Olympia provides biggest clue yet that a tax increase is coming

Best chance for cuts will pass this week with lawmakers in town, but no special session

By Erik Smith

Staff writer

Washington State Wire 

Around the state Capitol, you might say it's an open secret that a tax increase is coming next year – and not a small one, either.

For the record, though, no one is saying it for sure. The governor's office and the majority Democrats in the state Legislature use phrases like “everything is on the table” to describe how they will handle the state's looming $2.6 billion shortfall. They'll look at closing tax loopholes, they'll look at program cuts – and then, once they've exhausted every option, maybe they'll think about raising taxes.

But if you want proof that a tax increase is coming, no ifs, ands or buts about it, you might look to the House and Senate chambers this week. The entire state Legislature is coming to town on Thursday and Friday, Dec. 3-4, for a series of committee hearings, but the House and Senate floors will sit empty. No special legislative session is being called to consider further cuts in state spending. That means the best chance to cut spending will pass, if the idea was ever on the table in the first place.

The Senate Republicans' point man on the budget, Joseph Zarelli of Ridgefield, says the decision is a missed opportunity.

“I think the majority has thrown their hands up in the air and said we're just going to have to raise taxes – there's no way we can deal with this, and it really doesn't matter if we do it now or we do it later.” 

Cuts Would Hurt Less Now

It's a subtle point that makes sense to anyone who watches state government closely, but for anyone outside Olympia it probably requires a bit of explaining. Think of it this way: The state budget is a bit like a ship crossing the Pacific – turn the rudder a few degrees off course when you leave the Straits of Juan de Fuca and you'll miss Japan by a thousand miles. Right now you might say the state is only about a quarter of the way across, and if a course correction might seem punishing now, it'll only be worse when the state finds itself in Honolulu.

Washington writes its budgets to cover a two-year period. The latest budget, covering 2009-2011, started June 1, and by year's end the state will be only a quarter of the way through. But already lawmakers know that they missed the mark by $2.6 billion. Their budget counted on tax revenue that won't materialize, because the national recession proved deeper than anyone expected last spring. They were counting on a rebound this fall, and it never came.

At the same time, caseloads for welfare and schools increased, unexpected expenses emerged, and some of the dramatic $3.3 billion in cuts ordered by lawmakers this year couldn't be accomplished as quickly as they had hoped.

And the impact?

If lawmakers were to cut spending now, and allow the cuts to take effect on Jan. 1, the impact would be painful. But if they follow the normal course and pass a revised version of their budget during the next legislative session, and then allow the cuts to take effect on July 1 as they usually do, they would have to cut state programs by an additional 50 percent.

“You're squeezing into a shorter period of time the amount of money that you have to raise,” Zarelli explains.

And the fact that no one on the Democratic side seems to be thinking about the problem that way sends a clear message to Republicans like Zarelli:

Serious cuts really aren't on the table at all. They aren't even trying.

Setting the Stage

For the last two months, Zarelli has been urging that a special session be held this week. “Taxpayers are already paying for us to be in town. We ought to make something out of it.”

But he hasn't found any takers among the Democrats who control the governor's mansion and the House and Senate by wide margins. Instead, Democrats have been advancing with hints and persuasion the message that a tax increase of some type will be necessary.

The latest example is a video message from Gov. Christine Gregoire and budget director Victor Moore, posted last week on the governor's website. In it they argue that 70 percent of the state budget can't be cut, because of court rulings, federal requirements and other factors. And the remaining parts of the budget that can be cut – items like prisons, higher education, social services and economic programs – already took major hits the last time out.

Next week the governor's office will release a proposal to cut the budget without raising taxes – a plan certain to draw fire from every quarter, and make the lobbying for a tax increase all the more intense.

Some Democrats make the argument more directly. “The places that are left to cut are unacceptable, so for me taxes are on the table,” said Sen. Craig Pridemore, D-Vancouver. Senate Majority Leader Lisa Brown, D-Spokane, has even called for a state income tax.

Being Nice to Republicans

At a meeting of the state Economic and Revenue Forecast Council Nov. 19, state Rep. Ross Hunter, D-Medina, chairman of the House Finance Committee, was asked why Democrats opposed the idea of a special session.

It wasn't that Democrats are dead-set on a tax increase, he said. It was that there just wasn't enough time to involve everyone.

“Your suggestion is that we're here for a day in December, and – you could do something in December, [but] if you did something, that something would be decided in the back room,” Hunter said. “We no longer have smoke-filled rooms, thankfully, but it would be decided there, because there's absolutely no time to debate it. So you'd have relatively little input from the minority caucus, which I think we should hear from, and you'd have relatively little input from anyone other than three or four people.”

Republicans snorted at that one.

Said Zarelli, “I can't see what would be different about this than during any other session when the majority party has had control of the budget. Whether we're early or late, we're never invited to the dance.”