Lawmakers weigh options for state budget, tax increases

OLYMPIA — Gov. Chris Gregoire is hoping to nudge lawmakers closer to an agreement on tax increases to patch the state budget, outlining revenue options that don’t include a general sales tax hike — the major sticking point between House and Senate negotiators.

Gregoire has opposed a general sales-tax hike as part of the Legislature’s solution to a $2.8 billion deficit in the state’s budget, worried that it could weigh down the nascent economic recovery.

Lawmakers are targeting about $800 million in tax hikes to help close the deficit, but majority Democrats in the House and Senate differ over how to build such a package.

The House Democrats share Gregoire’s dislike of a general sales tax, favoring a menu of targeted tax hikes and shrunken tax exemptions. Senate Democrats included a temporary, three-tenths of a cent sales-tax increase in their revenue package.

Both sides appeared to be holding firm Wednesday, the third day of a special session that could last up to a month.

“They have a group of people who don’t want to do the sales tax, we have a group of people who don’t want to do a menu of individual taxes,” said Senate Democratic Caucus Chairman Ed Murray, D-Seattle. “We’re both on the edge.”

Gregoire said she hasn’t used the threat of a veto to nix a sales tax during revenue negotiations. But the second-term Democrat made clear that she’s keeping the veto pen at hand if needed.

“That’s an option that I’m holding right now,” Gregoire said Wednesday. “I’m just trying to work both sides, so that they can work together and come to a resolution. So, what they have before them is a way to raise sufficient revenue without a sales tax.”

Gregoire declined to reveal any additional details of her revenue proposal, which was presented to tax negotiators Wednesday. Legislative leaders also refused to talk about the offer, saying their caucus membership needed to be briefed.

The apparent slow pace of revenue negotiations could force the special session to drag on longer than the week Gregoire requested when calling lawmakers into an overtime period, which began Monday.

Murray predicted that lawmakers may need a few days next week to finish a tax-and-spending plan, in part because of sheer logistics.

“Once we reach agreement, staff has to write it, it has to be printed, and that by itself takes three to four days,” Murray said.

Negotiators said they are getting closer to solving the spending side of their task — a revamped budget for the state’s main checking account through June 2011. The roughly $31 billion budget, originally written during the winter, is projected to be about $2.8 billion in the red because of lower tax collections and higher government costs.

Democrats are working to patch the budget hole with a mix of spending cuts, tax increases and one-time fixes, such as fund transfers and federal money. They couldn’t get the work done in the short, 60-day election-year regular session mandated in the state constitution, forcing an overtime period.

“The operating budget negotiation in some ways is easier to do, because we don’t have huge, substantive differences,” said House Majority Leader Lynn Kessler, D-Hoquiam. “Sales tax versus no sales tax is a very substantive difference.”

Minority Republicans continued a steady drumbeat of criticism over the Democrats’ management of this year’s legislative work.

Sen. Mark Schoesler, R-Ritzville, said majority Democrats haven’t accomplished much since the special session started Monday. He pointed to the lone bill approved by the Senate on Wednesday: a resolution honoring the living computer museum.

“How many days do you spend doing the dance without producing any results?” he asked.

Associated Press Rachel La Corte contributed to this report.

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