The cost of Washington’s new child care bill will bow wave, but capital gains tax revenues aren’t needed to fund it

By: Emily Makings
11:03 am
October 13, 2021

The Seattle Times has a story today about the Fair Start for Kids Act, which the Legislature passed this year, and a new national report that gives Washington high marks for early childhood policies—and other general income policies (including paid family leave and a high state minimum wage).

According to the Times, regarding the Fair Start for Kids Act,

The state is looking at multiple sources of funding for these initiatives. It’s currently using some $300 million in federal pandemic relief funding to, in part, provide child care stabilization grants intended to help centers stay open. A new capital gains tax is expected to bring in around $400 million in net revenue annually, which will help the state budget for early childhood programs under Fair Start for Kids. The law would take effect in January, with the first returns due in 2023.

The tax, however, is being contested in courts over its constitutionality, and the case could ultimately be heard by the state Supreme Court. [Sen. Claire] Wilson said in an email that the Fair Start funding “is not contingent on the capital gains tax revenue being collected, and it will be funded regardless of what the courts decide.” If found unconstitutional, the state will have to fund the early childhood programs out of its general fund.

In writing about the enacted 2021–23 state operating budget, we identified seven particularly troubling issues. The Fair Start for Kids Act featured in two of them. First, the budget used one-time federal relief money to fund the bill’s ongoing programs. Second, the cost of the bill bow waves beyond the four-year budget outlook.

As I showed in this post, in 2021–23, the Fair Start for Kids Act is expected to cost $321.9 million. Of that, $310.2 million was covered with federal relief money. Only $9.0 million is from funds subject to the outlook (NGFO). In 2023–25, the cost to the NGFO will jump to $303.4 million. But many of the programs aren’t fully implemented until after 2023–25. Further, the bill delayed full implementation of the Early Childhood Education and Assistance Program (ECEAP) from school year 2022–23 to SY 2026–27—beyond the four-year outlook. The cost of the bill in 2025–27 will be much higher than $303 million.

Regarding the capital gains tax, Sen. Wilson is right that the state does not need its revenues to fund the Fair Start for Kids Act. It is a costly bill (and will be more costly down the road), but, as I wrote in April, “A new tax is not needed to fund the state’s paramount duty, as the Supreme Court stated. Early learning and child care could also be funded within current revenues, if the Legislature so chooses.” (Note, too, that the revenue forecast has increased substantially since the Legislature left town.)

Categories: Budget , Education , Tax Policy.