Budget plans ready to go

Top Democratic negotiators struck final deals on an operating budget and a capital-construction plan Sunday, paving the way for quick votes that could end the special session as soon as tonight.

“We have agreements. We have go-home plans, maybe as early as tomorrow,” Senate Majority Leader Lisa Brown said early Sunday evening.

The deal, which House Speaker Frank Chopp confirmed, relies on about $794 million in new revenues to balance a $2.8 billion budget gap for a roughly $30.6 billion operating budget. The budget also leaves nearly $500 million in reserves and uses about $500 million in federal Medicaid-related aid, according to Brown.

The House voted to approve the largest piece of the revenue package Saturday on a 52-44 vote. The Senate would follow suit today or Tuesday – when some of its missing Democratic members return to the Capitol to provide the crucial 25th vote needed for passage.

The tax package includes a $1 per-pack increase on cigarettes; a temporary sales tax on bottled water, candy and gum; and a temporary tax on soda pop amounting to 2 cents per can. The tax plan also adds a three-year surcharge of 0.3 percent to taxes on service businesses including lawyers, accountants, real estate businesses and hairdressers that now pay 1.5 percent on their gross sales.

The tax agreement also has tax credits for candy companies, awarded on a basis of jobs, and a doubling in the business tax exemption for small businesses.

Majority Leader Brown and Speaker Chopp, both Democrats, met with Gov. Chris Gregoire and reported their breakthrough on the budget Saturday afternoon. “She was very happy,’’ Gregoire’s legislative director Marty Brown said.

Republicans have uniformly opposed the tax increases. They also have been sharply critical of the majority party for its slow work on a budget and revenue package, which forced the Legislature into a 30-day overtime session after the Democrats failed to complete their work in the regular, 60-day session that began Jan. 11.

The budget deal was reached in the morning, and the capital budget in the early afternoon.

Sen. Ed Murray, the Senate Democratic Caucus chairman and revenue negotiator, said the budget deal includes hundreds of millions in spending cuts in virtually every area of government. He said that the cuts, when added to cuts authorized in 2009, would total $5.1 billion for the biennium – which he said is much larger than the tax increases, some of which are temporary.

Murray contended that the government-sector job losses from the two-year rounds of cuts could exceed 10,000.

Final details of the budget will be released today. Despite the prospect of additional job cuts, Murray confirmed there is better news for state workers as a result of the Senate moving to the House position on employee health care benefits. This was one of the major sticking points in budget talks since lawmakers hit their stalemate over taxes and the budget in March.

The House approach required $65 million in new subsidies from the state general fund for state government employees’ insurance costs. That is about three times what the Senate originally wanted to provide and would, according to past estimates by budget writers, raise the state’s monthly contribution for insurance to about $863 per month per worker (the Senate wanted to limit that to $795; last year lawmakers agreed to contribute $768 in 2011).

The Washington Federation of State Employees has said higher contributions are in order, because last year’s budget put in too few dollars to cover inflation. This led to a raiding of reserves in the public employee insurance fund and at the same time a $1,100 increase for state workers in their out-of-pocket costs for health care.

Going with the Senate position would mean another $1,100 hit to workers in 2011, federation leader Greg Devereux said last month.

One key to getting agreement on health care payments was the Senate’s final approval Saturday of a furlough bill that requires roughly one-fourth of the state government work force to take one day off from work each month through June 2011.

Individual agencies are given a chance to come up with alternative plans for reducing payroll by a total of about $45 million for general fund staffing. But the mandatory days off are the default if no agreements are reached, according to Senate Bill 6503. The measure is on its way to Gov. Gregoire for signing.

The furlough bill specifically exempts workers in public safety roles such as prison staffers, state troopers, and the Department of Health. It also exempts revenue-collecting agencies, state-run liquor stores, and classroom staff in colleges.

The decision to put more money into workers’ health care this year could have consequences down the road, according to arguments outlined late last month by Democratic Sen. Rodney Tom of Medina, a budget negotiator who wanted a tighter budget.

Tom said that putting $65 million into the Public Employees Benefits Board accounts from the state general fund (more than $130 million from all state accounts) creates a bow wave in the next biennium that could reach $515 million.

Republican Sen. Joe Zarelli of Ridgefield also has argued that the state should require higher contributions by workers, and he has cautioned that budget decisions made so far by Democrats this year are pushing a $4.7 billion unpaid bill into the 2011-13 biennium for a raft of programs.

Still unclear is what help the budget writers are giving to the Department of Social and Health Services to blunt the cuts announced last week of about 140 personnel in the Medicaid division in Olympia.

Sen. Karen Fraser, D-Thurston County, said she was still trying to understand why DSHS appeared to wait to announce cuts, which take effect by June. Several federation employees facing layoffs at DSHS corralled Fraser as she went to her car Sunday afternoon.

In other developments at the Capitol on Sunday, Fraser said she finished an agreement with the House on the capital budget but she was not free to share details.

However, the Heritage Center project championed by Fraser and Secretary of State Sam Reed won’t get additional funding to allow speedy site selection and groundbreaking in the next year on the Capitol Campus.

But a bond measure asking voters to approve $505 million in general obligation bonds was on a fast track to a vote in both chambers. The Jobs Act, also known House Bill 2561, lets the state issue bonds above the state debt limit to make energy upgrades at public schools, colleges and state government buildings, but it needs voter approval in November.

Rep. Hans Dunshee, D-Snohomish, told a Senate budget committee during a hearing Sunday that it would create 30,000 jobs over six years, and labor interests weighed in favoring it. But Republicans led by Zarelli questioned the job impact in the short term and the cost of paying off bonds for 25 years.

Dunshee says sales taxes collected during construction and energy savings should be enough to pay bond-interest costs for the first few years. After that, the bottled-water tax – which is imposed on a temporary basis in the Democrats’ overall tax package – would become permanent to cover the $36 million a year bond-interest payments.

Gregoire supports the bonds plan as a way to create jobs and improve energy efficiency in public buildings, and the state treasurer no longer objects to it.

“It’s smaller and paid for. It addresses our concerns,” said Deputy State Treasurer Wolfgang Opitz.

Brad Shannon: 360-753-1688