Politics & Government

Senate proposes hike in sales tax

House and Senate Democrats rolled out rival budget plans Tuesday that bridge a $2.8 billion budget gap with hundreds of millions of dollars of spending cuts that hit public schools, health programs and state worker jobs and could even close a few prison facilities.

But the bigger news Tuesday was Senate Democrats’ proposal to raise $918 million in new revenue with a 0.3 percent statewide sales tax increase and closure of so-called tax loopholes – all to avoid even deeper cuts such as those first proposed in December by Gov. Chris Gregoire.

The Senate tax plan avoids many of the “sin” taxes and changes to tax law that Gregoire proposed last week to raise tax collections by about $759 million. Instead, the Senate package closes 26 tax breaks, including an exemption for used car trade-ins, a sales tax break on coal used by the TransAlta power plant in Centralia, and tax breaks for out-of-state firms that do a certain amount of business in Washington.

The House has a smaller tax plan of $857 million in the works, but no details were available at least until today. But it was clear that both legislative chambers would raise more funds than Gregoire has suggested, and both cut less in spending.

“The budget is a moral document,’’ Senate Majority Leader Lisa Brown, D-Spokane, said in a news conference. “The budget is no less than the vision of the future that we want to see for Washington state, because in tough economic times it really does provide the blueprint for our hopes and our aspirations for our communities.”

Republicans were loud in their condemnation of the level of spending, and Rep. Gary Alexander of Thurston County immediately branded the budgets as “unsustainable.’’

But Brown said lawmakers had cut more than $3 billion in spending last year, and that overall spending was lower in the ongoing biennium than the previous budget period for the first time since 1951.

“I’m not particularly proud of this fact, but we cut more than any Democrats or Republicans in state history,’’ Brown said. “This one we think is balanced and responsible.’’

The Democrats are in the majority in both chambers, but the House and Senate budgets differ in many substantial ways – including how much of the Basic Health Plan to preserve for low-income workers, along with agency closures and consolidations. They also differ on the Senate’s proposed closure of both the Francis Haddon Morgan center for the developmentally disabled and the Maple Lane youth prison, as well as the Senate’s elimination of the state printer and request to consolidate the departments of Natural Resources and Fish and Wildlife, and Washington State Parks.

Lawmakers have just 16 days left in their 60-day session before adjournment March 11, and reactions to the budgets were predictable as interest groups waded through early details.

In general, human services and labor groups were grateful to not see deeper reductions, but many said the cuts were still too deep.

“On the upside, both are in the right general direction. They both are closing tax loopholes,” said Tim Welch of the Washington Federation of State Employees, which represents about 40,000 state workers. “They are raising revenue, although we don’t know exactly how the House is going to do it.’’

But Welch said both chambers count on saving nearly $50 million by requiring 11-day furloughs for some state workers, and other cuts will raise state workers’ health care costs in 2011.

Rep. Kelli Linville, the House budget writer from Bellingham, said state workers can expect some knocks in the budget, and so should people who depend on services they provide. She estimated that 3,000 state government and higher-education jobs are being eliminated by cuts in the budget adopted last year, and another 692 full-time equivalent jobs are eliminated in the proposed House supplemental budget.

Washington Education Association president Mary Lindquist slammed cuts to early learning programs in the Senate and said the House plan was “a better budget for children.”

The Senate is proposing to take $214 million of its total $838 million in cuts from public schools; the House is taking $112.4 million of its $653 million in cuts from public schools. The budgets agree on eliminating the last $78 million in voter-approved money for reducing the size of school classes, and both agree to get rid of teachers’ final remaining learning improvement day.

But the House added $25.3 million for levy equalization to help financially struggling schools, while the Senate added $1.5 million. “Our most poor districts desperately need that money,” Lindquist added.

Advocates for the mentally ill and those dependent on health care programs such as the Basic Health Plan had other criticisms with what programs were not protected by the new revenues.

And the labor-backed Rebuilding Our Economic Future Coalition put out a statement that said serious gaps remain in services if either budget is adopted. The cuts hit programs that help the elderly with long-term care needs, and “1,400 seniors and people with disabilities would lose care entirely,” coalition spokesman Sandeep Kaushik said.

The Senate plan also calls for closing the Maple Lane youth prison in Grand Mound; elimination of the state printer; more liquor sales by private contract stores; and a consolidation of similar functions done by the departments of Natural Resources and Fish and Wildlife, and Washington State Parks.

Even so, the budgets drew complaints from the GOP that too much is spent. And the Senate tax plan drew concerns from Republicans and business groups that it kills off job creation.

Overall, the tax increases and closure of exemptions would raise an additional $2 billion for the next budget cycle in 2011-13 – before the sales tax increase would end in June 2013.

Association of Washington Business lobbyist Amber Carter said that closing the variety of tax loopholes would likely harm businesses and put workers out of jobs. The sales tax part of the plan would add 0.3 cents in tax to a $1 purchase, swelling the highest rate in the state to 9.8 cents in Seattle, 9.6 cents in Tacoma and 8.8 cents in Olympia.

Ranking Republican Sen. Joseph Zarelli of Ridgefield said lawmakers were using the economic crisis as an excuse to decide which tax incentives to keep. “The majority can disagree all it wants, but there is no question that ending a tax incentive is the same as raising a tax,” Zarelli said in a statement.

But Democrats said closing tax loopholes is necessary to make the state tax system fairer and to raise revenues needed to avoid deeper cuts.