Article by Erik Smith. Published on Monday, January 09, 2012 EST.

The Nastier it is, the Better the Chance for a Tax Increase – and a Jam-Packed Agenda Raises Doubts That They Will Finish Within 60 Days

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Jan. 9.—Lawmakers return to the Capitol today for a session in which, as always, the budget is the central issue. But this time with a twist.

            They’re hoping it will be awful – awful enough to convince voters to undo much of their work. If they do their job well enough, they might be able to convince voters to pass a tax increase.

            And that’s just the start of the fun. It was supposed to be a simple session, or at least Gov. Christine Gregoire said so a couple of months ago when she tried to set the agenda. But since then the Legislature’s program has been jammed with other issues – gay marriage, marijuana, transportation, a billion-dollar-or-so bond issue and talk of big reforms in state government spending. Possibly even an effort to rewrite a green-energy initiative voters passed in 2006 – an effort that when last tried, back in 2009, brought the Legislature to a standstill. Only the bravest of souls expect lawmakers to wrap everything up in the allotted 60 days.

            This year’s legislative session is really the second round of a lawmaking season that began Nov. 28, when Gregoire called legislators back for a special session. At that point they faced a $2 billion nightmare, thanks to a sluggish economy and tax-revenue projections that proved too optimistic. Lawmakers must rewrite the $32 billion two-year budget they passed last spring. They managed to whittle down the problem by about a half-billion dollars last month, by making a few easy cuts, shifting money between accounts and adopting a few budget gimmicks that push some expenses into the 2013-15 budget. But the most daunting part of the job remains.

            The remaining $1.5 billion budget gap must be closed by either tax increases or budget cuts. Actually, the way things are supposed to work, lawmakers will be trying both.

            As Awful as They Dare

            The foremost task before the Legislature this year is to write an awful budget – a spending plan so nasty and so draconian that voters will be impelled to vote for whatever tax increase the Legislature chooses to put before them. The game-plan, as explained by the governor and the majority Democrats in the Legislature, is for lawmakers to pass an all-cuts budget and then seek voter approval for a tax package, possibly as early as April. Their approval is required because of Initiative 1053, passed by the voters in 2010. It requires a two-thirds vote of the Legislature for tax increases, and that just isn’t going to happen, because minority Republicans are unwilling to provide the needed votes. But the measure also allows a tax package to be placed on the ballot with a simple majority, and Democrats at least technically have the votes for that.

            The governor is proposing a temporary half-penny sales-tax increase, a move that would raise a half-billion dollars. She says lawmakers won’t have any trouble writing an awful budget. That’s about the only option the state has at this point, she says. Some of the state’s proudest social service programs have to go, and big cuts are coming for K-12 education and the state’s colleges and universities, the latter of which have been particularly hard-hit in previous rounds of cuts.

             “I refuse to accept that the state of Washington is going to cut the legs off public safety or protecting its most vulnerable,” she says.

            “We are going to turn to the citizens now and ask whether they are willing to step up. I believe they will.”

            Brave words, given the fact that voters’ pocketbooks are just as pinched as the state’s, and that they rejected taxes with three separate ballot measures in 2010.

            What if Voters Say No?

            The biggest question right now is how awful does the Legislature dare make it? Part of the idea is that the tax hike would be designated to restore specific programs. But there’s the chance voters will say no. So it’s really a gamble. For instance, basic education is arguably the state’s most popular program, but do lawmakers dare risk putting it on the chopping block?

            “There is a lot of discussion about not including basic education in that package,” says House Speaker Frank Chopp, D-Seattle. “We don’t want to desolate basic education, leaving it out there hanging for a public vote, but there are other things the state government does that could potentially be part of that referendum. It is also important to figure out what those are by figuring out what will be the most logical.”

            It’s all a game, really, says House Minority Leader Richard DeBolt, R-Chehalis. To pass a tax hike Democrats have to identify something awful enough to convince voters to say yes. Maybe something involving children, the sick, or the elderly. “They’ll try to put the vulnerable on the ballot so that people are more likely to vote for it,” he explains.

            DeBolt’s House Republicans have another idea. They advocate a second measure that would appear on the ballot at the same time, one that would raise roughly the same amount of money without a tax increase.

It would include the electronic-gambling proposal that has been put forward by the Recreational Gaming Association, which would allow non-Indian cardroom operators to offer the same type of ersatz slot machines now permitted in Indian casinos. The state doesn’t get a cut of Indian gaming revenues, but it would make millions from the cardrooms. The idea doesn’t sit well with Democrats, who call it an expansion of gambling – though it should be noted the tribes are among their biggest supporters. However, gambling by itself wouldn’t raise enough during the current budget period to do the job.

Still, DeBolt says Republicans would be willing to help with the tax referendum if an alternative is placed on the ballot. “If you let the people choose, they’ll choose not to raise taxes,” he says.

            Reforms Before Revenue

There’s a lot more to the debate – and it is clear that it is going to become awfully complicated, awfully fast. One big problem is that the way things are going, the current awfulness is just the beginning. Moderate Democrats – the so-called “Roadkill Caucus” – note that the state’s long-term spending plans will put Washington right back in the same mess next year, and things will just keep getting worse. That’s because projected spending will increase faster than tax revenue.

“If voters are going to be asked for more revenue, they need to know that our house is in order first,” says state Sen. Jim Kastama, D-Puyallup.

So the middle-of-the-road Democrats are saying they want to see big reforms in long-term spending plans before they’ll provide the votes for the revenue package. If they work with Republicans, they have the power to insist. At this point it isn’t clear what they mean. But among other things, it could involve repeal of Initiatives 728 and 732, the costly class-size and teacher-pay measures passed by voters a decade ago. Another idea – repeal of the $8 billion education reform bill passed by the Legislature in 2009 – appears to have been scotched by a Supreme Court ruling last week that declared it central to the state’s constitutional obligation to fully fund basic education.

            Discontent on the Left

Making matters even more complicated is the fact that not everyone agrees even on the taxes that ought to go before voters. Advocates for social-service programs, labor interests and others – under the banner of the “revenue coalition” – say a general sales tax increase is unfair to the poor. They’d rather see a crackdown on corporate tax breaks. “All the programs we work with are held under a microscope because they are government programs,” says spokesman Nick Federici. “I have yet to see a $100 million tax exemption going through the same scrutiny that a single mom on welfare has to go through or a kid on a subsidized lunch program has to go through.”

But switch from a sales tax increase to an attack on specific businesses and you’re bound to see them fight back. Association of Washington Business president Don Brunell takes pains to point out, contrary to many press accounts, that his organization has not taken a position on a tax increase. He notes, however, that if taxes are aimed at specific targets, they might just defeat them – as happened in 2010, when the soda-pop industry and targets of a high-earner income tax won at the polls. “Whatever they do, they have got to have some momentum going forward so that when it does hit the ballot it is going to pass,” he says.

            Sideshows Galore

And that’s just the main event. There are plenty of sideshows this year – among them one brought to the stage by the governor herself, a proposal that would make Washington the seventh state to legalize gay marriage. It’s the kind of debate likely to shut down the Legislature for days.

There’s marijuana – in the form of a legalization initiative, I-502, which has been submitted to the Legislature. If lawmakers fail to pass it, the measure moves to the ballot in November.

There’s a bonding-for-infrastructure proposal backed by labor and the Association of General Contractors, and a proposal for a gas-tax increase for highway construction. Both of which are likely to provoke a debate about job creation.

There is talk of amending I-937, the measure that requires utilities to purchase a steadily rising amount of power from costly green sources, whether they need it or not. That question by itself has stymied the Legislature for years.

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