State Reps. Charles Ross, Bruce Dammeier, Barbara Bailey, Gary Alexander and Maureen Walsh announce their ‘shadow budget’ Friday.

OLYMPIA, Feb. 20.—Minority House Republicans released a ‘shadow budget’ Friday to show the Legislature that it can balance the budget without a tax increase, but events already may have overtaken that idea. And it may show that if the big battle of the next couple of weeks isn’t over taxes, it may be over the amount of money the state leaves in the bank.

The Republican proposal Friday offered, as expected, a way to close the billion-dollar hole without new revenue, either by raising taxes or borrowing against the future. “We would like to show everybody, including Democrats, that it can be done without a tax increase,” said state Rep. Gary Alexander, R-Olympia, the House Republican lead on budget issues.

The Republican plan does exactly that. It puts a high priority on K-12 and college education, cutting other programs, requiring more furloughs for state employees, and giving most state programs a 5-percent haircut. While it provides an alternative to new revenue, the GOP plan also may be answering a question that has already been answered – can a tax increase be avoided? Big news from a pair of budget forecasts last week has dumped an additional $400 million or so in the Legislature’s lap. That makes it possible for the majority Democrats to do without it.

Washington will find out in coming days whether House Democrats will chuck the tax-increase idea. They will announce their own budget proposal shortly, most likely this week.

But the House Republican proposal may offer a hint of what the new battleground may be. Their plan would leave a $650 million reserve, enough money to provide a cushion for the state if the economy tanks again. Will the Democrats do the same?

No Chance of Passage

Not even the Republicans suggest that their budget proposal has any chance of passage. They are in the minority in the House and the Senate, and a Democrat sits in the governor’s mansion. But they say they offered their plan because they wanted to do something more than complain. “For years, being in the minority party, we have been asked what would you do?” said House Republican floor leader Charles Ross, R-Naches. “Instead of just sound bites and talking points and those kinds of things, in fairness, that’s what Gary and the Ways and Means Committee have gone to describe.”

The Republican budget plan is a detailed proposal that goes beyond the “education budget” they released at the beginning of the month. The $1.6 billion spending plan gives a trim to the 2011-2013 budget lawmakers passed last spring, and which was thrown out of whack by an economy that stubbornly refused to rebound.

Highlights include spending reductions of $839 million, while retaining most spending on education programs and social programs for the most needy. That provides a contrast with the governor’s proposal, which took cuts in all areas.

A Matter of Priorities

There are some ideas that might be hard for Democrats to swallow. Republicans would slash 51 state programs, including the Basic Health Plan, which provides subsidized health insurance for low-income Washington residents, and the “Disability Lifeline,” a program that provides medical assistance and housing vouchers for unemployable adults. And they would require state employees to take 24 unpaid furlough days over the coming year – a suggestion that is bound to raise the hackles of state employee unions.

But Alexander said it is all a matter of priorities, and the Republican plan ought to be seen as an alternative to the half-billion-dollar sales tax increase that has been proposed by the governor. Voter approval would be required for that measure.

“We’ve said from day one that before there is any talk of a huge sales tax increase, there needs to be a discussion and a focus on state priorities – the core services of government,” Alexander said. “I don’t know if that has happened in the other caucuses, but I know our caucus spent countless hours during December’s special session and earlier this session developing our priorities and specifically defining each one.

“This budget is a direct reflection of that effort. It is an all-priorities budget that funds the core services of government, which we believe are education, protecting the public, and protecting the most vulnerable. And we do this with no state sales tax increase, no bonding, no securitization and no budget gimmicks.”

Reserve is Central Question

If that tax-hike idea is losing steam, the reserve has become a bigger issue – and it is one that dictates the course of the session. Maybe the next one, too, and many more to come.

The idea is that the state generally wants to leave some of its projected tax revenue unspent, just to be on the safe side. Over the last three years, as the economy has bounced along at the bottom, that budgeting tactic has proven important. Turned out the state needed every dime and then some.

Tax revenue and caseload forecasts from last week essentially reduced the size of the state’s budget problem to about $1 billion. But that billion-dollar figure assumes that about half of the money would be left unspent, as a reserve.

The governor has proposed a reserve of $600 million; the Republicans, $650 million.

But if Democratic budget-writers leave no reserve at all, they could get by with about a half-billion dollars in cuts, call it good and go home for the year. By doing it that way, they could duck all this year’s talk of big-picture reforms, and avoid making controversial changes to things like pension policy and K-12 health benefits. They might even finish their session by the scheduled ajournment date on March 8.

The downside is that next year they’ll be back dealing with exactly the same problem. If they don’t fix things this time around and bring spending plans in line with tax revenue, projections indicate they will face more shortfalls just like this one – perhaps as much as $2 billion next year, and many more to come.

There is short-term risk as well. Last week the state’s top economist, Steve Lerch, interim director of the state Economic and Revenue Forecast Council, said there are many uncertainties that cannot be measured his latest revenue forecast – the European debt crisis and many others. He offered a statistical way of looking at it: If the forecast is wrong, there is an 80 percent chance the numbers will be worse, and only a 20 percent chance they will improve.

No Chance, Hunter Agrees

House Ways and Means Chairman Ross Hunter will formally get the ball rolling on the budget debate when he unveils his proposal. He said it will most likely be released early this week, but told reporters that nothing will be announced until House Democrats are convinced they have 50 votes for it.

The Senate Ways and Means Committee will follow shortly after that.

In the meantime, of course, the Republican proposal is D.O.A.

“A lot of work goes into producing a budget, and I know [Alexander] took the process very seriously,” Hunter said in a statement. “However, the hardest part of any budget isn’t writing one that balances. It’s writing one that the majority of legislators in the House and Senate can agree on. I don’t think this proposal meets that challenge, frankly.”

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