There’s not much information coming out of Olympia about the status of the ongoing budget talks, but what we have heard prompts a review of what we know.

McCleary and Initiative 1351. First, we started this session with the understanding that there could be a significant budget shortfall resulting largely from the state Supreme Court’s McCleary decision and I-1351 obligations. Both houses and parties have chosen to significantly increase funding for K–12 education—each of the most recent public proposals would increase K–12 funding by at least $2.7 billion over 2013–15. But both proposals focus on reducing class sizes in grades K–3 only; I-1351 requires reductions for grades K–12. Reducing class sizes for grades 4–12 would require an extra $2 billion. Additionally, there are new funds proposed once again by both houses and parties for school construction in the capital budget.

And there has been an eleventh hour attempt to show the beginnings of compliance with the part of the McCleary decision requiring the state to lower reliance on local levies to fund basic education. While a bill may pass that gives some guidance to a new commission on how to rationalize teacher compensation, there is, as of now, no agreement on a mechanism or formula for “swapping” state for local education dollars, much less for putting new dollars on the table to increase options for administrating this new system.

Revised Revenue Forecast. We are looking at a lot more revenue for state coffers than was originally assumed last year during the run-up to this session or even at the beginning of the year. While rural areas are still suffering recession symptoms, metropolitan areas, particularly in the Puget Sound region, are booming. What once looked to some to be a $1.7 billion chasm between expenditures and revenue now has either been eliminated or been reduced to about a half-billion dollars, depending on the size of the spending proposal in question. Revisions to revenue forecasts in February and May contributed $679 million toward closing the gap.

House and Senate Operating Budget Proposals. House (Democratic) and Senate (Republican) budget proposals are remarkably similar considering the contentious climate we are experiencing. Using publicly discussed numbers, the parties were about $633 million apart at the beginning of June. One of the most significant differences between them is teacher compensation (although both fund the I-732 COLAs.).

Transportation Package and Gas Tax Increase/Capital Budget. The House and Senate don’t seem to be too far apart in constructing a new, $15 billion transportation package, which will be the first one out of Olympia since 2005 if it moves forward. The package offers funds for much needed new projects and maintenance, and legislators seem resigned to a double-digit gas tax increase that would pay for it. But the package has not moved because of the contention over the operating budget. There is also no agreement as yet on a capital budget. As we have written , the spread between the two houses’ capital budget proposals is quite small .

New Tax Proposals/Income Inequality and Climate Change. Now we come to the heart of the contention. With the imagery of budget crisis that many were trumpeting at the beginning of the session, two new forms of taxation were proposed by the governor. One, a “cap and trade” regime of carbon taxation, was reflective of the governor’s priority issue and of the growing concern of many about climate change. While cap and trade does not seem to be in our immediate future, a marker has been laid down connected to an issue that is unlikely to go away.

The second, a capital gains “excise tax,” was a new bid in the ongoing effort to bring the income tax to Washington state. A source projected to provide five to six hundred million in new revenue, it is also a thrust for the ascending issue of the left, income inequality. Many Democrats have made clear they do not want to end the session without a new revenue source and point to studies alleging the regressive nature of our state tax system in continuing to tout a new capital gains tax. Meanwhile, Republican leaders point to significant spending increases in the Senate budget that pencil out without tax increases.

As we come to the end of this budgetary drama, regardless of its outcome, it will be important to understand the atmospherics surrounding the issues in the ongoing public policy debate.