Politics & Government

Surprise! $182M tax-amnesty windfall pares budget gap

Washington's three-month-long tax amnesty for businesses has delivered an unexpectedly fat cash bonanza, giving House and Senate budget writers an extra $182 million to help close their differences in Olympia.

"This is money that has already been collected in this fiscal year," Gov. Chris Gregoire said today in announcing an overall amnesty haul of $321 million that is more than double what she had expected after the March revenue forecast. "It is cash on hand. It gives us critical dollars to close the current (budget) gap."

The Democratic governor told reporters at the state Capitol the new cash should be used to shrink the $240 million owed to public schools by June 30 but that otherwise would be delayed to July 1 under House and Senate budget proposals. Gregoire suggested that approach to the four legislative caucus leaders and four budget negotiators earlier in the day and her sense was "they welcomed my suggestion."

Of the total collected and in hand, $57 million is for local governments and about $264 million is for the state. All told, the amnesty drew participation from nearly 11,000 businesses, most of them small enterprises doing less than $1 million in yearly business.

And 8,888 enterprises paid back taxes – avoiding penalties and fines under the amnesty – to generate $321 million. One in 20 participants were large businesses, including one big business that agreed to pay tens of millions in back taxes that it was contesting in court, according to state revenue director Suzan DelBene and Gregoire.

DelBene said state law prevents her from naming the firm, but Gregoire said it was a company that was in litigation with the state and decided to settle up rather than take chances in court.

Gregoire also said the collections dwarfed the $24 million originally estimated when she took the idea to lawmakers in a December special session. What swelled the state's take was the emergence of hundreds of businesses that weren't even on the state tax rolls.

DelBene estimated there were fewer than 1,000 businesses flying off the tax-man's radar that now are on the state's registry where they can be monitored for future compliance.

The amnesty let businesses pay up without penalty or fines if they did so between Feb. 1 and the end of April.

House and Senate Democrats negotiating the budget did not respond immediately for comment. But Republican Sen. Joe Zarelli, who has been a full partner with Democratic Sen. Ed Murray in producing a bipartisan Senate spending plan, said it solves only a portion of the problems dividing the House and Senate. He said policy changes that reform government also must pass.

"I think I've been pretty clear. This isn't just about balancing a budget," Zarelli said. "This helps us get out of town but it doesn't solve the problem totally (which includes taking) a new look at government processes – talking about some of the reforms in the entitlement areas and contracting out. It's about some reforms in education. It's about a lot of different things. We're not done with that and we're not going to pack it in on that simply because of this."

Zarelli said the money mostly helps the House come closer to the Senate position, which spends $330 million less. The House also counted on a $300 million windfall from leasing out the state's liquor warehousing business.

Gregoire said the windfall should help Senate and House budget negotiators settle their differences much sooner in a 30-day special session that began April 26, and she thinks they have no excuse but to finish on time.

"I'm not interested in a (second) special session. With this information they can go home," she said.

Zarelli said House Speaker Frank Chopp, D-Seattle, might have a thing to say about that.

"If she's going to talk to Frank and tell him how important our policy bills are to the Senate if she does that then she's right. We can get out of here really soon,’’ Zarelli said. But Chopp "hasn't been inclined to consider workers comp. He hasn't been inclined to consider reform bills on reducing the size and scope of government," Zarelli added.

Gregoire conceded workers comp could keep lawmakers in town and also there are "big policy bills" needed for the budget that have yet to be dealt with – "some of them haven't even had hearings." But, "having said that one special session is all we need, and I don’t think we need a whole special session. I think we ought to get done and go home."

Asked about workers' compensation reforms in Senate Bill 5566, which House Democrats have declined to act on until they get further along on an operating budget deal, Gregoire said: “I don’t think we leave town” without it. "So I'm working on it."

The biggest obstacle? "Candidly, lines in the sand " Gregoire said. "Here’s what it is. You've got businesses drawing a line in the sand and you've got labor who's drawn a line in the sand – and representatives and senators that believe in the positions of those respective parties. And basically what I've asked them to do is to understand that is the responsibility advocates have of their members, whether they are business or labor. That's not our duty. Our duty is to come here, listen to them, and then set that aside and reach a compromise. And so I'm going to do to try and get that done."

I have a similar story in the works for tomorrow's print editions.