Is a state budget deal imminent? Apparently not

OLYMPIA — It didn’t take long Friday for a bubble of optimism about a budget deal to be burst, stoking concern about a possible partial government shutdown in 10 days.

House Democrats had expressed a willingness to drop their demand for a capital gains tax, and gleeful Senate Republicans said that should make it easier to resolve a roughly $300 million difference between the two chambers’ budgets.

And Gov. Jay Inslee, in a morning news conference, suggested closing tax exemptions as the best way to generate the “modest amount” of additional revenue needed for a compromise.

“We need to get this done and we need to do it soon,” he said. “There is no reason, zero, why we can’t have a budget done in one week.”

The Senate’s lead budget writer echoed that sentiment in a celebratory press release.

“With new taxes off the table and a commitment to reducing tuition to make college affordable again, we should be able to work through the weekend to reach a final resolution,” said Sen. Andy Hill, R-Redmond.

Only one problem: House Democrats said neither claim is true.

“It is an out-and-out mistruth which I don’t understand,” said House Majority Leader Pat Sullivan, D-Covington. “There is no agreement on tuition reduction. There is no agreement on taxes. I don’t get it.”

He said that dropping the capital gains tax is contingent on Senate Republicans agreeing to raise revenue by eliminating tax breaks or “closing loopholes,” which they have yet to do. As for lowering tuition, it is in negotiation, he said.

Hill said at a news conference that his caucus is open to closing exemptions, but he, like Inslee and Sullivan, didn’t say which ones might win support in both chambers.

Earlier this year, Democrats proposed ending the sales tax exemption for out-of-state residents and collecting the sales tax on bottled water. They’ve also wanted to eliminate a tax break for oil refiners.

So where does that leave the Legislature as the countdown to a July 1 shutdown of government continues?

Negotiators from the House and Senate are working through the weekend, exchanging offers on how much to spend in the next two-year budget, where those dollars will be spent and where the money will come from.

Unless a budget is signed into law by midnight on June 30, most agencies will have no legal authority to expend tax dollars starting July 1.

Thirty state agencies would close completely, and an estimated 26,000 workers would be laid off until a budget is in place, according to the state Office of Financial Management.

On Friday, 35,000 parents in job-training programs were being notified there won’t be day care for their children if there’s no budget. Notices also began going out to state workers. Vendors have already been told they might not be paid when the new fiscal year starts.

Inslee called on lawmakers to find the middle ground swiftly and avoid a government shutdown. Democratic and Republican leaders, who also held news conferences Friday, voiced confidence they will reach agreement in time just as they did in 2013. That year the deal got struck June 27.

Here’s where the situation appeared to stand Friday:

The two chambers still haven’t settled on a level of spending.

House Democrats, whose original $38.9 billion spending plan assumed money from a capital gains tax and higher business taxes, are now offering to spend $38.2 billion without those taxes.

Senate Republicans, whose $37.9 billion budget had no taxes but several hundred million dollars in transfers, are still at about that same level.

Two of the bigger differences in terms of spending involve teacher pay and college tuition.

House Democrats want to award teachers the same 4.8 percent pay hike that state workers are likely to receive. Senate Republicans are supporting a 3.2 percent cost-of-living adjustment required under voter-approved Initiative 732. That difference adds up to $154 million in the next budget.

On tuition, Senate Republicans want to reduce tuition by 25 percent, and House Democrats want to freeze it at the current level. The cost to lower it is $245 million in the biennium.

Meanwhile, lawmakers also are trying to pass a capital construction budget and a multibillion-dollar transportation package. House Democrats withdrew from negotiations of those until the government operating budget is worked out.

Saturday is the 22nd day of a second special session. Members of the House and Senate are expected in Olympia by the middle of next week in anticipation of votes on budget bills.

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

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