Last night, Sen. Rolfes introduced a striking amendment to SSB 6614 that would reduce the state property tax for CY 2019 and ultimately reduce revenues deposited in the budget stabilization account (BSA, or rainy day fund).

Last year the Legislature created an additional state property tax to support public schools. Combined with the original property tax, the new state property tax rate was increased to $2.70 per $1,000 of assessed value for CY 2018 through 2021. The state rate was $1.89/$1,000 in CY 2017. The bill (EHB 2242) also specified that collections from the additional tax “must be deposited into the state general fund” (RCW 84.52.065).

The Senate-passed budget this year assumes enactment of SSB 6614, which, as passed by the Ways & Means Committee Feb. 21, would reduce the state property tax rate to $2.35 per $1,000 of assessed value in CY 2018. SSB 6614 would also transfer $228.0 million from the BSA to the general fund–state (GFS) in 2017–19, plus $203.0 million in 2019–21. This $431.0 million would be used to pay for the rate reduction.

Meanwhile, the House-passed budget assumes enactment of HB 2993, which would reduce the state property tax rate to $2.365/$1,000 in CY 2019 and $2.30/$1,000 in CY 2020. HB 2993 would also transfer $231.849 million from the BSA in 2017–19 and $763.953 million in 2019–21. This $995.8 million would be used to pay for the rate reduction.

Sen. Rolfes’s striker to SSB 6614 would make the state property tax rate $2.40/$1,000 in CY 2019. (It would be $2.70/$1,000 as planned in CY 2018, 2020, and 2021.)

The striker would not transfer funds out of the BSA. However, it specifies that $935 million of the property taxes collected would be deposited in the education legacy trust account (ELTA) in FY 2019 “for the support of common schools.” (The education legacy trust account is part of the near general fund–state plus opportunity pathways (NGSF+) rolled-up account. The state discusses the budget in terms of the NGFS+.)

Article VII, section 12 of the state constitution establishes the BSA. Each year, 1 percent of general state revenues must be deposited in the BSA. Also, each biennium, three-quarters of any extraordinary revenue growth (of general state revenues) must be deposited in the BSA. With a few exceptions, using BSA funds requires a three-fifths vote of the Legislature.

“General state revenues” is defined in Article VIII, section 1 of the state constitution. It is essentially general fund revenues. For example, it doesn’t include retirement funds or bond proceeds. It also doesn’t include “moneys received from taxes levied for specific purposes and required to be deposited for those purposes into specified funds or accounts other than the general fund.”

Thus, by redirecting $935 million from the GFS to the ELTA, the striker would reduce the amount that is constitutionally required to be deposited in the BSA. The impact to the BSA would be less than $935 million, but I haven’t seen an official estimate of the fiscal impact. According to Sen. Braun, it would mean that BSA funds would be reduced by “more than $700 million.”

If that’s correct, it’s not clear to me at this point why the $935 million figure was chosen. The bills assumed in the budgets would withdraw amounts from the BSA to cover the costs of property tax rate reductions. But this striker would seemingly redirect from the BSA more than necessary to cover the rate reduction. The CY 2019 rate reduction in HB 2993 is larger, yet it would reduce revenues by only $438.8 million in CY 2019.

According to Walker Orenstein of the News Tribune, the House “is on board” with the striker. Orenstein also reports: “Rolfes said the move is just normal budgeting and necessary to cut property taxes because the GOP wouldn’t support the previous plan that tapped the rainy day fund.” The Senate didn’t vote on this last night but could today.

We wrote about the BSA in a recent policy brief; as we show, the Legislature has used BSA funds in every biennium except 2011–13, and it has spent almost all of the extraordinary revenue growth the state has experienced.

(For more on the Senate- and House-passed supplemental operating budgets, see here.)