Politics & Government

State pins hopes on feds

The Washington State Capitol in Olympia. (Tony Overman/The Olympian)
The Washington State Capitol in Olympia. (Tony Overman/The Olympian)

Gov. Chris Gregoire said Monday that she is confident enough of receiving extra federal money for Medicaid that she will add $435 million to her budget on the revenue side, reducing the amount of additional funding she will request from the Legislature this month.

The new money is Washington’s expected share of the $25 billion that President Barack Obama’s budget proposal includes as extra Medicaid help for the states. If Congress delivers the cash, it would reduce the state’s expected shortfall, last estimated at $2.6 billion, to about $2.2 billion for the budget period ending in June 2011.

Democratic U.S. Rep. Jay Inslee told reporters during a visit to Olympia on Monday that he is confident the money will be available.

Gregoire previously said she would seek a $780 million revenue package to “buy back” programs – including college student aid, levy help for poor school districts, and health care for the poor – that her no-new-taxes budget in December would have cut. But she could not say how much smaller her request would be until she sees forecasts next week on expected state caseloads and projected revenue.

“Again, my budget asked us to buy back $780 million. If I book the $435 (million), it’s the difference,” Gregoire told reporters at the Capitol in a joint meeting with Inslee. “But again that’s premature for me to lock in on that because I need that February forecast. … I really do not have a good feel about that February forecast.”

Gregoire’s original budget included $1.7 billion in cuts, nearly $1 billion of which she would let stand. Gregoire, a Democrat, has said she wants money to “buy back” levy equalization aid to tax-poor school districts, class-size reduction for lower grades in public schools, the state Basic Health Plan and general assistance. She also wants to avoid cuts to programs providing health care and other aid to the poor, the elderly and the disabled.

Republicans oppose cutting levy equalization and insist no new revenue is needed if lawmakers make further cuts in other programs or make government more efficient.

Senate and House Democrats have been coy about the size of tax increases they might seek. House Speaker Frank Chopp, D-Seattle, has been careful to say that his people are first looking at making cuts and closing tax “loopholes” or exemptions that no longer are deemed worthwhile, before looking at other tax options.

In the Senate, Majority Leader Lisa Brown, D-Spokane, has been more blunt in saying she doesn’t think eliminating tax exemptions is enough. Brown also has said she would not want to simply shrink the revenue request if the state gets more federal aid.

Some Democrats have talked about taxes on sales of bottled water, soda, candy, airplanes and gold bullion and about repealing tax incentives that haven’t proved they create jobs. Other ideas include a tax on toxic chemicals including oil, which could pay for future stormwater projects but help general spending in the short term.

House Majority Leader Lynn Kessler, D-Hoquiam, said she would be cautious about counting on the congressional aid.

“It would be very welcome,” Kessler said, adding: “We were trying not to count on that because we could just be disappointed and have to go back to the drawing board. Having said that, I think we have a lot more confidence that we will get more help with Medicaid.”

At the same time, Kessler said it is too early to say if lawmakers could back off on the size of a revenue package.

Gregoire has said she does not want taxes that harm business operations during the economic recovery. But she said Monday that the state is hampered by its reliance upon a “three-legged stool” of taxes – including sales, business-occupations and real estate excise taxes – which complicates lawmakers’ work.

Don Brunell, president of the Association of Washington Business, said fears of tax increases on business have not gone away.

“I would hope before they reach that conclusion (on repealing tax exemptions and tax increases) they go back and look at some ways to restructure government and privatize some of the things, like liquor stores and the print shop,” Brunell said. “There doesn’t seem to be any appetite to deal with (cutting state) employee compensation. If it is a tax it’ll hit business.”

Brunell said lawmakers should keep in mind that Obama might seek tax increases, local governments might be raising fees or taxes on businesses, and state businesses already have seen unemployment and workers’ compensation tax increases in 2010.

“We’re saying connect the dots and do the math. It’s the cumulative effect that is really damaging,” Brunell said.

In contrast, Democratic Rep. Brendan Williams of Olympia warned against treating the hoped-for federal funds a “as a cookie jar to be robbed while the state actually cuts Medicaid programs and protections for vulnerable citizens.”