1. G OVERNOR I NSLEE ’ S P ROPOSED 2015−17 B UDGET WSSDA – WASA – WASBO Legislative Conference March 1, 2015

2. Our budget needs & obligations far exceed revenue projections PROJECTED REVENUE GROWTH MAINTAIN SERVICES AT CURRENT LEVELS POLICY OBLIGATIONS & LAWSUITS BASIC EDUCATION OBLIGATION (HB 2776) 2

3. 2015−17 B UDGET S OLUTION (I NCLUDING I-1351) 3

4. Under the Governor’s budget … Our schools will be stronger Our air will be cleaner Our kids will be healthier Our tax system will be fairer 4

5. Education » Largest-ever state investment in early learning » Increases basic education funding by $1.3 billion: › Reduce K-3 class sizes to 17 ($448 million) › Implement full-day kindergarten statewide in 2016−17 ($108 million) › Fully fund MSOC in 2015−16 ($752 million) » Promotes student success, higher graduation rates ($87 million) » Funds first teacher COLA since 2008 » Freezes tuition and boosts financial aid 5

6. 6

7. Health & human services » Adds community beds for psychiatric patients » Funds civil admission and competency restoration wards at Western State Hospital » Adds Child Protective Services staff to reduce caseloads and speed up responses » Adds child and family welfare services workers to ensure safety of foster children » Increases reimbursements to foster parents 7

8. Natural resources » Enhances State Parks operations and maintenance » Implements carbon pollution reduction program » Increases oil spill prevention and response » Boosts efforts to prevent toxics in our waters 8

9. State employee compensation » Funds 28 collective bargaining agreements negotiated under state law » Funds modest pay raises for most state employees − 3% and 1.8% » First general wage increase since 2008 » Total cost (including non-represented employees) − $440 million NGF-S 9

10. Revenue collections are at historically low levels when compared to overall economy General Fund-State revenue as percentage of Washington personal income Projected Washington State Economic and Revenue Forecast Council, September 2013 ›In 1990, GF-S revenue equaled about 7% of total personal income. ›If the same were true today, we would have about $15 billion in additional revenue for current biennium. ›In 1990, GF-S revenue equaled about 7% of total personal income. ›If the same were true today, we would have about $15 billion in additional revenue for current biennium. 10

11. In 1995, Washington ranked 11 th in state and local tax collections … By 2011, we ranked 35 th State and Local Tax Collections Per $1,000 Personal Income Fiscal Year 2011 Washington $98.95 Source: Bureau of Economic Analysis and Census Bureau U.S. Department of Commerce U.S. Average = $108.31 11

12. Governor’s revenue package » Impose 7% tax on capital gains above $25,000 for individuals, $50,000 for couples ($798 million) » Increase state cigarette tax by 50 cents per pack; start taxing e-cigarettes/vapor products ($56 million) » Repeal 5 tax breaks ($282 million) » Use portion of new revenue generated by market- based carbon pollution reduction plan ($380 million) » Reinstate or extend 8 tax breaks, including B&O credit on research and development 12