uncertainty. But the Governor has not told Democrats in the legislature exactly what he will accept in new taxes, and so somewhat understandably they went ahead and advanced all the major pieces of their tax package over the weekend.
At this point it’s very unclear what’s going to happen. Nobody really knows how to interpret Governor Ferguson’s statement and if he would veto a budget if these taxes were included. In order to finish the budget process by the last day of the session, April 27, Democrats will need to release a final operating budget proposal by April 23. It’s possible they’ll need to extend the session for at least a few days, maybe longer.
A lot of stressful issues in K-12 education
The highest profile things happening in K-12 education policy are around potential funding increases, and revising a citizen initiative about parental rights that the legislature passed last year. The parental rights issue is very divisive, and Democrats have passed bills that primarily focus on changes around parents’ access to their children’s medical records, including for mental health counseling.
The K-12 funding soup has been reduced down to a stew consisting of special education funding, and funding for materials, supplies and operating costs. It looks like there will be a meaningful improvement to special education funding with the removal of the 16 percent enrollment cap on special education dollars allocated to school districts, as well as increases to the overall amount of funding going to special education. The final amount is a compromise between the House and the Senate, with the Senate budget proposal putting in more money originally.
Democrats in the House and Senate were less unified on funding levels for materials, supplies and operating costs. The Senate wanted to spend more, but the House amended the amount of funding in the Senate bill from $198 million over two years to $35 million, before passing it.
It’s important to remember that this year’s K-12 funding questions are nested in the larger question of what the final operating budget plan will be in terms of new taxes and budget cuts. That’s driving everything, and if the $12 billion revenue package ends up being much higher than the final amount, then it’s possible and maybe likely that the new funding levels for K-12 education in these bills does not happen after all.
And then beyond the near-term issue of funding amounts, there is still the fact that Washington pays for K-12 education mostly on an equal basis, allocating money to districts based on enrollment and largely not considering poverty or equity. This is a long-standing issue that we’ve weighed in on, but that hasn’t yet had the policy window come open. The Seattle Times had a great piece on a low-key effort so far by district superintendents to develop a new funding plan and goals for resourcing the K-12 system. We think this is really important work, and if it can be paired with a rediscovery of the old wisdom around learning standards and accountability, that it would be a substantial improvement to our K-12 education system.
Improved outlook for college affordability
As we wrote about previously, we had serious concerns that solving the budget deficit was going to entail a disproportionate hit to higher education funding this year. Specifically, the Senate budget proposal that was released a few weeks ago proposed to shift tuition cost burdens from the state to students, by simultaneously raising the cap on annual tuition increases, and cutting need-based financial aid. Something completely counter to what you might expect from a legislature with large Democratic majorities.
The bill that we and most higher education interest groups were most worried about was Senate Bill 5785. In its original form, the bill would have allowed public colleges and universities to raise in-state tuition beyond the current cap of 3 percent per year, up to 5 percent per year. It also would have eliminated need-based financial aid for in-state students from households who make more than 70 percent of the state median family income. Right now we provide need-based financial aid on a sliding scale for any in-state student who comes from a household making up to 100 percent of state median family income.
Thankfully, lawmakers from the House and the Senate worked together to course correct and put together a substitute bill for SB 5785. The new version of the bill removes the language about authorizing an increase to in-state tuition, as well as the part about ending need-based financial aid for students making between 70 to 100 percent of median family incomes. It also makes permanent the policy of providing free tuition to public colleges and universities to students from households that make up to 60 percent of median family income; the current statutory cut-off for free tuition is 55 percent median family income.
So that is all fantastic. At the same time the new bill does propose some reductions in financial aid: A cut to aid for students attending private non-profit colleges and universities, a modest cut to financial aid for students in apprenticeship programs, and eliminating need-based financial aid altogether for students at private for-profit institutions.
If it were up to us we’d want to see increasing need-based financial aid overall and across the board, but this legislative session is a year of defense for higher education. If lawmakers manage to hold together a consensus position to preserve the tent pole funding for students at our public colleges and universities, we would consider that a very important win.
