Article by Erik Smith. Published on Thursday, February 04, 2010 EST.

First Move in This Year’s Budget Debate – Suspends Strict Requirements of Initiative 960

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Feb. 4.—Not that it comes as a surprise to anyone at the statehouse, but the Democrats who control the state House and Senate are getting ready to suspend Initiative 960, the measure that makes it all but impossible for them to raise taxes.

            The move sets the stage for some sort of a tax increase this session, most likely in the hundreds-of-millions-of-dollars range, though the details remain to be determined.

            State Sen. Margarita Prentice, D-Seattle, chairwoman of the Senate budget-writing committee, introduced legislation Wednesday that temporarily suspends the most onerous requirement of the initiative, which requires a two-thirds vote of both houses of the Legislature before taxes can be increased. Because the initiative passed in 2007 – more than two years ago – the Legislature can make changes to it with a simple majority vote.

            “We knew it was going to happen sometime,” said Rep. Gary Alexander, R-Olympia, the Republican point-man on the budget. “From my standpoint, the Democrats want to raise taxes, and this is the first step.”           

Democrats have been warning ever since the session began that they will suspend or repeal the initiative. There’s no way they can deal with the state’s $2.6 billion revenue shortfall without a tax increase, they say, and Republicans won’t give them the votes. Changing the rules is easier – they can do that without Republican help.

            For their part, Republicans promise to put up a fight when the bill comes to the House and Senate floors, even though they acknowledge they don’t have the votes to win. And Tim Eyman, author of the initiative, said the move fuels his effort to pass another version of the same initiative this fall, which would put the rules back in place for at least another two years. But nothing voters do in November could have an effect on this year’s legislative session.

            ‘Straightjacket on our State’

            Democrats have never been fond of the measure. Senate Majority Lisa Brown, D-Spokane, challenged the initiative in court shortly after it passed, arguing that it strips the Legislature’s authority to make decisions by majority rule. Judges disagreed and the measure stayed on the books. Last year the measure had a major effect on debate at the statehouse: As lawmakers grappled with an even worse budget shortfall last year, some $9 billion, tax increases were never considered.

            Democratic leaders were careful to give Initiative 960 no credit for that. They said they simply wanted to avoid raising taxes in the middle of a recession.

            A tax increase may be a foregone conclusion for a variety of political reasons this year, but Democrats this time around say there is another reason to modify the initiative. The measure would prevent them from repealing tax loopholes without a two-thirds vote, they say. One such loophole was expanded dramatically by a state Supreme Court decision last year, granting tax breaks to certain out-of-state wholesalers doing business in Washington. Without closure they say the Dot Foods decision would cost the state over $100 million in the next year.

            But the main reason, Democratic leaders admit, is that they don’t see a way around tax increases. In a statement Wednesday, Brown called the measure “a straightjacket on our state in a time of economic crisis.”

She said, “This is about keeping our commitment to prepare students to succeed in the national and world economy, allow those with affordable health care to keep it, and stay tough on crime by preventing it. The minority will certainly say no to this before they’ve seen even a single detail for how we intend to get this done. I respect their right to do so, I just don’t think their minority say should carry the day in a time of crisis – and I believe the majority of Washingtonians agree with me.”

            A Fight Republicans Can’t Win

Currently Democrats have an unbeatable majority in the Legislature – 61-37 in the House and 31-18 in the Senate. And because Democratic Gov. Christine Gregoire has expressed support for I-960 repeal or suspension, the bill’s passage appears a formality.

Republicans say they will put up a fight anyway: The 960 issue lies at the heart of the argument they are making this year. “It’ll be the first substantive debate on the floor,” Alexander said.

Republicans argue that the state ought to be making deep cuts in ongoing state programs rather than raising taxes. Projections show the state will face another shortfall next year of anywhere from $4 billion to $7 billion, and spending cuts this time around will reduce trouble the next.

The tax-loophole argument doesn’t hold water, they say. They’re just as willing as the Democrats to end tax exemptions that don’t make sense. Republican leaders have called specifically for ending the loophole created by the Dot Foods ruling, for instance. But if Democrats want to pass a broad general tax increase, they aren’t going to get Republican support, said state Rep. Ed Orcutt, R-Kalama, ranking Republican on the House Finance Committee.

That forces Democrats to amend Initiative 960.

“We’ve heard some Democrats say they don’t know if they have the votes for it,” he said. “Well, of course they’re going to vote for it.”

            Officially a ‘Temporary Suspension’

In an official sense, Senate Bill 6843 does not repeal Initiative 960. Instead it ‘temporarily suspends’ the two-thirds vote requirement until July 2011. Although the measure technically would be reimposed at that point, the Legislature could always pass another bill suspending the rule at that time.

The measure also makes permanent changes to the initiative. The bill:

n                  Changes the definition of ‘increasing taxes’ to exclude changing or repealing tax preferences, or changes to the law designed to ‘fix’ court decisions that reduce revenue.

n                  Eliminates public-notice requirements when bills raising taxes are introduced.

n                  Eliminates a requirement for a 10-year cost projection when tax increases are analyzed by legislative staff. The requirement would be reduced to six years.

n                  Eliminates a requirement for a public advisory vote when taxes are raised.

Sponsors maintain that the requirements were unwieldy. The public notice requirement, for instance, applied to all bills filed in the Legislature, even though only a small percentage of them pass. They note that other means exist to track legislation. Long-term projections involve too much guesswork, they say, and they maintain a public advisory vote would only confuse voters. People might think they were voting on a referendum to repeal taxes.

            He’ll be Back

Eyman, the initiative’s sponsor, said the move against 960 isn’t exactly a shock, but called elimination of the public-involvement provisions “galling.”

Eyman said, “I don’t think they’re going to be able to justify with a straight face taking away the ‘transparency’ requirements,” he said. “Taking away the two-thirds vote – well, we expected that. But this is really a jettisoning of all of 960’s provisions.”

Eyman, who has made a career of initiative campaigns, already has gone to the secretary of state’s office to file his Initiative 1053, which would restore 960. Petitions will be mailed to supporters on Friday.

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