$2 billion short, state will find tax talk hard to avoid

OLYMPIA — Faced with a multibillion-dollar deficit, Gov. Chris Gregoire and fellow Democratic lawmakers will likely be unable to avoid a very unpopular topic next year: taxes.

Though the governor and legislative budget-writers are not bringing up the subject, they expect others will argue taxes must climb to help plug a $2 billion hole that’s appeared in the state budget since May.

“I think absolutely we should,” said Jeff Chapman, research director for the Washington State Budget and Policy Center and a member of the governor’s council of economic advisers. “We just cannot afford to make another $2 billion cut out of state government.”

Yet that is what Gregoire will do in the budget proposal she’ll send to the Legislature next month. Under state law, it must be balanced without relying on new revenue.

She said Monday she will hack funds from some programs and others, such as the nationally recognized Basic Health Plan, which provides state-subsidized medical coverage for the poor, “are on the table” for elimination.

It’s a “formidable challenge” because after cuts made last year there are not many places in government where large chunks of savings can be found.

In the 2009 session, the Legislature faced a $9 billion shortfall and filled in with a blend of $3.6 billion in spending cuts — most of which were in education, health care and human services — plus $3.8 billion in federal stimulus aid and about $2.5 billion in transfers from reserves and other funds.

Since May, projected revenues have dropped and government costs have risen to create the latest deficit of $2 billion. It could climb higher Thursday when the next revenue forecast is released.

Gregoire said she’s “focused on how do I cut” and has not deliberated on any revenue-raising ideas.

For those who are, the list of ideas is topped by a carryover from 2009 that would raise the sales tax statewide and give a rebate to those with lower incomes who qualify for a federal earned income tax credit.

Several Democratic lawmakers tried unsuccessfully to get a measure boosting the sales tax by a third of a penny onto the Nov. 3 ballot. That increase would have raised an estimated $242 million a year for health care and human service programs.

If it comes up again, legislators could bypass the ballot. They could enact it themselves if they first suspend Initiative 960, the voter-approved measure requiring such increases be put to a vote.

Adam Glickman, public affairs director for the Service Employees International Union 775, said lawmakers need to consider raising revenue along with erasing tax loopholes and improving how services are provided.

“I don’t know that there is a magic bullet. I don’t know that there is one proposal that will solve the problem,” Glickman said.

“We need to look at all the options,” he said, “so we don’t further decimate our school system, our health care system and our safety net for seniors and the disabled.”

Rep. Mark Ericks, D-Bothell, who is vice chairman of the House Ways and Means Committee, said the Legislature tried to “spread the pain” last year by paring a little from everywhere. Now they must look at mothballing entire programs.

“From my perspective, that is what we have to do,” he said. “That won’t make some people happy but that is what is ahead for us.”

No one’s talked to Ericks about hiking taxes. Nor does he think it’s a panacea.

“Where’s that tax that people would raise that would temporarily increase our revenue to get us over the hump? I don’t see it,” he said. “The whole issue about the tax is a red herring.”

Rep. Barbara Bailey, R-Oak Harbor, a member of the House Ways and Means Committee, said she expects that a statewide tax hike will be discussed and leaders of the majority party will try to keep it from happening.

“It’s going to be an election year. I just don’t think the majority party is willing to go out there with a tax increase they want to impose on the people,” she said.

Instead, they may allow higher fees and other “hidden taxes” to help agencies recoup some of the funds they lose, she said.

There will be pain, she said. Democrats could have lessened it had they been tough enough to make deeper cuts last year, she said.

“They should have ripped the Band-Aid off rather than do this slow, agonizing peel,” she said.

Reporter Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com

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