Gregoire budget proposes fuel tax to help school transportation

Gov. Chris Gregoire outlined a package of budget cuts and tax increases Tuesday that will shape discussions next month when a sharply divided Legislature convenes and a new Democrat, Jay Inslee, takes over as state government’s chief executive.

Gregoire’s two rival plans, which drew a mix of kudos and criticism, included a no-new-revenues option that cuts more deeply than she wants but bridges an expected $975 million shortfall in the 2013-15 budget cycle.  

The other plan would raise numerous taxes and make budget cuts, while ponying up some $1 billion in new spending for K-12 schools in response to a Supreme Court ruling on the inadequacy of state funding.

“The facts are, we can, we do, live within our means. But we need revenue if we are going to meet our constitutional and moral responsibility to fund education,” Gregoire said in announcing her Book I and Book II budgets. “The Book II budget does invest in our future.”

The new-tax options are likely to hit many political obstacles — and not just from Inslee, who ran on a no-new-taxes platform. There is a pretty solid wall against taxes in the Senate, where the chamber is evenly divided and the two parties are struggling for control. A tax-control initiative that passed in November requires two-thirds of lawmakers to approve any tax hikes.

Sen. Andy Hill, a Republican lawmaker who hopes to take over the Ways and Means Committee with the help of two Democratic senators, said his coalition assumes “additional taxes are not an option.”

House Republicans also are skeptical, and Rep. Gary Alexander, R-Thurston County, said “the fact that her budget increases spending by about $3 billion and includes around $1.2 billion in new taxes leads me to believe her proposals are dead on arrival.”

But Rep. Ross Hunter, chairman of the Appropriations Committee in the Democrat-controlled House, thinks Gregoire’s second budget recognizes “the structural need to have revenue” beyond what the current tax laws allow.

“She put a lot of good, useful thought into this,” Hunter said, adding that she nonetheless might have underestimated the amount of money needed to meet the state Supreme Court’s demands for K-12 education funding by $500 million.

Gregoire insisted in a news conference that her plans — which include continuation of a service-business tax surcharge and continuation of a fee paid by hospitals — are consistent with Inslee’s positions on not adding taxes. Hunter said he thinks continuing a tax is not the same as adding one.

Inslee’s transition office spokesman, Sterling Clifford, put out a statement that didn’t make clear how Inslee will come down.

Inslee plans during the session to “lay out his own budget priorities that reflect his vision for state government and his commitment to create a lasting economic recovery with secure jobs for Washington’s middle-class,” Clifford stated.

Among the highlights of Gregoire’s plans:

• Her Book I proposal would make do with existing resources and make cuts of $52 million to higher education and $100 million to levy aid for tax-poor schools; scuttle K-12 teacher pay raises; and curtail the State Food Assistance program.

• Her Book II plan would raise $1 billion in new revenues to reduce class sizes in grades K-2; speed the phase-in of all-day kindergarten statewide to cover half the state’s children; add to professional development for teachers and principals; boost funds for maintenance and classroom supplies; and fully fund school transportation.

Among the Book II plan’s spending elements:

• A $3.4 billion increase in spending for a total general-fund budget of $34.37 billion that includes $1 billion in new revenues, $882 million in reserves (including the rainy-day fund) and $557 million in reduced spending. The reductions include $57 million in liquor revenue and other funds for cities and counties.

• The spending cuts also include $140 million in savings from expansion of Medicaid under terms of the Affordable Health Care law, which is not a reduction in services but a shift of payments from the state to the federal government. This is the result of fully expanding Medicaid, granting new coverage to 255,000 more low-income people.

• Funds are included to cover labor contracts Gregoire negotiated with more than two dozen state government unions. There also is money to erase a reduction in funding for K-12 teacher pay and to increase the state contribution to K-12 workers’ health care insurance costs.

• Gregoire again is asking lawmakers to suspend Initiative 732’s automatic cost-of-living raises for K-12 and community college employees, saving $360.3 million.

• Nearly $19 million is provided to state parks, which she said need additional money to sustain operations.

Gregoire also is asking for new revenues:

• Legislative approval is sought for $125 million in new taxes on junk food, including a 0.19-cent-an-ounce tax on soda pop and sales taxes on candy and gum. Gregoire would devote the money to fund $125 million in pay increases for home-care workers that an arbitrator awarded to members of the Service Employees International Union 775 Northwest. However, her plan falls short of covering all home-care workers, and it depends on the union to push for the tax.

• Repeal is sought for a fuel-tax break worth $62.6 million in the budget cycle, and Gregoire said the tax break mainly benefits oil refineries. Oil interests contributed heavily to Tim Eyman’s successful ballot initiative that requires a two-thirds vote to approve such tax increases.

• A temporary business-occupations tax surcharge of 0.3 percent on service businesses is sought for another three years; a similar tax is scheduled to expire June 30 but would raise $534 million over the first two years if it is extended.

• A temporary beer-tax increase of 50 cents per gallon on name-brand brews is sought for another three years, raising $101 million over the first two years.

• A new excise tax on the wholesale cost of gasoline and diesel fuel is proposed to raise $368 million in the first biennium and more than $940 million in the 2017-19 biennium — all of it devoted to pupil transportation in K-12 schools.

• A hospital fee enacted in 2010 would be continued in order to qualify the state for $276 million in additional matching Medicaid dollars for health care.

Gregoire also is proposing two-year budgets for transportation and capital-construction projects, which she said together “create or sustain more than 50,000 good-paying jobs.”

As part of the capital budget, Gregoire wants to invest $501 million into the cleanup of Puget Sound (some money also comes from transportation and other budgets). Gregoire said the long-fingered inland sea drives $20 billion in economic activity in the state.

Gregoire has said work to clean up Puget Sound fell short of her goals during the Great Recession, calling it her biggest regret as governor. She called her new request for Puget Sound “the largest appropriation yet for this critical work to serve our future and create a fishable, swimmable, dig-able Puget Sound.”

The budgets also have funds to continue work on flood control in the Chehalis River basin and money for taking water policies the next step in the Yakima River basin.

Brad Shannon: 360-753-1688
bshannon@theolympian.com
@BradShannon2
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