No, the capital gains tax is needed to fund Washington’s new child care legislation.

Washington recently received some good national recognition  for its investments and policies to advance early childhood education. The Seattle Times writes,

The accolades come after state lawmakers greatly expanded child care initiatives the 2021 Legislative session by passing the Fair Start for Kids Act. The state is also shifting its focus to making the business of child care more sustainable for providers. 

In a blog post Emily Makings with the Washington Research Council reminds us that no new tax was required to support the program. Moreover, there are some issues with the accounting. We’ll quote her generously, including her pullout from the ST.

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.

Still, Makings concludes,

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.)