Budgetocalypse 2015:

State Budget Battle Could Have Big Impacts on Evergreen’s Future

By Issac Scott

Evergreeners frustrated with the lack of program options this quarter should pay close attention as the State Legislature meets this month, where lawmakers face a multi-billion dollar budget crisis that could have lasting impacts on Evergreen. Washingtonians have already felt the second largest tuition hikes in the nation since the 2008 recession, with tuition at Evergreen nearly doubling in the past six years due to major cuts in funding. The college prepared for a possible 15 percent cut ahead of this year’s legislative session, where lawmakers will negotiate a new budget for the next two year period.

As it stands, lawmakers could fly a Boeing airplane through the hole in Washington’s budget. The state expects to be about $4.4 billion short of what it needs to maintain current levels and implement newly mandated investments in K-12 education, according to the state Office of Financial Management (OFM). Three years ago, the Washington Supreme Court ruled in the McCleary decision that lawmakers were failing to adequately fund public schools. Then, in November’s midterm election, voters approved Initiative 1351 to build new schools and reduce K-12 class sizes, but did not include any measures to pay the price tag. The state estimates that to fully satisfy both demands would cost around $3.3 billion dollars over the next two years. That’s money may have to come out of existing state resources like Evergreen if no new taxes are implemented to pay for it.

Meanwhile, existing state taxes are failing to provide adequate funding for what already is in place, about $1.2 billion short of what the state needs to maintain the status quo.

A main problem, according to Kim Justice, senior budget analyst at the nonpartisan Washington Budget and Policy Center, is Washington’s antiquated tax system which relies heavily on retail sales tax, and taxes the poor at higher rates than the wealthy.

“In Washington, people with lower incomes pay disproportionately more of their incomes in taxes,” Justice says. “If you make less than $20,000 a year you pay 17 percent of your income in taxes, and if you make more than $430,000 a year you pay only about 3 percent of your income in taxes. It is very upside down.”

Washington is one of only five states without any form of personal or corporate income tax, and relies heavily on retail sales tax. In 2013, the Institute on Taxation and Economic Policy condemned Washington’s tax system as the most regressive in the nation, meaning it most disproportionately taxes the poor compared to the wealthy. According to the Institute, “Washington is highest-tax state in the country for poor people.”

Because Washington taxes are not directly extracted from incomes, tax revenues have not kept pace with growing incomes as the economic recovery picks up speed, leaving the state deeply in the red.

Overall, tax revenue as a percentage of personal income in Washington is at a historic low, ranking 35th in the nation, according to the Office of Financial Management, equaling only about 9.7 percent of total income in the state. The OFM says if tax collections in Washington were at the U.S. average of 10.7 percent of income, the state would generate about $2.8 billion more a year in revenue.

Governor Jay Inslee has called for new taxes to stave off sweeping budget cuts. His proposed budget, released in December, would include a new capital gains tax to raise an estimated $1.6 billion by taxing high-end financial transactions like the sale of stocks, bonds, and properties.

“Washington has a structural budget problem—a problem largely the result of an unfair, antiquated, and inefficient revenue and tax system,” Inslee’s budget proposal states. “And our tax system places a disproportionately higher burden on low- and middle-income households.”

Inslee’s plan would use additional revenue from raising taxes and eliminating some industry tax breaks to freeze college tuition rates and boost education funding.

But new taxes are unlikely to make it into the final budget with Republicans in control of the state Senate for the first time in eight years.

“In my personal perspective, I think this may be the worst budget situation we’ve seen,” Justice says. After $10 billion in budget cuts following the global economic recession of 2008, Justice says, “we’re already operating at such a low level that even the status quo is not acceptable.”

Without new tax revenues to fill the gap, state programs face further cutbacks. Last year, Governor Inslee instructed every state agency, including Evergreen, to prepare budgets for 15 percent reductions in state funding. For Evergreen students, this could mean more of what we’ve already seen: exploding tuition costs, fewer class options, and staff layoffs.

Meanwhile, Washington has repeatedly conceded enormous tax breaks to corporations, such as Boeing, attempting to prevent jobs from migrating to different states. In 2013, Washington gave Boeing the largest tax break by a state to a corporation in history, valued at $8.7 billion over the next quarter-century, the Seattle Times reported. Regardless of receiving this concession from the state, Boeing announced in September plans to move 2,000 Seattle-area jobs to Oklahoma and Missouri by 2017, mostly high-paying engineering positions.

In the past six years, Washington-resident tuition at Evergreen increased over $3,800 while state funding to the college was cut nearly in half, according to the college’s budget office. Out-of state tuition went up over $7,500 in the same period. For the first time, Evergreen students now pay more of the college funding than does the state. Today, Washington pays only 38 percent of Evergreen’s budget, compared to 68 percent in the 2007-08 school year and 75 percent in 1990.