Washington state Senate Democrats unveil $59.2 billion two-year budget they say ‘hits all four corners of the state’

OLYMPIA – With an anticipated boost in tax collections, the rainy day fund and federal stimulus funding, plus a capital gains tax, Senate Democrats’ two-year budget proposal looks to make new investments, fight COVID-19 and help the state recover from a year of economic uncertainty.

The proposed budget released Thursday would spend $59.2 billion over the next two years, in addition to $7 billion in one-time federal stimulus funding.

The budget would make new investments in child care, early learning, foundational public health, forest health and a tax credit for lower-income families. To address the pandemic, it would also use one-time funding to pay for vaccine distribution, school reopening, rental assistance and unemployment tax relief.

“We just created a budget that hits all four corners of the state,” said Senate Ways and Means Committee Chair Christine Rolfes, of Bainbridge Island. “That’s working on equal recovery for everybody and equal recovery for rural and urban, north, south, east and west.”

Of the $7 billion in federal funds, the budget would use $1.7 billion to assist school reopenings and $1 billion for vaccinations and other pandemic response.

Much of the federal funding had guidelines for how it could be used, but about $4 billion was given directly to the state with some flexibility. The Senate Democrats’ plan leaves about $2.3 billion of the flexible funds to be allocated at a later date. The state has until the end of 2024 to spend them.

The plan would use the entirety of the rainy day fund – about $1.8 billion – for other one-time costs. It would leave the state with about $1 billion in reserves.

Using state money over the next two years, the proposal would invest $150 million in foundational public health services and $125 million in wildfire fighting resources and forest health. It sets aside $12 million for police accountability reforms passed this session.

Perhaps the most controversial aspect of the budget is the proposed capital gains tax, which passed the Senate last month. It would impose a 7% tax on the sale of stocks and bonds, personal property and businesses that exceed $250,000 annually.

That tax would bring in about $550 million in revenue a year. About $350 million of that would fund the Fair Start for Kids Act, which would address child care issues. About $200 million would fund the Working Families Tax Exemption, which gives rebates to low-income working families.

In a statement, Ranking Republican on the Senate Ways and Means Committee Lynda Wilson, of Vancouver, said she supports a lot of the spending decisions in the Democrats’ plan, but she was disappointed in its use of the tax.

“The bad news is how this budget is tied to a tax proposal that is unnecessary, considering the amount of revenue already available, as well as unconstitutional,” Wilson said.

House and Senate Republicans released their own proposals early on in the session that increase spending without implementing new taxes.

Revenue collections in the state are in a better place than a year ago, when the state was forecast to have an $8.8 billion shortfall because of COVID-19. Tax collections have since rebounded, with last week’s forecast showing the state’s projected revenue was back to pre-pandemic levels.

The spending in the budget is up from the current $53.3 billion two-year operating budget. Much of the increased spending will aid in getting the state’s economy “more normalized” after the pandemic, Rolfes said, adding the proposed investments are “necessary.”

House Democrats will release their budget proposal Friday afternoon.