Washington Senate Democrats Propose New, $59.2 Billion Budget With COVID-19 Funds and a 7% Capital-Gains Tax

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OLYMPIA — Flush with rebounding tax collections and a windfall in federal aid, Washington Senate Democrats on Thursday released a new budget plan that funds public health amid COVID-19, provides relief for immigrants and renters, gives new aid for businesses, child care programs and funds a tax exemption for low-income families.

The new, proposed $59.2 billion state operating budget for 2021-23 doesn't even reflect the magnitude. Lawmakers are spending an additional roughly $7 billion from the federal government's COVID-19 relief package on programs.

In short: it's a big proposal.

"This budget spends a lot of money ... to stabilize our economy, to stabilize our health care system, to stabilize our schools, to stabilize our environment," said Sen. Christine Rolfes, D-Bainbridge Island, during a news conference. "And just to stabilize the working families of our state."

It's quite the turnaround from last spring, when the COVID-19 outbreak and restrictions to slow the virus shuttered swaths of Washington's economy, creating a projected $8.8 billion budget shortfall as tax collections stalled.

But with the economy beginning to recover and several federal aid packages passed by Congress giving money to both people and governments, Washington's tax collections have since rebounded.

Thursday's plan also assumes the passage of a new proposed 7% tax on capital gains above $250,000 to fund a tax credit for low-income families and child care programs. It is a long-sought priority with many Democrats unhappy with Washington's regressive tax system, and that legislation passed the Senate earlier this month.

Republicans, who are in the minority in the state House and Senate, have criticized the proposed tax as unconstitutional and unneeded.

In a statement, Sen. Lynda Wilson, R-Vancouver, said the Democratic proposal "reflects several of our priorities, including more access to broadband, and improving the health of our state-managed forestlands."

Wilson added later, "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."

The federal dollars in the proposal include $1.1 billion for coronavirus response, including testing, vaccine deployment and contact tracing, and $1.7 billion to help K-12 schools reopen amid the pandemic and address learning loss.

It adds an additional $495 million for rental assistance amid the pandemic, and budgets $500 million in new money to help reduce the impact of rising unemployment-insurance taxes amid the pandemic.

The plan includes $300 million in assistance for immigrants impacted by COVID-19, and $150 million in the state's crumbling, long-underfunded public-health system.

It provides $125 million in long-sought money to boost Washington's forest-health and wildfire-fighting capabilities. And the plan boosts child care and early learning programs by $312 million and $101 million for more community mental-health services.

"We just created a budget that really hits all four corners of the state," said Rolfes. "That's working on equal recovery for everybody and equal recovery for rural and urban, north, south, east and west."

To fund all that, the proposal also uses about $1.8 billion from the state's existing budget reserves.

The proposal keeps about $1 billion in budget reserves and about $2.3 billion in unspent federal aid, which can be used through 2024, said Rolfes.

With unified control of the Legislature and the governor's office, Democrats will be negotiating this year among themselves to get a final budget agreement by the scheduled end of the legislative session in late April.

House Democratic lawmakers are expected to release their own budget proposal Friday.

Gov. Jay Inslee in December proposed his own $57.6 billion state budget plan.

Senate Democrats Thursday also released their proposed $6.2 billion capital-construction budget, which Sen. David Frockt, D-Seattle, called the largest in state history. It would spend nearly $500 million to expand broadband internet access around the state.

It also adds $205 million to the state's Housing Trust Fund, which supports building or maintenance of affordable-housing units, said Frockt. And it includes $90 million for a rapid-housing acquisition program, which, Frockt said, "is designed to allow communities like Seattle, like Tacoma, like Olympia and other communities ... state support for hotels or buildings that come on the market quickly" for shelter.

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