Created in 2005, the Education Legacy Trust Account (ELTA) supports educational priorities in Washington state, including early learning and child care. ELTA originally prioritized K-12 schools and access to higher education, but Washington’s legislature added early learning and child care as temporary allowable uses in the 2015-17, 2017-19, and 2019-21 Biennia, before permanently adding these uses through the Fair Start for Kids Act in 2021.
ELTA was originally funded by estate and cigarette taxes but is now funded by a 7% excise tax on capital gains over $262,000 (that is, gains generated from the sale or exchange of long-term capital assets). This tax was authorized by the state legislature in 2021 and went into effect in 2022. The revenue it generates — which came to just under $900 million in 2023, the first year of collection — is distributed through ELTA according to a formula set by statute. It includes a $386 million appropriation to the state’s Department of Children, Youth, and Families (DCYF) in the 2023-25 budget.
DCYF’s ELTA appropriation supports early learning by funding portions of the Fair Start for Kids Act that were previously funded by federal stimulus dollars. This includes funding for the Working Connections Child Care and the Early Childhood Education and Assistance Program (ECEAP), the state’s child care subsidy programs. The funds are allocated for expanding income eligibility and reducing family copayments for Working Connections, increasing child care provider rates, enhancing the rate for infants, and covering other costs to DCYF for implementing the Fair Start for Kids Act.
The capital gains tax has survived notable pushback, including a 2022 lawsuit challenging the tax’s constitutionality brought before the Washington State Supreme Court. It also survived a 2024 ballot initiative to repeal it, spearheaded by hedge fund manager Brian Heywood.
Sources:
Washington State Budget and Policy Center. (n.d.). Washington state’s capital gains tax boosts investments in kids from Omak to Ocean Shores.
Start Early Washington. (2024, July 24). The Education Legacy Trust Account, Capital Gains and Early Learning in Washington State.
Washington State Department of Revenue. (2024, January 17). Capital Gains Excise Tax generates $896 million for education, school construction.
Blanford, Stephan. (2022, March 24). Big Win for Washington Kids and Families! Court Upholds Capital Gains Tax. Children’s Alliance.
Washington State Legislature. (2024). Chapter 82.87: Capital Gains Tax.
Connections to Key Early Learning Study at Harvard (ELS@H) Findings:
Stable, robust funding is essential to expanding and improving early education. Unlike K-12 education, early education has historically been supported through a fragmented – and largely insufficient – set of federal, state, and local funds. Research suggests there is a need for more accessible, affordable, and high-quality approach to early education across the mixed-delivery system – and for better financial and professional supports for the educators who serve children and families each day; creating dedicated funding streams can therefore help states and cities address these needs and achieve these goals.
Findings from the Early Learning Study at Harvard (ELS@H) show:
- Families rely on a range of formal (e.g., Head Start, center-based care, public pre-K) and more informal (e.g., home-based, relative care) early education settings; when choosing a setting for their child, families balance many logistical constraints and personal preferences.
- But for many families – and especially low- and middle-income families – early education choices remain tightly constrained due to issues of affordability and supply.
- No one early education setting type is inherently of higher quality than another; children develop and learn well in every setting type, and in the study, all setting types showed room to grow in quality. – Early educators play a critical role in supporting the well-being of young children and families across setting types.
- Yet their pay, benefits, and other professional supports are often inadequate in light of the job demands and their cost of living.