(Photo by Phil Augustavo/Getty Images)
Democratic state lawmakers are aiming to erase a voter-approved limit on annual property tax hikes as a way to generate hundreds of millions of dollars for public schools and local governments.
The state House Finance Committee held a hearing Tuesday on House Bill 1334 which would repeal a 1% cap on annual growth for property tax collections and give the state and local governments the ability to levy hikes up to 3%.
This could drive $818 million into state coffers for education and close to $1 billion for cities and counties over the next four fiscal years, according to a fiscal analysis.
“When it comes to the basic services that our constituents need in order to do anything, all of these duties have literally been kneecapped by a 1% cap on revenue growth. What else is capped at 1%? Nothing,” Rep. Gerry Pollet, D-Seattle, the bill’s sponsor, told the committee.
But, as in previous years, the move drew fierce opposition from those who argue it will drive up the costs of living and housing.
“Taxpayers feel the crushing weight in taxes that the state already levies,” said Anthony Mixer of the Washington State Young Republicans. “The young people that I represent are already struggling to afford to buy a home, and with this, any of them that do have a home will find it harder to live in.”
Senate Democrats pushed a bill last year allowing only local governments to exceed the 1% cap. They dropped it after encountering a buzzsaw of opposition from Republican lawmakers, residents and a smattering of county leaders who warned the measure would drive up costs.
Senate Majority Leader Jamie Pedersen, D-Seattle, the bill’s sponsor, said then supporters needed to do a better job explaining the needs of cities and counties in providing services like public safety, and helping the public better understand the mechanics of property taxes.
Tuesday’s committee hearings on House Bill 1334 and House Bill 1356, which would increase the cap on property tax hikes and boost how much schools can collect from local levies, marked the committee’s first conversation this session on large-scale tax bills.
No votes are expected soon because tax bills are considered necessary to implement the budget, said Rep. April Berg, D-Mill Creek, the committee chair. Because such bills are subject to less strict deadlines, lawmakers tend to deal with them later in the session.
In the meantime, House Democrats planned to huddle Tuesday night to discuss the path for contending with a projected budget shortfall in the neighborhood of $12 billion over the next four years. Spending cuts and new revenue are among the subjects expected to come up.
“We are in the process of exploring everything,” said Rep. Lillian Ortiz-Self, D-Mukilteo, chair of the House Democratic Caucus. “We’re in a year where we have to explore all options — our cut options and our revenue options.”
How Washington got here
Voters established the property tax cap in 2001 when they approved Initiative 747, the handiwork of anti-tax activist Tim Eyman. It limited cities, counties, schools and special districts from increasing property tax collections by more than 1% from one year to the next unless voters approved a larger increase. At the time, the maximum allowable increase was 6%.
The initiative passed but faced an immediate legal challenge. In 2007, a divided state Supreme Court found it unconstitutional. But days later, lawmakers held a one-day special session to chisel the limit into law. Then Gov. Chris Gregoire, a Democrat, signed it.
The revenue growth limit applies to both state levies and all regular local property tax levies. The proposed bills would raise the cap for both. The changes would apply for taxes levied for collection in 2026.
Under both House bills heard Tuesday, the limit would be 100% plus population change and inflation – with increases capped at 103%. Using the $1 million example, the collection by the state and a local government could rise 3%, or $30,000 each.
Red ink woes
The primary source of public school funding is the state property tax, also known as the state school levy. Raising the cap under House Bill 1334 would generate $200 million for the next budget and $618 million for the 2027-29 biennium, according to an analysis of the legislation’s fiscal impact.
“My number one mission as a legislator is to fund our schools,” said Pollet, adding that many school districts are “deep, deep, deep underwater” because the state fails to provide ample funding as required by the state constitution.
City and county leaders told the House Finance Committee that the cap starves local governments of enough money to keep up with inflation-driven increases in costs of public services. It has forced them to scale back or cut services or find other sources of revenue, such as higher fees or sales taxes, to make ends meet.
“Times have changed since the 1% [cap] was put in place,” said Paul Jewell, government relations director for the Washington State Association of Counties. “We didn’t have the housing crisis that we have today. We didn’t have the homelessness issues. We didn’t have the fentanyl issues that we’re fighting in our communities right now. And every year, the Legislature adds new requirements upon local governments without providing adequate resources to pay for them.”
While counties can ask voters to tax themselves above the limit, Jewell said “that’s not an acceptable solution for the basic, essential, statutorily required services that counties are supposed to provide.”