OLYMPIA — Gov. Jay Inslee's plan to ask voters to allow the state to borrow $4 billion for housing projects isn't dead yet.
House Democrats on Monday released a $69.5 billion, two-year budget that makes investments in housing, education and behavioral health. In addition to the $69.5 billion of state funds, the budget uses more than $300 million in funding from the state's new cap-and-trade program and remaining federal COVID-19 relief funds.
The House proposal looks similar to a $69.2 billion plan released by Senate Democrats last week, though some differences, including funding Inslee's housing referendum and allocating new cap-and-trade money, remain. The two chambers will have to consolidate their proposals into one that will pass the Legislature by April 23.
Much of the new funding in the House proposal would go toward K-12 education, special education, behavioral health and salary increases for state employees. K-12 education makes up most of the budget proposal, with $30.8 billion spent on public schools. Human services make up another $14.5 billion, the Department of Social and Health Services gets just under $10 billion and higher education gets about $5.6 billion.
House Appropriations Chair Timm Ormsby, D-Spokane, said the proposal builds on work done in the past few years, when an influx of federal dollars from the COVID-19 pandemic allowed the state to make significant investments in communities that needed it the most.
"Now we have the opportunity to continue those strategic investments in a way that maximizes this and improve the impacts on those that are struggling," Ormsby said.
The House budget leaves about $3.2 billion in reserves and doesn't rely on any new taxes, though some increases in the real estate excise tax or a new tax on wealthy residents are still making their way through the Legislature.
The proposal also spends the revenue from a 7% tax on capital gains worth more than $250,000, which went into effect this year and the state Supreme Court ruled on Friday is constitutional in Washington.
Housing Referendum Revived?
The House budget assumes passage of a voter-approved referendum to allow the state to borrow $4 billion to spend on housing. Inslee's plan would allow the state to spend $4 billion over a six-year period to build housing.
The House budget sets aside funding beginning in 2025 to pay off the debt service that will incur because of the borrowing. There would be about $1 million in the budget cycle ending in 2025 and about $56 million in the budget cycle ending in 2027 to begin paying back the debt. Budget writers acknowledge that money would not be needed if the Legislature does not pass the referendum or if voters don't approve it.
In the House capital budget, lawmakers spend about $704 million on affordable housing projects, though not directly related to Inslee's referendum, as much of that funding would not be available until after it is approved by voters.
House Majority Leader Rep. Joe Fitzgibbon, D-Burien, said he anticipates some initial bonds from the referendum would be issued over the next two years, with more available in the following budget cycle.
Senate Democrats did not fund Inslee's referendum proposal, as budget writers said borrowing that much money would require the state to pay back too much in interest — money they said could go toward other projects, such as building more housing.
Inslee slammed the Senate for not including his proposal in its budget, calling the move an "unacceptable" step backward on housing.
Fitzgibbon said Inslee's referendum is still just one idea of many to increase funding for affordable housing this session.
"Our members want to see a greater level of effort on affordable housing and access to affordable housing across the city," Fitzgibbon said.
Another difference between the House and Senate: how to spend the new cap-and-trade program funds.
The cap-and-trade program requires large polluters in Washington to either clean up their work or purchase allowances from the state. It is expected to bring in more than $2 billion through July 2025 that the state must spend on projects to fight or reduce the effects of climate change.
In its proposal, the House spends about $316 million in the two-year operating budget, with most of the money going toward capital budget and transportation proposals.
Some of those projects include improving processing for clean energy projects, adding funding for wildfire prevention and creating a new institute for clean energy at the Washington State University Tri-Cities campus.
The Senate spends more in the two-year operating budget, with about $700 million going toward projects that would reduce the effects of climate change. The rest is split in the capital and transportation budget proposals.
The Senate operating budget funds similar projects to the House proposal, including those that finds ways to capture and store carbon in the air, add building and utility assistance to help energy costs for low-income families, and add grants for cities with climate action plans.
Fitzgibbon said the overall revenue spent over all three budgets is similar between the House and the Senate, but the budget teams will have to work to find a compromise in the final budget.
Other programs, services funded
The budget spends significantly on K-12 education, including almost $600 million in the next two years to adjust salaries for inflation. Another $160 million-plus would boost funding for special education, and another $85 million would increase access to free school lunches.
About $2 billion would be spent to raise salaries and improve health insurance for state employees, including $1,000 incentives for employees to receive COVID-19 boosters.
The proposal would fund a new covenant homeownership program that will allow people affected by historical discrimination in homeownership, such as people of color, to apply for grants and credit programs. The $150 million program is still being discussed in the Legislature but would be funded by increasing the document recording fee.
The proposal would significantly invest in behavioral health, including by raising the rate for providers and increasing funding for staff at Western State Hospital and Eastern State Hospital.
To address the State v. Blake decision, which ruled the state's drug possession law unconstitutional, the House proposal would allocate $113 million to assist with court costs related to the new law and another $77 million to help set up new behavioral health and treatment services. The state Supreme Court ruled in 2021 the drug possession law was unconstitutional because it did not require someone to knowingly possess drugs to be convicted. Since then, courts across the state have had to vacate hundreds of cases while the Legislature works on a solution that addresses the criminal penalty while boosting support for behavioral health and substance abuse treatment.
A plan to study Spokane's Waste-to-Energy plant is not included in the House proposal. The Senate proposal would set aside $200,000 to study the plant in an attempt to get it exempted from the state's cap-and-trade program like landfills are.
More than $16 million would be used for reproductive health services to reimburse clinics and provide grants for higher education institutions that train in abortion care.
The proposal would make new investments in child care, including with funding to increase access to subsidies for families and grants for providers.