Published Nov. 20, 2009
By The Associated Press and the Tri-City Herald Staff
OLYMPIA — Tax increases probably can’t be avoided as the state tries to patch a budget deficit that’s ballooned another $760 million to about $2.6 billion, top Democratic lawmakers said Thursday.
Leading options include closing tax loopholes and raising “sin” taxes, typically levied on indulgences like tobacco and alcohol. Broad-based tax increases, such as larger levies on sales and business revenue, probably are a last resort because of the fragile economic recovery, Democrats said.
Further spending cuts also are on the table, even though the Legislature already whacked billions from state programs earlier this year to help match recession-hammered revenue collections.
“There’s no way you get to $2.6 billion without looking at absolutely everything that’s left,” said Senate Ways and Means Committee Vice Chairman Rodney Tom, D-Medina.
Rep. Larry Haler, R-Richland, said because of limitations on what can be cut, he fears that higher education and K-12 programs not protected by the state constitution — such as levy equalization — will be on the chopping block.
“I think attacking education is not the right manner,” Haler said. “I think there is overspending in the Department of Ecology. There are far too many employees there. We need to look at (the Department of Social and Human Services) and figure out what are the priorities of DSHS and what could be removed for at least a few years.”
Because higher education lacks constitutional protections, Columbia Basin College President Rich Cummins said he’s reconvening a budget cutting committee and asking it to prepare scenarios for how the college could slash up to 6 percent of its costs.
He won’t know just how much to cut until the Legislature adopts a supplemental budget. But what Cummins does know is that CBC will have to bear the brunt of cuts in the first six months of 2011 because of an edict from the state’s Office of Financial Management to hold the line on cuts in 2010 or the state would risk losing some of its federal stimulus funding.
Some stimulus money came with the requirement that it had to be used to “supplement, not supplant” state budgets. That was to prevent states from using the federal money to balance their budgets rather than creating jobs, according to the federal Department of Education website.
The effect on institutions like CBC is to create a bow wave in which deep cuts must be made in 2011 rather than spreading them out over the biennium, Cummins said.
Thursday’s comments by majority Demo-crats — the clearest signal yet that tax increases are in Washington’s future — came after the state’s economic forecasters predicted further drop-offs in state tax collections.
Through mid-2011, when the current state budget expires, the treasury will collect about $760 million less than previously expected. One major factor is a lack of consumer confidence, which depresses spending in Washington’s sales-driven revenue structure, chief economist Arun Raha said.
“To me, it seems like the consumer’s mindset is stuck within a band of pessimism at recessionary levels,” he said.
Consumers are likely to come off the sidelines and resume spending only when they feel more secure about the employment picture, which continues to look dark, Raha said.
Hiring typically lags behind an economic recovery, and Washington’s 9.3 percent unemployment rate is expected to peak at about 9.8 percent next spring.
Republican lawmakers said the fragile recovery and sour job market are precisely the reasons Democrats should avoid tax increases when the Legislature reconvenes in January.
Instead, lawmakers should start work immediately on a package of reforms that fundamentally alter the way government services are delivered, seeking out every cent of savings before considering new revenue, said Rep. Ed Orcutt, R-Kalama.
“We cannot afford to raise taxes on working families or on businesses that are already struggling,” Orcutt said. “We have to be careful that we don’t worry so much about our budget problem that we forget about the problems of everyday people out there.”
One Republican broke from the pack by showing a bit of optimism in the face of the budget shortfall. Rep. Bruce Chandler, R-Granger, said the additional $760 million revenue drop represents only 0.004 percent of the state’s total revenues, and he remains confident Washington can emerge from the recession stronger.
“We are in a better position than other states,” Chandler said. “Because of our diverse economy, our global trade and our talented work force, we have the opportunity to be a leading economy among Western states and into the next decade. Central Washington is an important part of the solution, with our large agriculture industry as well as our high-value manufacturing.”
Gov. Chris Gregoire, a Democrat, will get the first crack at balancing the state’s budget when she releases a supplemental spending plan next month.
By law, the governor must propose a budget that balances the books within existing revenues. But that probably won’t be the last word from Gregoire, who has said repeatedly that she’s considering tax increases to help bridge the gap.
Raising taxes would require suspension of Initiative 960, which voters approved in 2007. It requires any tax increases to get either a public vote, or a nearly impossible two-thirds approval from the Legislature.
The Legislature, however, may amend initiatives after two years, and majority Democrats have enough votes to do so.
Additional news stories can be accessed online at the Tri-City Herald.
Throughout the 1990s, a coalition of numerous non-governmental organizations, the International Campaign to Ban Landmines (ICBL), campaigned successfully to prohibit the use of landmines.
