Fight over I-884 tax boost pits educators against businesses

Supporters of Initiative 884 say the statewide ballot measure that will go before voters next month has enough financial oomph to bring sweeping changes to the state’s education system.

Opponents say it’s a billion-dollar tax increase that will cripple the state’s already-limping economy.

If approved, the measure would increase the state’s sales tax by one cent per dollar to raise an additional $1 billion a year specifically for the state’s preschool, kindergarten through grade 12 (K-12) and higher education systems.

It is money that proponents say is desperately needed to help teachers, students and schools in general work toward meeting the tough academic standards that are required by state and federal laws.

Dan Beavers, 29, of Olympia, cringes at the thought of a sales tax increase.

He has been on disability assistance since a car accident last February, and said he knows how hard it is for low-income families to make their pennies stretch.

On the other hand, Beavers also grew up and attended schools in Oregon, where funding is so tight that schools have been forced to undergo major staffing and program cuts. Some have even shortened the school year.

Beaver said he wants his stepchildren to have better educational opportunities and experiences than he had. And he’s willing to pay for that, despite the economic sting.

“If it can help kids out, it’s all good with me,” he said. “I support it 100 percent.”

But the sales tax worries many small-business owners across the state, who say it will make it hard to stay competitive.

In January, Washington’s minimum wage will increase 19 cents to $7.35 an hour, according the Department of Labor and Industries. It’s the second year in a row that the state expects to have the highest minimum wage in the country.

“It doesn’t do Washington business any good to keep raising and raising the sales tax,” said Chuck Boyd, owner of the Nisqually Bar and Grill.

He said that, initially, his business would likely absorb the tax increase because it doesn’t make sense to boost the price of a drink by two or three cents. But eventually, Boyd said, he might have to raise food and drink prices to help offset costs from the increased tax rate.

He thinks the best way to raise money for education is to raise the state’s revenue by improving the economy.

“The overall key to the success of Washington state is to get business moving,” Boyd said. “We’re stagnant. We’re looking at businesses moving out of the state. Boeing is almost out of here, and who is going to be behind them?”

The benefits

Should I-884 pass, the Olympia School District would receive an estimated $2.95 million a year of new funding, according to Citizens for the Education Trust Fund, a campaign group in support of the measure. Tumwater schools would receive $2.3 million and North Thurston Public Schools could expect about $5 million in new money.

“I think it’s great,” said Olympia School District superintendent Bill Lahmann. “Reform is unfair without the appropriate resources.”

Though he doesn’t usually support the “initiative form of government,” Lahmann said, he favors I-884 because it could make a big difference in the public school system.

Students who are English language learners, and those who qualify for the free- and reduced-price lunch program, which is an indicator of poverty, will benefit the most from I-884, he said.

“At some point in time, education breaks the cycle of poverty,” he said.

The Olympia School Board recently voted to join several other districts in the state in endorsing I-884, which also has garnered support from numerous parent-teacher groups, the state’s largest teachers union, and some of the Northwest’s most prominent businesses, including Microsoft, Costco and Starbucks.

Districts also could receive money designated to reduce student-teacher ratios. The 18-school Olympia district, which cut nearly $3.6 million to meet a shortfall in its general fund for the 2004-05 school year, could benefit from $2.2 million in state funding for that purpose.

It’s money that the district should have received as the result of Initiative 728 — which voters approved in 2000 to reduce class sizes. The Legislature temporarily suspended the measure because of the state’s budget crisis. And it’s money that I-884 proponents promise would be “better protected” if their measure is approved.

I-884 supporters began looking into creating an education trust fund more than a year ago. Gov. Gary Locke’s office drafted an earlier version of the measure and unveiled it during the legislative session in February. But when lawmakers kicked it back, supporters hit the streets to get it placed on the fall ballot.

The Seattle-based League of Education Voters, which ran the Initiative 728 campaign four years ago, helped gather more than 280,000 signatures to qualify it for the ballot.

A pro-I-884 campaign run by Citizens for the Education Trust Fund has raised $1.5 million in political contributions, enough to pay for television commercials that organizers say are scheduled to begin airing this week. Georgia Meeks, who has children at Woodland Elementary and Komachin Middle schools in Lacey, has mixed feelings about I-884.

She supports getting more state funding for public schools.

“We need money in our educational system,” Meeks said. “I believe, honestly, that it’s a Band-Aid. But I also believe that Band-Aids serve a purpose.”

But Meeks said she’s concerned that if I-884 passes and the sales tax is raised, it could be harder to get voter support next spring if North Thurston Public Schools decides to rerun a $125 million construction bond measure that failed last February.

“I was like, ‘Oh my God, if they run this (I-884) before they run the bond, we’re in trouble,'” Meeks said. “It could hurt us really bad. And then again it might not affect us at all if it doesn’t pass.”

The costs

Opponents say the tax increase will hurt families, small businesses and the state’s economy.

According to the Washington Policy Center, the tax increase could result in 10,000 fewer jobs in the state. The largest decline would be in the retail sector.

Besides the economic effects, some think that I-884’s money is targeting the wrong areas of the education system.

Marsha Richards, director of the Olympia-based Evergreen Freedom Foundation’s Education Reform Center, said she has concerns about several of the areas that would receive more funding, including the state’s preschool program, which she describes as more of a social services program than an educational one.

She also thinks the state should invest in a merit-based pay system for teachers, instead of across-the-board pay raises for teachers, whose salaries are based on education level and years of experience.

“Putting a billion more dollars into a system and into programs that aren’t working already isn’t going to help students, and it isn’t going to make those programs start working,” Richards said.

One of the main arguments against the initiative: Can the state’s lawmakers be trusted to keep their fingers out of a brand-new $1 billion pot of tax revenue?

Proponents say they wrote the initiative with strict language to protect the fund and the current levels of education funding. And, they say, they’ve built a strong coalition of supporters to “defend it in Olympia.”

But by law, the state legislature could amend the measure as early as January with a two-thirds majority vote and in two years with a simple majority.

“They claim that there’s all of these firewalls and things,” said former House speaker Clyde Ballard of East Wenatchee, who leads an opposition group called the League of Freedom Voters. “I’m sorry I just don’t believe that. The Legislature is going to be short about a billion this biennium. They have a choice of either raising taxes by a billion dollars, or they can make some cuts. Or they can take this billion and incorporate it into the overall budget.”

“People say, ‘Oh they’ll never touch it,’ but people said that about I-728 and the last two educational initiatives,” he said. “And they did touch them, first thing.”

Financial effect

If I-884 is approved, Washington will have the highest state sales tax rate in the country. The new tax rate would take effect in January, said Natalie Reber, a spokeswoman for the Citizens for the Education Trust Fund.

Currently, Mississippi and Rhode Island have the highest state sales tax rates. Both are 7 percent.

The state’s sales tax was last increased in 1983, when the Legislature increased it from 5.4 percent to 6.5 percent. A penny-per-dollar increase would push the state’s sales tax to 7.5 percent.

Most county and local governments have additional sales taxes that pay for public transportation, prisons and other services. For example, in Thurston County and the city of Olympia, the current tax rate is 8.4 percent; it would rise to 9.4 percent, if I-884 passes.

In some areas of the state, such as Snohomish County, the retail tax rate would hover just below 10-cents on the dollar. Basically, a penny-per-dollar increase in the state’s sales tax adds $1 to every $100 taxable purchase.

For a $25,000 car, the increase would be $250.

Ballard thinks the one-cent-per-dollar increase could have some of the greatest effect on the state’s border towns.

Because Oregon does not have a state sales tax and Idaho’s state sales tax is 6 percent, he said, Washington residents might decide to cross the border to purchase their big-ticket items.

“You can drive to Oregon and save 10 percent,” Ballard said. “It will have a very negative impact on small businesses in the state of Washington.”

New home buyers would also be hit by the increased tax, said Erin Shannon, a spokeswoman for the Building Industry Association of Washington (BIAW), a group that lobbies for 11,200 small home builders, supply houses, real estate companies and others in the industry.

Washington is one of six states in the country that levy sales tax on labor and materials for new homes, Shannon said. The BIAW says it will add $3,000 on a $300,000 new home.

“It has a devastating impact on affordable housing,” Shannon said.

Critics also call I-884 a regressive tax, saying it will squeeze low-income families the hardest. Families that earn less than $20,000 a year would pay an average of $93 more a year in taxes, or nearly 0.8 percent of their income in taxes, according to the Washington Policy Center.

In comparison, families in higher tax brackets would pay 0.3 percent to 0.5 percent more of their income.

It’s an unfair tax, said Jamie Daniels, director of the Washington Citizens for a Sound Economy, an anti-tax group that is based in Lacey.

“These are the same families that can’t pay a $5 co-pay,” she said.

Lisa Pemberton covers education for The Olympian. She can be reached at 360-754-5445 or lpembert@olympia.gannett.com.

Thurston County sales tax

Initiative 884 concerns dedicating funds designated for educational purposes.

This measure would create an education trust fund for smaller classes, extended learning programs, certain salary increases, preschool access, and expanded college enrollments and scholarships, funded by increasing retail sales tax by 1 percent.

Here’s where the current sales tax collected in Thurston County goes:

TOTAL SALES TAX RATE: 8.4 percent*

– State Sales Tax: 6.5 percent
– Local Sales Tax: 1.0 percent
– Transportation: 0.6 percent
– Criminal Justice: 0.1 percent
– Juvenile Detention: 0.1 percent
– Communication: 0.1 percent

*If located outside the PTBA (which is bus service), the rate is 7.8 percent.

Who supports, opposes I-884; where the money will go.

A special report on Referendum 55, which would authorize charter schools, and the potential effects.

I-884 proponents and opponents

Proponents

The pro Initiative 884 campaign is run by the Citizens for the Education Trust Fund. The measure is also supported by the Seattle-based League of Education Voters, which ran a ballot measure in 2000, Initiative 728, to lower student-teacher ratios in public schools. The Washington Education Association, the Washington State PTA, several school boards and parent organizations and several prominent Northwest businesses — including Microsoft, Starbucks and Costco — also support the initiative.

As of Aug. 31, the Citizens for the Education Trust Fund had raised more than $1.5 million.

– Online: www.edtrustfund.org

Opponents

The campaign against I-884 is being run by the Lacey-based League of Freedom Voters, which is heavily funded by Citizens for a Sound Economy, a conservative group that has traditionally favored federal tax cuts and limits on state spending. The League of Freedom Voters said it has garnered support largely from retirees and small-business owners. Other groups that have come out against I-884 include the Olympia-based Evergreen Freedom Foundation and the Building Industry Association of Washington.

As of Aug. 31, the League of Freedom Voters had raised more than $20,000.

– Online: www.freedomvoters.org

What I-884 would cost you

Basically, a penny-a-dollar increase in the state’s sales tax adds $1 to every $100 taxable purchase.

Here are some examples of what the tax increase could add up to. The following rates are based on the state’s sales tax rate; local rates would be higher.

– $5 case of soda pop, a 5-cent increase. Total: $5.38
– $50 pair of shoes, a 50-cent increase. Total: $53.75
– $300 in Christmas presents, a $3 increase. Total: $322.50
– $500 in home improvement supplies, a $5 increase. Total: $537.50.
– $25,000 car, a $250 increase. Total: $26,875.

How local school districts would fare

If voters approve Initiative 884, each school district in the state will receive a one-time $35-per-student allocation for the 2004-05 school year.

Annual distributions of new funding the trust fund generates would begin during the 2005-06 school year.

The money would be distributed to districts individually, and each district would be able to decide how the money would be spent, depending on the needs of its students, I-884 proponents say.

Here are projected distributions for South Sound districts:

North Thurston Public Schools

– One-time distribution amount: $436,700
– Annual distribution of new trust fund money: $5 million
– Amount of I-728 money protected by trust fund: $3.17 million

Olympia School District

– One-time distribution amount: $299,500
– Annual distribution of new trust fund money: $2.95 million
– Amount of I-728 money protected by trust fund: $2.17 million

Tumwater School District

– One-time distribution amount: $216,100
– Annual distribution of new trust fund money: $2.3 million
– Amount of I-728 money protected by trust fund: $1.56 million

Yelm School District

– One-time distribution amount: $158,400
– Annual distribution of new I-884 trust fund money: $1.88 million
– Amount of I-728 money protected by trust fund: $1.15 million

Rochester School District

– One-time distribution amount: $67,500
– Annual distribution of new trust fund money: $846,900
– Amount of I-728 money protected by trust fund: $489,900

Tenino School District

– One-time distribution amount: $47,600
– Annual distribution of new I-884 trust fund money: $554,300
– Amount of I-728 money protected by trust fund: $354,400

Rainier School District

– One-time distribution amount: $30,600
– Annual distribution of new I-884 trust fund money: $360,300
– Amount of I-728 money protected by trust fund: $222,100

Griffin School District

– One-time distribution amount: $23,000
– Annual distribution of new trust fund money: $205,800
– Amount of I-728 money protected by trust fund: $167,200

Online Extras

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