House Democratic Freshman unveiled a long-term tax proposal during a news conference this morning, Wednesday, February 29th.

In total 12 freshman were in attendance showing support for the proposal. Among those 12 was Representative Chris Reykdal who represents Evergreen and parts of Thurston county.

The proposal would establish a state tax on capital gains. A capital gains tax (CGT) is a tax on the profit realized on the sale of non-inventory assets that are purchased at a lower price than the sales price. The most common capital gains are realized from the sale of stocks, bonds, and real estate.

According to legislative staff research, under the federal tax code, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income. The amount of federal CGT depends on both the tax bracket of the individual and the amount of time the capital asset was held before being sold. In addition to the federal CGT, capital gains are often subject to state income taxes. Many states do not have separate capital gains tax rates. Instead, most states tax capital gains as ordinary income subject to the state’s income taxes rates. Washington has neither an income tax nor any specific excise tax on capital gains.

Introduced as HB 2563, the tax would begin January 1, 2013.  An annual state net capital gains tax would be imposed on the sale or other voluntary exchange of capital assets by resident individuals, trusts, and estates during the year. The tax rate would be five percent and applied to the capital gains amount reported on the federal income tax return. For resident individuals, all capital gains are apportioned to the state, regardless of the location of the asset. For taxpayers filing joint federal tax returns, a $10,000 deduction is provided. For taxpayers filing other returns, a $5,000 deduction is allowed. The sale of a person’s primary residence is not subject to CGT.

The bill is up for public hearing this morning in House Ways & Means.

 The House Democrats moved their 2012 supplemental operating budget to the floor yesterday, Tuesday, February 28. Several amendments were proposed, with 9 total passing. Among the amendments, several were technical in nature and do not affect the budget. Others restored partial funding to various departments such as the Department of Ecology’s Water Quality Financial Assistance program and in the State Conservation Commission. Others that passed deal with “what if” scenarios. Specifically, if the budget improves by certain amounts in 2013, funding that is currently delayed in the House budget for the K-12 sector will be restored.  None of those amendments have an impact on higher education.

In a somewhat rare occurrence, the budget was placed on final reading (known as “third reading”) last night but not voted upon. It now awaits final passage on the floor. Once that happens, the budget will move to the senate where the two chambers will begin negotiations to come to one final budget proposal.

The Washington State Senate Democrats released their 2012 supplemental operating budget this morning, Tuesday, February 25th. The Senate proposes NO cuts to higher education.

“The budget honors the highest priority of families and communities across the state by making no cuts to current K-12 or higher education funding, recognizing their importance to the future of our residents and our state,” said Sen. Ed Murray, chair of the Senate Ways & Means Committee.

The budget taps revenue from legislation to end the tax exemption on interest on mortgages for national banks and end an exemption on sales tax on wind power generation equipment ahead of schedule. Savings were also achieved from the better-than-expected case load and revenue forecast of $340 million.

Opportunity to comment on the budget will be tonight at 5:30 in Senate Ways & Means. Upon passage in Ways & Means the budget will move to the Senate floor.

Over the next weekand a half House and Senate budget leaders will come together to reconcile their budgets. If all goes accordingly, we will expect to see a final budget proposal early to mid-next week with final passage in time for the end of the supplemental session, sine die, on Thursday, March 8th.

Last Wednesday, February 15, Education Secretary Arne Duncan unveiled the Obama Administration’s $5 billion proposal to improve the teaching profession at every level – recruitment and retention, training, the career ladder and pay and tenure.

The program, known as the RESPECT Project (Recognizing Educational Success, Professional Excellence and Collaborative Teaching), would be structured much like “Race to the Top” – the competitive federal grant program that asked states to submit performance proposals.

Although the details have yet to be developed, Duncan vowed to take a “comprehensive” look at the teaching profession. Among the changes, those that may affect Evergreen are:

• Reforming Teacher Colleges and making them more selective
• Creating new career ladders for teachers
• Improving professional development

According to Duncan, this is the first time the Obama Administration has taken such a comprehensive look at the overall teaching profession  – including the teacher-training programs that feed into it.” He went onto say, “Many of our schools of education are mediocre at best … many teachers are poorly trained and isolated in their classrooms.”

What this means for Evergreen at this point is unknown. We will continue to monitor and update the blog when new developments unfold.

Last week, President Obama unveiled his 2013 proposed budget, including his plan for higher education. This year President Obama’s proposal called for a variety of new expensive programs, from $8 billion in additional funding to community colleges, to additional money for the Perkins Loan program and a $1 billion “Race to the Top” for higher education.

Under the President’s proposal, funding for the National Science Foundation would increase by 5 percent, to $7.4 billion and the National Endowment for the Humanities  would get a slight increase, from $146 million to $154. The American Opportunity Tax credit is also made permanent – providing up to $2,000 per year for tuition.

With a goal for the US to “lead the world in college graduates by 2012,” specifics include:

• Sustaining the maximum Pell Grant award of $5,635 through the 2014-2015 award year.
• A one-year measure to prevent student loan interest rates from doubling this summer and doubles the number of work-study jobs over the next five years.
• New reforms that shift federal aid away from colleges that do not keep tuition low.
• Making permanent the American Opportunity Tax Credit.

Libby Nelson of Inside Higher Ed notes, “College leaders may not like all of the president’s proposals,” including, the recent controversial idea of tying campus-based federal financial aid to measurements of “value.” In this proposal, federal aid would be shifted away from colleges that do not keep net tuition low. She also notes that subsidized loans for financially needy undergraduate students would take another hit in the President’s proposal – “borrowers would lose eligibility for the program if they stay enrolled full-time longer than three years for an associate degree, or six years for a bachelor’s.”

The Washington State House Democrats unveiled their 2012 Supplemental Operating budget proposal this morning. In an effort to keep higher education accessible, the House proposes significantly less reductions than Governor Gregoire’s proposed budget from December.  The higher education sector took a total reduction of $65 million. Of the $65 million, the four year public baccalaureates were cut $30 million, while the community colleges took $35 million of the cuts. In addition to the $65 million, an additional $10 million was cut from the state need grant program. No money was cut from the work study program.

The University of Washington and Washington State University did receive some funding for science and technology degrees, leaving a net cut of $51 million for the higher education sector.

What this means for Evergreen:

The reduction to Evergreen is roughly 3% or around $1.1 million in operating revenue for the biennium. Keep in mind, this is on top of the back-to-back budget cuts Evergreen has seen over the past 5 years. Any reduction will result in continued negative impacts to the institution. However, these proposed reductions are much less than the $160 million cut to the higher education sector Governor Gregoire proposed back in December.

One area where the State achieved savings, but where impacts will be felt, is in health care.  According to the Olympian, “like the GOP, the Democrats propose cutting the $850 per employee monthly allocation for health and other insurance benefits to $800. Gregoire proposed $825.”   Both the Republican and Democratic House plans cut the state contribution to the Public Employee Benefits Board by about $33 million, but the Democrats do not call for the 24-day furloughs that the GOP did.

We are continuing to sift through the fine details of the budget to ensure additional cuts were not taken in other sections of the budget and will report back when we know more.