Issue 21 -- What Happened with School Funding in the 2026 Legislative Session

In this issue:

• An Income Tax — If You Can Keep It
• A Big Fight Over the Estate Tax and Public Schools
• $90 Million in K-12 Cuts for 2026

The 2026 Washington State legislative session came to an end last Thursday, and it could be an historic session. Legislators passed an income tax on the rich — what state leaders are calling a “millionaires tax” — and promised to dedicate some of its revenues to K-12 public schools.

But those promises are merely legislative intent language and are not firm commitments. A future legislature will have to actually deliver on those promises. Income tax revenue is not expected to begin arriving in the state treasury until 2029.

Legislators also made $90 million in cuts to K-12 public schools. While those cuts will not have much impact on Seattle Public Schools, our district could be hurt much more in future years because legislators also rolled back an estate tax increase.

These cuts, and promises of some future spending, come amidst a backdrop of underfunded schools and a growing fiscal crisis for districts across the state. In 2024, State Superintendent of Public Instruction Chris Reykdal told the Governor that public education in Washington State is underfunded by at least $4 billion a year.

That hasn’t changed. Jeff Snell, head of the Washington Association of School Administrators, slammed the legislature in a Seattle Times op-ed this week for their cuts and lack of commitment to students as demonstrated by the 2026 session.

Seattle legislators recognize that they have more work to do to fund public schools. But that’s nothing new. What is new this year is a growing number of serious challenges to incumbent legislators that could shake up the legislature, a body that in recent decades has been unfriendly to public education even under Democratic rule.

An Income Tax — If You Can Keep It

The big news of the year is the passage of the “millionaires tax,” a state income tax targeting people who make a million dollars a year or more. This has been 90 years in the making and represents a major accomplishment for progressive tax reformers.

Legislators passed SB 6346, creating the millionaires tax, after weeks of discussion, a 25-hour debate on the floor of the State House, and long negotiations between the Democratic caucuses and Governor Bob Ferguson. The final version levies an income tax of 9.9%, exempting the first $1 million of income as well as the value of one’s home. (If your Adjusted Gross Income on your federal Form 1040 is below $1 million, you’re not subject to this tax.)

After much debate, legislators created what is known as “intent language” in SB 6346, stating that revenues would “Increase state funding for K-12 education in order to improve outcomes for Washington’s students by strengthening high quality instruction and expanding student supports.” But that is effectivelysi a promise since it’s not binding legal language.

The final deal reached between legislators and the governor would also fund universal free school meals for all students in Washington State. This too is stated as legislative intent and is not binding. A future legislature will have to actually include this in the budget. That won’t happen until 2029 at the earliest, since that is when the state will begin collecting the tax, based on the 2028 tax year.

Nearly every state in the union has an income tax, and several states levy a “millionaires tax.” California adopted theirs in 2004 to fund mental health services and expanded it in 2012 and 2016 to fund public education. Massachusetts adopted theirs in 2022, with much of the revenue being specifically earmarked for public education.

Washington State leaders chose not to make such a firm commitment. They rejected pleas from State Superintendent Reykdal to use most of the money for K-12 education and a property tax cut. The Seattle Times supported that idea, as did hundreds of parents mobilized by Washington’s Paramount Duty to call and email their legislators.

Reykdal’s proposal to cut the property tax stems from the legislature’s actions in 2017 to fund its obligations to K-12 education under the McCleary decision. That’s the 2012 ruling handed down by the State Supreme Court that said the legislature was violating the state constitution by failing to “amply fund” public education. In 2017 legislators rejected calls to use an income tax or a capital gains tax to pay for their obligations under the Court ruling and instead passed the largest property tax increase in state history.

The final version of SB 6346 does fund a Working Families Tax Credit, eliminates the Business and Occupations Tax on businesses with less than $250,000 in annual gross receipts, and eliminates the sales tax on some items such as diapers.

Whether this will fare better with voters than Reykdal’s plan is an open question.

This is not the first time Washington State has adopted an income tax. In 1932, a whopping 70% of voters passed Initiative 69 to create a graduated income tax targeting the rich, with the funding going to public schools.

A year later, a divided State Supreme Court handed down the Culliton v. Chase decision, ruling I-69 unconstitutional. It was a 5-4 decision that saw several justices change their positions after an initial 4-4 deadlock and a new justice joined the bench. (The Seattle Times’s Jim Brunner had an excellent overview of the Culliton decision last week.)

Washington State’s constitution does not forbid an income tax. What five of the nine justices did rule in 1933 is that “income is property” and thus a state income tax is subject to the state constitution’s rules governing property taxes — including that they must have a flat, uniform rate.

This was controversial. One justice called his colleagues’ 1933 ruling “sheer sophistry” and indeed, most courts around the country have rejected the “income is property” view. But since 1933, numerous efforts to try again and enact an income tax failed either in the halls of the State Capitol or at the ballot box. The last time was in 2010, when Initiative 1098 went down to defeat by a large margin, with just 36% of voters saying yes to an income tax on the rich.

The “millionaires tax” will surely face a legal challenge. The outcome of that case may rest on the fate of this fall’s crucial State Supreme Court elections, when for the first time in many, many years, an entire majority of the Court (five seats) will be up for election.

Observers expect that the State Supreme Court as currently constituted would probably uphold SB 6346, as it levies a flat rate. Property tax exemptions are not unusual, and the use of an exemption to exclude people making less than $1 million from the tax should not by itself get the law overturned. (Unless conservatives win those judicial elections.)

As I-1098’s fate in 2010 demonstrated, the larger challenge to the survival of the new state income tax is at the ballot box. 

Legislators controversially blocked SB 6346 from being put on the ballot this fall as a referendum, but opponents can still gather signatures to change it via the normal initiative process. They are likely to successfully gather the signatures needed, and so an initiative to repeal SB 6346 will appear on the ballot in November 2026 or sometime in 2027. Only then will we know whether Washington State will finally have an income tax, and whether the legislature will actually use it to fund the schools.

A Big Fight Over the Estate Tax and Public Schools

While the 2026 legislature adopted a major new tax on the rich, they also cut taxes for wealthy people. Well, dead wealthy people.

In 2025 the legislature increased the estate tax for those estates with more than $1 million in taxable value. The highest rate increase was from 20% to 35% for estates with more than $9 million in taxable value — giving Washington the highest estate tax rate in the country. Most of the money would have gone to the Education Legacy Trust Account, one of the sources of funding for K-12 public schools.

Wealthy individuals claimed this was going to cause them to leave the state, and as a result, legislators voted to roll back last year’s estate tax increase. SB 6347 passed both the House and Senate last week and is likely to be signed by Governor Ferguson.

SB 6347 is also a cut to public education. According to the fiscal note for the bill, the estate tax repeal will reduce the revenue that goes to the Education Legacy Trust Account in the following amounts:

2027: $17 million

2027-2029: $127 million

2029-2031: $105 million

Because of that cut, several students and educators across Washington State rallied against SB 6347. The Washington Bus, a youth organizing project, launched a “Don’t Roll Back Our Future” campaign. State Representative Shaun Scott and Port Commissioner Toshiko Hasegawa, both from Seattle, also helped rally the public to try and stop the estate tax cut.

They didn’t succeed in stopping SB 6347. But one notable vote flipped: Senate Majority Leader Jamie Pedersen voted yes when the bill first came out of the Senate, but voted no on final passage. Pedersen represents the 43rd District in Seattle (downtown, Capitol Hill, Wallingford) and is being challenged for re-election this year by progressive advocate Hannah Sabio-Howell. 

Legislators have not explained how they will restore the money lost to the Education Legacy Trust Account as a result of SB 6347. The millionaires tax is one option. But if that tax is used just to backfill money lost from the estate tax cut, and from this year’s cuts to schools, it would mean the millionaires tax doesn't provide new money for public education.

$90 Million in K-12 Cuts for 2026

The millionaires tax and estate tax involve revenues and cuts for the next few years ahead. But legislators also made $90 million in cuts to K-12 public schools for this year, although they are not expected to have much impact on Seattle Public Schools.

ESSB 6260, a bill titled “Implementing efficiencies and programming changes in public education,” includes the following cuts to public schools:

• $27 million cut from transition to kindergarten programs
• $25 million cut from Local Effort Assistance funds
• $25 million cut from funds to mitigate bus depreciation costs
• $7 million cut from Running Start
• $4 million cut by freezing bonuses for National Board Certified Teachers

These cuts were contentious. The Washington State PTA and others mobilized against them, ultimately failing to stop the legislature from passing the bill. But they came close. ESSB 6260 passed both the House and Senate by just a single vote in each chamber.

Earlier this month, the Seattle Public Schools board saw a presentation from district staff indicating these cuts would have a minimal impact on the district. 

For example, Seattle does not benefit from Local Effort Assistance funds. Also known as “levy equalization,” those funds are used to provide extra state funding for school districts who cannot, or will not, pass levies to tax themselves at the same levels as Seattle and other large Puget Sound districts.

SPS would lose about $1 million in bus depreciation reimbursement. But a potential cut of $2 million in funds was averted when legislators agreed to exempt public schools from the expanded sales tax they adopted in 2025.

Legislators did cut $7.5 million from charter schools, perhaps the only “good” cut in the budget. But Democratic leaders acknowledge they need to step up for public schools in future sessions. “We’re going to have to do some more work on education funding,” Sen. Pedersen told reporters after the session ended.

That is an understatement.

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