Politics & Government

Increasing taxes not off table

Gov. Chris Gregoire left the door ajar to tax-increase proposals Tuesday, saying she is unsure how to make another $1 billion in new spending cuts the state Legislature could face in January.

The Democrat spurned tax increases in her re-election campaign last year and again this last legislative session when $4.5 billion in cuts were enacted. But she told reporters the size of past cuts and lack of additional federal dollars to blunt the anticipated next round of cuts are part of her reason to consider options.

“I didn’t want revenue last year because I couldn’t figure out how you could do a revenue package that wouldn’t hurt the economy, either individuals or businesses,” Gregoire said. “We’re still stuck in that rut, but I’ve told the leadership, ‘Come make your case. My door’s open, you can make your case.’ But I don’t want to do anything that adversely impacts our economic recovery.”

The governor didn’t specify what tax increases might meet her criteria, and House Majority Leader Lynn Kessler, D-Hoquiam, said no specific ideas are in the mix yet for her caucus. But Kessler said some House Democrats would welcome Gregoire’s apparent change in position.

“Certainly we need to keep all our options open,’’ Kessler said. “I think we’re going to hear a lot of proposals. … It’s definitely something that’s going to be buzzing around in the 60-day session.”

The governor’s stance is a clear shift from her position in the session or election. Both times she said a recession was the wrong time to put a burden on businesses and individuals, and she warned that tax increases could endanger the economic recovery. But revenue continuing to slip and caseloads for Medicaid and other services are rising.

Gregoire said she’s heard from hospitals interested in some kind of fee increase that would let them receive extra matching federal dollars through Medicaid. Gregoire said she remembers the 2003 “bed tax” on nursing homes, which some said had an effect on consumers before the tax was repealed.

“That’s why I am asking, ‘you have to prove it to me,’” Gregoire said of any proposals that might surface in the next few months.

Cassie Sauer, spokeswoman for the Washington State Hospital Association, confirmed the group shared its idea for revenue increases with the Governor’s Office. But she said hospitals are not considering a bed tax like the one that hit nursing home consumers directly.

More details of the hospital proposal are due in a few weeks. Sauer said it would raise $260 million over four years and is like what 25 other states already do, including Oregon and now California. The assessment on hospitals would serve as a kind of loan, sending extra money to the state for additional spending on Medicaid; this in turn would trigger higher federal reimbursements and lead to a net increase for care to low-income people at hospitals.

Republicans including Rep. Gary Alexander of Thurston County have said more cuts are needed to lower the size of government in the short term, and also going into the next budget cycle in 2011. The GOP also has warned of harming the economic recovery by raising taxes.

But Gregoire said her concern is how to actually make additional cuts, which could lead to elimination of the state’s shrinking Basic Health Plan for low-income workers or the General Assistance Unemployed program that gives cash and medical care to the destitute.

“My No. 1 concern right now, to be perfectly honest with you, is how do we do the cuts? How do we get there? Do we devastate the Basic Health Plan? Do we completely gut it?” Gregoire asked. “We are almost to the point where we have as many people covered as we do on the (plan) waiting list. We can’t cut education any more. We won’t come out of the recession, and we won’t have an economic future.”

“So there are no good options, because the cuts are either social services, corrections, health care or education,” she added.

The governor said it is too early to say anything more specific, and she has been scheduling meetings to get up to speed on the budget. But she did say $750 million to $1 billion in additional cuts are needed to make up for falling revenues and higher caseloads.

An income tax on high earners would not bring in money soon enough to help with the short-term budget problem, because it would require a public vote and would trigger legal challenges, Gregoire said.

Before she would embrace any temporary sales tax, she would want to be convinced it is “the right thing to do and that the people will support it. … At some point the people, I assume, don’t want us to take any more cuts.”

Brad Shannon: 360-753-1688