Inslee signs $43.7B state budget, averting government shutdown at 11th hour

OLYMPIA, Wash.  — With less than an hour to spare, Gov. Jay Inslee signed a new two-year $43.7 billion state operating budget in time to avoid a partial government shutdown.

The new law increase spending for public schools, mental health and state worker contracts.

At the signing ceremony, Inslee called it a “truly historic budget” that fully funds “basic education for the first time in 30 years.”

His signature came after rapid voting in the Legislature the same day details of the budget were publicly released. The Senate approved the measure on a 39-10 vote, followed by the House’s 70-23 vote.

The 2017-2019 budget needed to be passed by the Legislature and signed by the governor by midnight to avoid a partial government shutdown. Inslee signed the bill at about 11:19 p.m. Friday.

Details of a new two-year state operating budget were released Friday.

The $43.7 billion plan adds $1.8 billion for K-12 public schools in the next biennium, part of $7.3 billion hike over the next years designed to satisfy a state Supreme Court ruling that the state had not adequately funded basic education.

"This is a historic budget that I believe fully funds our schools for the first time in decades and will meet our constitutional obligations,"  Inslee said in a written statement.

The budget also adds $618 million for public employee collective bargaining and pay and $102 million in mental health spending. Inslee had sought more money for psychiatric care as the state's largest mental hospital faced staffing and safety problems.

The spending plan would save $1.9 billion by not funding a 2014 voter-approved initiative to reduce class sizes.

The plan is paid for with a mix of revenue. The statewide property tax per $1,000 of assessed value increases from $1.89 to $2.70, with the increase being earmarked for education. That rate — expected to bring in $6.6 billion over the next four years, with $1.6 billion of that coming in the next two years. The plan also keeps in place local property tax levies but caps them beginning in 2019 at a lower level and requires they be used for programs that supplement basic education.

Senate and House nonpartisan analyses show different impacts of the property tax increase, with the Senate analysis show most districts would see a decrease by 2021 and a House analysis showing that most would see an increase.

"Constitutionally, the property tax is what funds our public education system," said Republican Sen. John Braun, one of the key budget negotiators. "We worked very hard to make sure it's balanced so that there's not a huge weight on one part of the state."

House Democratic budget negotiators said that while the increase in some districts, including Seattle, is causing some of their caucus angst, it was the best solution they could agree to.

"We all know that in the end we have to pay for schools somehow," said Democratic Rep. June Robinson. "This is what we can agree on in a divided government."

“The process is terrible, it's a result of a divided government,” Rep. Nicole Macri said.

“There is definitely new investment,” state Superintendent of Public Instruction Chris Reykdal said, adding that the bill includes more resources for transitional, bilingual students, low-income students, highly capable students and for career and technical education.

Reykdal says lawmakers should have left levy dollars alone and most educators agree.

“There are a lot of rules, to make sure these dollars go to this thing, and you can’t use it for that,” Justin Fox- Bailey, with Snohomish Education Association, said.

Reykdal says the plan will satisfy the state’s Supreme Court mandate on education -- or come close. But other educators like Fox-Bailey are not convinced. He says the exact impact is still unclear to many districts and they don’t know if the rules on paper can be implemented in real life.

“We have next year to come back if there are glaring problems that we missed; we will come back and fix those next year,” Rep. Kristine Lytton said.

A big sticking point for many lawmakers is the heavy reliance on property taxes to fund education.

“That's the piece I am struggling with,” Macri said.

Macri, who represents Seattle, says she supports the billions more for education but worries about the property tax increase for her constituents in Seattle.

“Not only does it hit hard on property tax but in my district where 60% are renters, eventually those increases will trickle down to renters,” Macri said.

An additional $456 million over the next two years comes from adding sales tax to bottled water, removing the tax break for fuel extraction used by oil refineries, and requires online retailers based out of state to collect and remit sales tax from Washington state customers.

The overall plan also would lower the business and occupation rate on state manufacturers from .484 percent to .2904 percent — the same preferential rate given to Boeing and others in the aerospace sector.

Legislative leaders say the budget complies with a 2012 state Supreme Court ruling that they must meet the state's constitutional requirement to fully fund the state's basic education system. Lawmakers have already put more than $2 billion toward the issue since the ruling, but the biggest piece remaining of the court order is figuring out how much the state must provide for teacher salaries. School districts currently pay a big chunk of those salaries with local property-tax levies.

The court has said that the state has until Sept. 1, 2018, to do that, but that the details — including funding — must be in place before the Legislature adjourns this year.

Lawmakers — who started their regular 105-day legislative session in January — have had to go into three overtime sessions.

The outline of the education plan provided Thursday sets a minimum starting salary for teachers at $40,000, with adjustment for inflation and regional differences. Under the plan, the average minimum salary for instructional staff will be $64,000, and adding in regionalization, it will range from $66,194 to $82,081. School districts can pay a salary over the maximum of $90,000 by up to 10 percent for educational staff associates or teachers who teach science, technology, engineering, math or in bilingual or special education programs.

Also under the measure:

—There's a mandatory 10 percent increase after 5 years of employment.

—Starting in 2020-21, the minimum state allocations for salaries must be adjusted annually for inflation.

—Starting with the 2023 session, and every six years after that, the Legislature must review compensation to make sure they are adequate based on the market and economic differences between school districts.

While lawmakers have expressed confidence that they will pass the budget in time, contingency plans for a potential shutdown were still in place. Notices went out last week to about 32,000 state workers warning them they will be temporarily laid off if a budget is not in place by midnight Friday. A partial shutdown would affect everything from community supervision of offenders on probation, to meal services to the elderly to reservations made at state parks. The state parks were initially set to close early on Friday because of extra time needed to prepare in case of a shutdown, but Gov. Jay Inslee has asked them to stay open.

In addition to the state operating budget, lawmakers still need to address the capital budget that deals with projects across the state. That budget has been held up by a dispute over a legislative fix to a water ruling. Legislative leaders acknowledged they may need additional time this month to finish work on that and other lingering bills.