Washington state schools chief adds capital-gains tax, special education to his budget wish list

The school walkouts that riled teacher contract talks this summer in more than a dozen districts across Washington state have only recently settled down with the start of the academic year.

Officials in many of those districts, especially in southwest Washington, blamed the chaotic negotiation season on the recent overhaul of the state’s public-schools budget, a response to a decision on the landmark McCleary school-funding case. Those leaders have called on lawmakers to offer a financial lifeline to the superintendents and school boards that agreed to unsustainable pay hikes for teachers.

On Tuesday, state Superintendent of Public Instruction Chris Reykdal offered the first glimpse of what that lifeline could look like — and he pitched a new $2 billion tax to pay for property-tax cuts and increased K-12 spending.

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“This state, candidly, has made great progress but is on an unsustainable path,” Reykdal said at a news conference in Olympia, where his office released details of its 2019-21 budget request.

The request now heads to Gov. Jay Inslee, who will consider similar wish lists from every state agency before releasing his proposed budget in December before the next legislative session starts in January. Here’s a breakdown of what Reykdal wants:

• A new capital-gains tax: Reykdal resurrected an idea that died in the House of Representatives this year, proposing that the state tax capital gains — profits made from the sale of corporate stocks, bonds and other financial assets. His office estimates the tax would generate $2 billion over two years, half of which Reykdal wants to pay for a cut in the statewide property tax that funds K-12 schools. The average homeowner in King, Pierce and Snohomish counties would see about $1,500 shaved from the property tax bill, Reykdal said. Republicans have criticized a capital-gains tax as unconstitutional in a state that bans income taxes.
• Other K-12 priorities: The other half of this proposed capital-gains tax would boost education spending. Under Reykdal’s proposed budget, that remaining $1 billion from the capital-gains tax would provide a $150 million boost in services for students with disabilities — who Sen. John Braun, R-Centralia, agreed should be a top priority heading into the 2019 legislative session — and additional funding for school nurses and counselors, career and technical education, dual-language program, mental health and school safety. Reykdal also wants to start a pilot program for districts that seek to extend the length of a school day, week or year.
• Flexibility for local taxes: Meanwhile, as he seeks a cut in the statewide tax, Reykdal also suggested allowing individual school districts to set higher local property-tax levies to pad their budgets. The state’s new K-12 budget, starting in 2019, will cap those levies at the lower of two rates. Many districts, including those with teacher strikes this summer, have cried foul and forecast years of revenue shortfalls because of the levy lids. However, Braun and the Senate GOP’s chief budget writer rejected the idea of raising the new levy lids. “We’ve put billions of additional money into education over the last six years,” he said.

“On the spending side, students with disabilities and mental health are big priorities for us,” Reykdal said.

“The tax proposal will get lots of headlines,” he added. “But if they (lawmakers) don’t bite at all on transforming revenue or harder tax questions, they need to address additional money to (those priorities).”