2003 Seattle Election Information

Primary Election Voters' Guide

Initiative 77 - Fund Early Childhood Programs

Ballot Title

Initiative Measure Number 77 concerns funding childcare and early learning through an espresso beverage tax.

The measure would fund qualifying pre-kindergarten programs, grants to qualifying families, and education-based compensation increases for childcare and early learning providers by imposing on businesses that prepare and sell espresso beverages in Seattle a tax in the amount of 10¢ on each such sale. The measure establishes an oversight committee and requires that tax revenues not replace existing funding for these services and that the City continue to fund these services at 2002 levels, adjusted for inflation.

Should this measure be enacted into law?

Yes......
No......

City Attorney's Explanatory Statement

The Proposal

This measure concerns funding for childcare and early learning services through an espresso beverage tax. It asks voters to impose on every person who prepares and sells espresso beverages within Seattle a tax of 10¢ on each sale of an espresso beverage in the City. The measure states that the City would be required to spend any revenues generated from this tax on childcare and early learning services, in addition to existing funding provided by the City. The measure requires that revenues from the tax be spent solely on childcare and early learning services as defined in the measure, including: (1) qualifying pre-kindergarten programs and related services for 3-5 year old children; (2) direct grants to qualifying families to subsidize the cost of childcare and early learning services; and (3) education-based compensation increases for qualifying childcare and early learning providers. The measure requires that the City maintain at least its 2002 funding levels for childcare and early learning services from other (non-espresso tax) funding sources, if possible.

The Law as it Now Exists

Seattle B&O Tax: As authorized by state law, the City of Seattle currently imposes a business and occupation ("B&O") tax for the privilege of doing business in Seattle, regardless of the type of product sold or services provided. When imposing the B&O tax on retail sellers, the City of Seattle does not distinguish between businesses according to the type of products they sell. The B&O tax in Seattle is now calculated on a percentage of a business's gross receipts, not as a flat fee per unit of sale.

Seattle Sales Tax: As authorized by state law, the City of Seattle currently imposes a sales tax on the purchaser for every retail sale within the City. The sales tax is calculated as a percentage of the value of the item or the price paid for each sale. The City currently imposes its sales tax at the maximum rate allowed by state law.

No Required Funding of Childcare and Early Learning Services: No law currently requires the City to appropriate funds for childcare and early learning services as defined in the measure or annually fund childcare and early learning services at designated levels. All such City funding is now discretionary, with the possible exception of restricted fund that the City may have accepted under certain regulatory or contractual condidtions.

This measure, if approved, would require the City of Seattle to impose on every person who prepares and sells espresso beverages within the City a tax of 10¢ on each sale of an espresso beverage within the City. This tax would be in addition to the B&O tax already imposed by the City of Seattle generally, including on persons who prepare and sell espresso beverages in the City. This new tax would be calculated as a flat fee per unit of sale, in this case 10¢ on each espresso beverage sold, unlike the B&O tax imposed by the City and currently measured by gross receipts. This tax, unlike the B&O tax, would tax sellers of one type of product _ espresso. This tax would also be in addition to the sales tax already imposed by the City of Seattle on purchasers of retail goods, including espresso beverages. The measure states that no more than 5% of the total revenues collected from the tax may be used for central administrative support. The measure requires that remaining revenues generated by the tax be used only for childcare and early learning services in the following manner: 55% of the funds would fund qualifying pre-kindergarten programs; 20% would provide grants to low-income families to subsidize their purchase of childcare and early learning services; 20% would fund career and wage ladder programs of qualifying childcare providers; and 5% would fund professional education programs of qualifying in-home childcare and early learning providers. An oversight committee would be established to review and advise the City regarding the expenditure of tax revenues. Revenues generated by this tax would be a new source of funding for childcare and early learning services in addition to funding already provided by the City for such services. The measure states that the City, "to the extent possible," would be required to continue to fund (from sources other than the new espresso tax revenues) childcare and early learning services at the levels appropriated in the City's 2002 budget. The City's Department of Finance cannot with certainty determine which services provided by the City in 2002 fall within the definition of "early learning and care services" under the measure, nor is it clear whether non-City funds appropriated in the City's 2002 budget are to be included. Estimates by the City's Department of Finance of the amount appropriated in the City's 2002 budget for similar services range from $2.7 million (general fund only) to $18.6 million (all sources), depending on what services and funding sources are included. Approximately $1.5 million of the 2002 appropriation for these services that did not come from the general fund was provided through the Families and Education Levy, approved by the voters in 1997 and due to expire with property taxes collected in 2004. The measure provides that if the City's general fund appropriations are reduced for four divisions of the City's Human Services Department (the Divisions of Aging and Disability, Community Services, Family and Youth Services, and the Office of Domestic Violence or their successor agencies), then the City may reduce by a proportionate amount its general fund appropriations for childcare and early learning services.