♪♪
-Hello, I'm your host, Brian Callanan.
State lawmakers have just wrapped up
their session in Olympia,
but their answers to a multi-billion dollar
deficit problem
are still raising some questions.
-The 2025 regular session is adjourned.
-Sine die. -Sine die.
-Legislators are celebrating the end of their session
with a new budget they say will fix
a $16 billion shortfall
projected over the next four years.
Democrats, who hold the majority,
say their package maintains core state services
with some cuts and some new revenue.
-We achieved a balance in the budget
with the combination of spending reductions
and then some targeted increases in taxes.
-But Republicans say the Dems' tax hikes,
which touch everything from the sales tax
to capital gains, to big businesses,
will end up hurting the entire state.
-It's going to hit regular people in your cost of housing,
fuel, gas, groceries, health care --
all going to go up, unfortunately.
-Governor Ferguson, who pushed back
on his party's plans for a wealth tax,
says he's concerned about possible cuts
in federal funding for our state
and favors a more conservative approach.
-I appreciate the hard work of the legislature
these past 100 days or so,
but of course, I'll be taking a close look
to see what stays in the budget and what might need to come out.
-What's the fallout from the state budget
and which programs are getting a boost?
-I'll just say, none of these decisions were easy.
-Our panel of Democrat and Republican leaders weighs in.
-It was a balanced budget, balanced between bad and worse.
-Get the state legislative lowdown,
next on "City Inside/Out."
♪♪
Welcome, once again, to City Inside/Out
on the Seattle Channel.
Brian Callanan here with you.
And I'm joined by two people
who are going to help us examine
the recently wrapped-up state legislative session.
The Democratic state senator
from the 36th district, here in Seattle -- Noel Frame.
Senator Frame, welcome.
-Thank you for having me.
-Also with us, the state GOP chair
and Republican state representative
from the 19th district, down in Aberdeen -- Jim Walsh.
Representative Walsh, thanks for being here.
-Great to be here, Brian.
-Let's jump into this.
And Senator Frame, I want to talk budget,
if I could, with you first.
So, the state's facing the $16 billion shortfall
over the next four years.
We've heard a lot about that.
Democrats put together a package to respond to that.
So, you approved a budget that includes some cuts,
but also some new tax hikes on capital gains,
businesses and emission credits.
As reported in The Seattle Times,
spending for the next two years,
as compared to 2023 to 25, is going up by more than 8%,
or about $6 billion.
I just want to get your guiding principle
in looking at this budget, if I could?
Do you think you got it right?
-Well, I certainly think
we did the best that we could, Brian.
And you're right, we walked into this session
with a $16 billion deficit,
something that was growing over the last years.
We were watching it. It got bigger and bigger.
And so as we came into the session,
we knew we wanted to take a balanced approach.
An all-cuts budget was really never an option for us,
because we know what happened when we did that the last time.
During the recession, we shredded our social safety net,
put our most vulnerable community members in harm's way.
So coming into this session,
we wanted to make sure we took a balanced approach,
which was a combination of both cuts
as well as raising revenue, and we did both.
-When you say you did the best you could,
what's in the back of your mind there?
I can feel some -- some challenges
that you're thinking about there.
-Yeah, I'll just say, none of these decisions were easy.
The cuts were not easy.
Raising the revenue was not easy.
I don't think any of us take
the gravity of our decisions lightly.
Making -- You know, having to roll back decisions
and programs that we advocated for
were very personal, in many respects.
Programs that we passed ourselves,
things that we advocated for personally.
-Is there an example you can think of?
-Yeah, I really a good example.
I advocated for years
to extend the right to counsel, an attorney,
to children entering the foster care program,
something that I started advocating for
when I was a foster parent, and before I was a legislator.
Finally got that passed a few years ago,
and it was a phased in implementation timeline.
And to put that implementation timeline on freeze
for four years, knowing that about 20 counties --
Those kids in those counties aren't going to get
that right to counsel on the schedule that we had planned.
And that's important because we know that kids
that have their own attorney in the foster care process
have better educational outcomes,
are likely to get to permanency faster.
So, that's an example of something
that was a really difficult decision,
but one we had to make in the current budget context.
-Thank you for that.
Representative Walsh, as you know,
this budget package did not receive any votes
from Republicans who were looking to cut spending
and not raise any taxes.
Six Democrats in the House also voted no.
What are your thoughts on what the legislature approved here?
-Well, Brian, we didn't advocate cuts.
We didn't think cuts were necessary.
Senator Frame is right.
It was a balanced budget -- balanced between bad and worse.
Uh, the spending
in the two year budget cycle for operating budget
that's just ending,
was about $73 billion for two years.
We believe strongly that if we had just held that line,
kept, but not cut anything,
just held spending at the $73 billion level,
we could've resolved this projected budget deficit
almost completely.
Not quite, but almost completely.
Instead, my colleagues across the aisle
decided to spend more money, as you've said, about 8% more,
and will plan to spend even more money
in the next two-year cycle after the one coming.
So really, we're spending, spending, spending
when if we had just held the line at the 2023 to 2025 level,
we could've resolved the deficit projection
without cutting anything.
-Senator Frame, can you respond to this whole
holding the line thing?
I'm thinking you might have a response to that.
What are your thoughts about that?
-Yeah, so, we have kind of a couple different things
in the budgeting process.
We have a maintenance level budget.
And then you have policy level decisions.
And it is not --
The idea of just holding the line
and not having any increased spending
doesn't reflect the reality that, when you pass programs,
they have maintenance level costs associated with them,
that even if we made no additional new policy decisions,
the costs are going up.
Costs of inflation, costs of goods sold.
Um, you know, if you just think about construction costs, right?
If we've committed to certain construction projects,
costs are going up regardless.
So we could make no additional decisions.
And our maintenance level budget has gone up.
That's where a lot of that increased need was,
a lot of where that deficit was.
So holding the line absolutely would have actually been cuts,
because we wouldn't have been able to fund the policies
we had already chosen to put into law.
-Briefly on that one, Representative Walsh?
-Well, Senator Frame is being very clever.
She's parsing her words.
Not growing is not the same as cutting,
and phasing or delaying expenditures are not cuts,
especially when the programs that are being delayed,
where the expenditures aren't being made, aren't in place yet.
Those are not cuts. Those are delays? Okay, maybe.
But they're not cuts.
I think when it comes to budget negotiations,
this word "cut" -- You hear "all cuts" or "cuts" --
is used strategically
to cover things that aren't actually cuts.
And it makes for a negotiating stance
more than a practical reality of spending.
-It sounds like we have
some different frames of mind on that one,
and I want to make sure that I put a pin in that for a second,
because I do want to cover some more ground here.
Specifically, I wanted to talk about the wealth tax,
which a lot of people were speaking about
at the beginning of this session.
Senator Frame, you were a prime sponsor of this --
Senate Bill 5797.
This measure aimed at the stocks
or other intangible financial assets of Washingtonians
worth more than $50 million.
Governor Ferguson indicated early on
he didn't really like this idea.
And while the Senate did approve it,
it didn't get taken up in the House and didn't pass.
But there were a lot of passionate speeches.
I saw you and many other lawmakers on TVW
talking about this on the last day of the session.
Are you planning to bring this measure back?
What's going on?
-Oh, I will absolutely bring it back.
And frankly, it's going to be the same bill.
We're in the first part of a two year biennium.
So Senate Bill 5797 will just go back
and sit in the Rules Committee, ready for us to take back up
when we are back in session next January.
So the bill remains.
-And why do you think it's a good idea?
-So, we have the second-most inequitable
tax code in the country.
And frankly, really a relic of the past.
This is the 90th anniversary of the Revenue Act
that was passed in 1935.
And we, unlike other states,
we don't have sort of the three-legged stool
in the same way that other states do.
And I've spent a lot of time --
-Property tax, sales tax, income tax.
-Right. -Keep going.
-Correct, and, um...
it creates a real structural inefficiency for us.
And I've spent a lot of time thinking about, you know,
what are the drivers of modern inequality?
Wealth inequality, income inequality.
And in sort of deep looking at our tax code,
one of the things that caught my attention,
several years ago at this point,
was that while we tax real property
and we tax tangible property,
called personal property in our code,
we just entirely exempt intangible property.
And intangible property --
specifically, financial assets --
are one of those key drivers of modern inequality,
and that felt like a really appropriate place
to focus some of our energy,
which, of course, would then impact
only those that have a certain amount of those assets.
And again, it's just paying taxes on those assets,
like the rest of us already pay taxes on ours.
That's the proposal. -Okay. Thank you.
Representative Walsh, your thoughts on the wealth tax?
I've even heard some rumblings that some supporters
might try to make an initiative about it this fall.
-Some rumblings, eh? -Rumblings, yeah. Mm-hmm.
-It's a terrible idea, Senator Frame.
The wealth tax --
Intangible assets are incredibly mobile.
And if we jack up the taxes on intangible assets,
they'll just move.
Sort of like Jeff Bezos moved to Florida.
-Okay.
There are also constitutional issues with it.
Our state constitution is clear
that taxes in Washington state
must be uniform on all classes of assets.
That includes financial investments.
And if you tax citizen A at one rate
and tax citizen B at a different rate,
you're breaking the constitutional edict, rule, law,
and a good one, that all taxes are flat.
They're even, uniform, on all taxpayers.
That's equity.
Senator Frame talks about our regressive tax structure,
yet she and her colleagues
keep making our regressive tax structure more regressive.
That's what happened this session.
-I think she was trying, with the wealth tax --
I guess, was a piece of it.
I hear what you're saying, though.
And can you respond to some of these concerns,
because I think the governor might share them.
Just these legal concerns about the wealth tax
and how it might be enacted.
I think Representative Walsh has brought up a few ideas, too.
-Yeah, and, you know, I want to just start with the governor.
I mean, the governor recognizes
that we will be taken to court on this no matter what we do.
And I think his point was balancing the budget
on something that is likely to go to court was his concern.
I've worked with the Attorney General's Office,
including when he was Attorney General,
the entire time I've worked on this,
and it is constitutionally compliant
and legally defensible.
Um, you know,
Representative Walsh talked about having different rates
on different members of the Washington community.
It's one rate.
It was 1% in the bill that was introduced.
It was a half a percent in the bill that we just passed.
It's one rate across all citizens.
The piece that people often don't know
and don't pay attention to in our state constitution
is we have broad exemption authority.
We use it all the time.
In our property tax code, there's, like,
probably 200 exemptions at this point,
and only three of them are enshrined in the Constitution.
So that broad power of exemption we use all the time.
And I will say that the claims of mobility of taxpayers,
while we will always have outlier examples,
the data doesn't actually support it.
The mobility claims are very, very overdone.
And it is in the margins of taxpayers that actually move.
And I love when folks bring up the Bezos example,
because if you look at what the man has said himself,
his explanation of why he moved to Florida
tracks all the research.
He went back to where he grew up.
He wanted to be closer to his parents
and where his fiancée's family was,
and closer to Cape Canaveral,
which is a major piece of public infrastructure
that his company, Blue Origin, is involved in.
And he's no longer doing the day to day of Amazon,
when he stepped down as CEO.
So, interestingly enough,
he never, ever said he left about taxes.
It's always an assertion
made by people who don't support the idea,
but it's not what he said,
and it doesn't match what the research says.
-Interesting.
I would love to move on, if I could...
-[ Laughs ] -...'cause this is --
this is going to be a big argument, I know, next year.
-Just let me say -- -Briefly, please.
-Senator Frame did get a kind of wealth tax
in what did pass this past session.
We jacked up the rate
of our capital gains tax in this state,
itself controversial and legally dubious,
and we jacked up -- -The State Supreme Court
said it was all right, but keep going.
-Yeah, I know. They got stuff wrong before.
-Okay. All right. -And also,
we jacked up our estate tax,
which is highest, or near highest, in the country.
And all of these things together
will compel not just billionaires and tech bros,
but anybody with some resources
to think about moving out of Washington.
-I can give you 30 seconds on that.
-The one 30-second thing I want to say about the estate tax --
I'm actually really proud of passing that bill
because it was a long-overdue update to the estate tax.
We have had small estates
getting caught up in the estate tax for years,
because the inflator doesn't exist in law anymore.
So by updating that law,
we brought the threshold up to $3 million.
We updated the threshold for family-owned small businesses
and that exclusion, and updated that inflator,
so smaller estates will no longer
be getting caught up in the estate tax.
And it will just focus on those who really have --
Uh, their estates have the ability to really give back.
-Okay. -It's a much higher rate.
-All right, well, set the date.
We're going to talk about the wealth tax next year too.
Representative Walsh, I'll go back to you.
I want to talk about the something --
or something the governor really wanted in this budget --
$100 million to help hire and retain
more police officers across the state.
You've both heard it.
Washington state is last in the country
when it comes to officers per capita.
So, this money is in the budget via House Bill 2015.
But the measure also authorizes this 0.1% sales tax,
which would happen at the local level.
And this could help, I guess,
pay for, purchase law enforcement,
if you want to look at it that way.
You, along with all the House Republicans,
voted no on this bill. Why?
-Yeah, because it's a three-card monte scheme.
Yes, we got the 100 million into the budget for new cops.
That's a good thing.
The way we're funding it is a little sketchy.
As you say, it shifts some or a big chunk of that 100 million
onto local jurisdictions -- cities, counties --
in this new section of the sales tax that they collect.
So it's a little bit of a shift there.
It's not the worst thing in the world,
but it does detract somewhat from the new-money sense
of this $100 million.
And if the local jurisdictions don't agree to do that,
they don't get any part of that new money to hire officers.
I was speaking, last night, with one of my constituents,
the sheriff of Cowlitz County,
and he's pretty upset
with the lack of throughput, I would say, on the 100 million.
He's not convinced it's going to translate
into additional cops on the beat --
In his case, deputies on the beat.
And he thinks it's a big promise,
but not a lot of delivery.
And we can do some things on our end
to make sure that it does deliver better.
But there's a lot of red tape
wrapped around that $100 million.
-Senator Frame, some thoughts about this, please.
-Yeah. I mean, House Bill 2015,
which was led by Representative Debra Entenman of Kent,
really focuses on transparency and accountability
that local law enforcement agencies are, frankly,
complying with state law. -And you were a yes vote
on this, too? -I was a yes vote.
I mean, frankly, it's not my favorite tool
in the toolbox either, to be fair.
I would say, law enforcement, for a long time,
has been largely funded at the local level.
This is where a big portion of the local property tax,
for local cities and counties, goes to.
That's how we fund local law enforcement.
But, of late, we have been spending
some state resources on this.
And, frankly, the thing that's not getting
as much attention as it should is the work
that's been happening over the last several years,
led by my colleague, Senator John Lovick,
former State Patrol, former Sheriff of Snohomish County --
-He's been on this set before. -Yeah, I mean,
setting up these regional law enforcement academies,
so you don't have people from all over the state
having to come to Burien,
but rather being able to do training
in their local communities,
is wildly successful.
And we're seeing more folks, as John would say,
having more people join law enforcement
that reflect and look like the communities that they serve.
We're seeing more women, more people of color
joining law enforcement
through those training academies.
So, these are all different tools in the toolbox.
I mean, I will say House Bill 2015,
as somebody who sits on the Ways and Means Committee
and works on tax policy,
was pretty broadly supported by the business community.
So I will say that, if the business community
wants to have more law enforcement,
this is a tool that they supported,
and, ultimately, we helped pass. -Thank you for that.
I'm going to move on to what the governor was talking about here
in a few days -- the few days after the session ended.
He has yet to approve the budget.
He'll have to do so or veto it,
or veto parts of it via line-item veto, by mid-May,
20 days after the end of the session.
He told TVW, near the end of the session,
that he's especially concerned about possible cuts
in federal funding.
Here's a brief excerpt of what he said.
-27 to 20% of our budget is federal funds,
and your viewers who watch every day
see news articles of cuts from the federal government
on public health, Head Start programs,
universities and colleges -- you name it.
So we need to make sure that, in these coming months and years,
we're doing the best we can to prepare
for what's coming from D.C.
and protecting our values as a state.
-Senator Frame, how real is the threat of those cuts?
Are you preparing for that? What's going on?
-The threat that the federal government
is going to pull funding is very real.
We're seeing this right now,
where the president has issued an executive order
to dismantle the U.S. Department of Education.
The federal funds that we get
under the Individuals with Disabilities Education Act
for our students with disabilities,
Title I funding that we get for our schools
that have a majority of their students in poverty --
These are critical funding sources,
which is why, I think, all the more reason
why it was important for us to make investments
in public education in this budget.
As we thought about
our priorities as Democrats this session,
upholding our paramount duty
to provide an education for our children was important.
And, you know, we may not all agree with new funding,
but I'm proud of $500 million a year of new funding,
specifically for special education
and the daily operating costs of schools,
something that we put in this budget,
which will help us hedge against any cuts that are made
by the federal government. -Thanks for that.
Representative Walsh, some thoughts about this?
-There's a lot of fear-mongering
about cuts from the federal government,
when what they're doing is reforming
some bloated bureaucracies
and shifting programs from one agency to another,
but not cutting, so far, anything.
Uh, Senator Frame is right.
We added some money to special ed, and that's a good thing.
Special ed is still not fully funded in this state,
and it's the conservatives, ironically,
who are arguing for spending more on special ed.
A little bit of a flip on traditional stereotypes
of political polarization on issues.
We think that more money should be spent on special ed.
And really, uh, if we're going to talk
about funding education, Senator Frame,
we mucked it up with how we've rejiggered the balance
in property tax levy structure.
We've shifted more weight onto local levies
to fund education, K-12, that competes with the local levies,
funding things like law enforcement.
It gives the state a little breathing room and discretion
in how it spends its portion of property taxes.
It is, effectively, a back-door property tax increase.
Although it's not the 1% to 3% version that was proposed,
it's a different way to do it.
Most troublingly, and the Senator knows this,
is it opens up the state to another McCleary lawsuit,
which was focused specifically on the structure
of property tax levies,
how they compare, locally and state.
Remember, your property tax bill
is comprised of different components --
Some stay local, some go to the state.
The McCleary lawsuit was all about that formula,
and we've screwed it up.
We've made the formula more likely
to have another McCleary lawsuit.
-I want to make sure I allow you the chance
to respond to that -- briefly, please.
-There's a lot there that I could comment on.
I'll just say, first and foremost --
The wealth tax was dedicated to public education.
So I don't think anybody can argue
that I'm not a champion for fully funding
our public schools.
That was -- That's the whole point.
Frankly, it's the reason I got into politics
as a teenager, Brian,
as somebody who grew up
in the battleground school district
that was, at the time,
using local levies to fund basic ed,
because the state was not doing its part, right?
So I understand inherently
what Representative Walsh is speaking to.
But what I will say -- local levies are voter-approved.
They allow local communities
to vote-in tax increases on themselves to do enrichment.
I agree, that should not be used for basic education,
which is why we have got to keep moving the needle forward.
But we have a long -- you know,
we have a long way to go on special education, I agree.
I wish we could have done more this session.
I'm proud of that $500 million a year.
I would have loved to have seen more,
which is why I proposed the wealth tax.
But there's nothing about the local levy formula.
That's not what McCleary was about.
McCleary was just about the state doing its portion.
It had nothing to do with the local levies.
-Sounds like another argument we're going to have next year.
But here we go. We're going to have to hustle through this one.
But, Representative Walsh,
I want to check in on House Bill 1296,
which the legislature approved.
This is the measure that modified
the Parents' Bill of Rights Initiative I, 20, 81,
that the voters approved last year.
You were the author of this.
Are you planning to follow through
on a promise from Brian Hayward,
who sponsored the initiative effort last year
to follow up with another initiative
to try to restore the original language here?
I know there are a lot of debates about this.
-Yes. -Okay. Short answer is yes.
Your concerns about what happened with 1296?
-Oh, it's hideous. House Bill 1296 was an awful, awful thing.
It guts the Parents' Bill of Rights,
and, worse still, Brian,
it bolts onto gutting the Parents' Bill of Rights
two Senate bills that had nothing to do
with gutting the Parents' Bill of Rights --
one of which gives
the Office of the Superintendent of Public Instruction, OSPI --
a position currently held by a former colleague of ours
called Chris Reykdal --
the power to withhold operating money from school districts.
Get your head around this, Brian.
The bill allows the person
who's supposed to be school's biggest champion
to withhold money from schools.
It's horrible.
And a couple of other things were bolted onto it too.
So, it's a mess.
There are likely to be lawsuits,
and there will certainly be one initiative.
There might be a couple.
-I can give you the one-minute reply here.
I know there's a lot to unpack here too.
Some thoughts about what happened with 1296?
-Well, what happened was that we passed a law, last year,
that was vague and, probably, we said,
last year, when we passed it,
"We're going to listen for where there is confusion,
where we need to clarify."
And we heard that confusion and need for clarification
throughout the year that followed.
-From school districts?
-From school districts, from families.
And we did exactly that.
I mean, the whole point, Brian,
is that children have the ability to go to school
and learn in an environment free from discrimination,
so that they can feel, you know, feel safe, be their true selves.
And the reality is,
what Representative Walsh is speaking to
is about school districts that engage
in willful noncompliance of state law.
There are resources and tools
for accountability for parents and families
to make sure that those school districts
are following the state law.
-Okay. Thank you for this. We need to wrap up.
I'm so sorry we didn't get to
talking about rent stabilization,
because I know that's important, too.
Final question, though -- Where's Governor Ferguson
going to end up on the budget?
He's been a little cagey about this
when, if he were sitting next to us here --
-Cagey? Ferguson? What a shock.
-I know -- the high school chess champion you never knew.
But let me know about this.
Senator Frame, what would you say to him
if he were sitting right next to us here?
-Well, we've done our job, and he's got to do his, right?
We have, you know, three branches of government,
and he's one of them, and he's got a job of review.
He's got a pen that he can veto.
We have done the work that we can,
where we have to get 25 votes in the Senate,
and 50 votes in the House.
And that reflects our values as a legislature.
Now, he needs to go through and reflect his as governor.
-Got it. Some final thoughts here?
-Watch the ending fund balance in the operating budget.
It's about $230 million on a 78, $79 billion
two year expenditure.
Not much of a margin there.
That's your ending fund balance, your cushion at the end.
If Ferguson is going to veto
any of the significant tax increases,
which he's indicated he might --
and there are about five of them
that are relevant to the operating budget --
each of them is worth more than 230 million.
So if he vetoes any of them,
the ending fund balance goes into the red.
That's illegal.
And he will either have to cut the budget with section vetoes,
or he's going to have to call a special session,
and have us do his dirty work for him
and straighten the budget out.
So we are far from over in this process.
He's between a rock and a hard place.
If he stands true to what he said
about not supporting some of these tax increases,
he bollocks up the budget's ending balance.
I don't know what he's going to do.
I don't think he knows what he's going to do.
But if he can't get to a balanced budget,
we will have to come back into session and clean it up.
-Thank you very much,
and we'll see what happens with that.
And we will be right back.
What are people saying on social media
about what happened in the state legislative session?
One person writes...
Another person comments...
We'd like to know what you think.
Send us an email at contact@seattlechannel.org,
or find us on social media.
Good to have that input, and great to have the input
of Representative Jim Walsh, Senator Noel Frame.
Thank you very much.
We'll see you next time on "City Inside/Out."
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