Article by Erik Smith. Published on Tuesday, November 22, 2011 EST.

Governor’s Budget Plan Takes Big Risk – What if Voters Say No?

Gov. Christine Gregoire outlines her budget strategy Monday.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Nov. 22.—Gov. Christine Gregoire says she wants voters to answer a simple question next March – do they think state government is worth half a penny?

            The half-cent sales tax increase is the central feature of the budget plan Gregoire released Monday morning. She’s asking lawmakers to slash spending by about $2 billion when they return to Olympia for their special session next week. Then she wants voters to pass a referendum in March that would raise the state sales tax for three years and keep a quarter of the cuts from taking place.

            Those cuts are so awful, so horrific, so downright damaging to the well-being of Washington that Gregoire says the good-hearted voters of Washington are bound to step up and do the right thing.

            Of course, there’s a bit of risk involved. What if voters decide, on reflection, that state government really isn’t worth half a cent?

            Then those awful, horrific and damaging cuts actually take effect. And by stacking the deck that way, you might say the governor is playing a mighty aggressive game. Gregoire says she’s willing to take the gamble. “I’m asking the people of the state of Washington to stand with me,” she said. “This is the answer that is going to immediately give us the relief to ensure education, public safety and the protection of our most vulnerable.”

Now it’s up to the Legislature to decide whether it likes that bet.

            A Big Buy-Back

            The strategy became clear as Gregoire outlined her supplemental budget proposal Monday. Next week lawmakers are supposed to roll up their sleeves and begin dealing with their $2 billion problem. That shortfall is almost nothing by comparison with the big budget problems the state has experienced since the onset of recession in the fall of 2008. But precisely because lawmakers have been chopping away at the budget for the last three years, cutting desired spending by about $10 billion, and sometimes even cutting actual spending, that last $2 billion is looking like the most difficult cut yet.

            Under the governor’s budget proposal, even the Legislature’s most sacroscanct programs will get the chop – things like the Basic Health Plan, which provides subsidized health insurance for the working poor; and the Disability Lifeline, the state program that provides housing assistance and medical care for the adult disabled. There are more than 160 cuts in all; among the highest profile cuts are a shortening of the K-12 school calendar by four days, a plan to turn prisoners loose early, and another big slash to colleges and university spending.

            All told, the governor is asking the Legislature to pass about $1.7 billion in cuts during the upcoming special session. Another $340 million would be saved through a one-time budget gimmick, by delaying a large payment to school districts by a single day and moving it into the 2013-15 budget period.

            But then comes the redemption. The governor is hoping for about $830 million in new revenue, to “buy back” some of the cuts. Nearly all of that would have to go to voters for practical reasons. Under Initiative 1053, a two-thirds vote of the House and Senate is required for a tax increase, which isn’t possible because of Republican opposition, or else a majority of the public can approve it with a referendum.

Among other things, the governor is proposing to eliminate the sales-tax exemption for non-residents – a big issue in border areas – a new 5 percent “luxury tax” on sales of vehicles over $50,000, and a B&O tax hike for oil companies and financial institutions with “windfall profits.”

But the sales tax is the biggie. It would raise nearly a half-billion dollars.

The increase would also give Washington the second-highest sales tax in the country, at 7 percent, one of five states that charge that rate. Only California is higher, at 7.25 percent. And in some parts of King County, where local sales taxes are the highest in the state, the sales tax rate would hit 10 percent for the first time.

Most Popular Programs at Stake

            The governor’s plan would restore money for school-levy equalization, the program that pumps out money to small and property-poor school districts. It would stave off a proposed 15 percent cut in higher education, keep the K-12 calendar intact, keep the prison doors locked and maintain probation programs. Cuts would be avoided in home-care programs for the elderly and developmentally disabled, thus allowing clients to remain in their own homes.

It’s a simple choice, really, the governor said. “This is not a partisan issue,” she said. “This is an issue about whether we’re going to have a future for Washington state, for the values of our people. It is time for this generation, our generation, to step up and see to it that we do have a future.”

And to those who might quibble that the proposal singles out the state’s most popular programs – the ones with big constituencies that might help work to pass a sales tax increase – the governor said there really weren’t any other options. “I vetted every possible idea,” she said. “This is the single best idea. It’s everybody stepping up and taking ownership of the future of the state of Washington. We’re going to be asked to spend one-half penny to buy a better future for Washington state. I believe my fellow Washingtonians will stand up for that.”

Of course, there were plenty of critics who were willing to call that choice a false one.

            Scream-o-Meter at Work

The way they saw it, the governor’s plan was an obvious ploy to build support for a tax hike. “Education, public safety and services for the most vulnerable are our highest priorities and should not be held hostage in an attempt to extort a tax increase out of the voters,” said House Minority Leader Richard DeBolt, R-Chehalis.

“How can we ask taxpayers who don’t have jobs to pay higher taxes to state agencies that are still giving pay raises to some employees? Why are we raising taxes to avoid a 20 percent cut to senior services when the Department of Ecology has been spared any significant cuts? The governor’s plan reflects a clear difference in budget priorities compared to House Republicans.

“By establishing priorities of government and unleashing the power of the private sector to create jobs, we believe we can balance the state budget without raising taxes on families when they can least afford it.”

Tim Eyman, the initiative promoter who sponsored I-1053 in 2010, said he can’t quibble with the idea of sending a tax increase to the ballot – that’s an option the initiative provided, after all. Democrats can do it with a majority vote, meaning that Republican votes aren’t needed.

            But he pointed out that Washington voters have demonstrated a deep-seated skepticism toward tax increases at a time when many have financial problems of their own. In 2010 they not only said yes to I-1053; they also rejected an income tax and voted to roll back taxes on soda pop. “I do believe the voters were pretty clear last November in saying no to two cents on a can of pop,” Eyman said. “That’s about as no-new-taxes as voters can go.”

Being Honest With the State

At Monday morning’s news conference, the governor said there really are no other options. She noted that the state has not raised the sales tax rate since 1983 – “if you listen to people you would think it was yesterday,” she said. It should be noted, however, that the state collects substantially more than it did in 1983, because even a stable rate generates additional revenue every year as sales increase.

The governor said she doesn’t consider it reasonable for the state to demand further concessions of state employees. She said state employees have already taken it in the shorts during the recession and the state has a “demoralized workforce.” Public employee unions have already rejected her call to renegotiate health benefits, and she said she is unwilling to press the issue.

“This is not about scare tactics,” she said. “I am being honest with people of the state of Washington. I am not misleading, misinforming, distorting or anything. These are the facts. Look for yourself. I have tried to be as transparent as I possibly can.”

            Money for SEIU Initiative

Your support matters.

Public service journalism is important today as ever. If you get something from our coverage, please consider making a donation to support our work. Thanks for reading our stuff.