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Sales tax increase, cuts sought

Washington Gov. Chris Gregoire speaks at a press conference where she announced proposed budget cuts and said she’d ask voters to raise the state sales tax by half a penny. (Jim Camden)
Washington Gov. Chris Gregoire speaks at a press conference where she announced proposed budget cuts and said she’d ask voters to raise the state sales tax by half a penny. (Jim Camden)

Governor urges lawmakers’ support for March referendum

OLYMPIA – Washington voters could be asked to approve a half-cent sales tax increase next March to help replace a portion of the $1.7 billion in cuts the Legislature will face when it convenes next week for a special session.

Gov. Chris Gregoire said this morning she would propose an “all-cuts” budget that will affect schools, colleges, social services for the poor and elderly, and public safety.

“You will see more devastating cuts,” Gregoire said.

She will also ask legislators to let voters approve, through a March referendum, raising the state’s sales tax from 6.5 percent to 7 percent for three years, starting in August.

That would raise an estimated $494 million in fiscal 2013, which the referendum would require to be split so that $411 million goes to offset proposed cuts to education, $42 million would offset proposed cuts to long-term care and developmental disability services and $41 million would replace proposed cuts to public safety programs.

Gregoire denied that she was proposing cuts to key programs as a “scare tactic” to push through a tax increase.

“These are not hypothetical cuts, they are real,” she said. “I’m being honest with the people of Washington.”

The referendum would need a simple majority from both houses of the Legislature to be put on a statewide ballot in March, and a simple majority from voters to become law.

To pass it simply by legislative action would require a two-thirds majority of both houses, which Gregoire, a Democrat who will be in the final year of her term next year, said was unlikely. Her party holds a majority in each house, but not a supermajority. Some conservative Democrats in the Senate often side with Republicans on tax issues.

At a morning news conference, Gregoire laid out her proposed supplemental budget, which would cut:

• $500 million from public schools and colleges.

• $384 million from social and human services.

• $274 million from health services.

• $111 million from general government.

• $87 million from prisons and other public safety programs.

• $16 million from natural resource programs.

Among the cuts to education that she’s proposing are the reduction of levy equalization payments to some school districts and the elimination of those payments to others. Such payments provide a state match to help districts that have relatively lower property values.

Gregoire is also asking the Legislature to save $99 million by eliminating four days from the 2012-’13 school year; that’s an alternative to raising class sizes in grades 4-12, which she had suggested last month.

State colleges and universities would see a $160 million reduction in state support through mid-2013.

But those three cuts would not take place if the sales tax increase is approved, she said.

Democratic legislative leaders commended Gregoire for her willingness to propose a tax increase, but didn’t rush to support a higher sales tax.

“The governor’s proposed budget reflects how few options remain open to the state,” Senate Majority Leader Lisa Brown of Spokane and Ways and Means Committee Chairman Ed Murray of Seattle said in a prepared statement.

House Speaker Frank Chopp, D-Seattle, said he was “heartened” Gregoire proposed tax increases. “We owe it to our school children, to our citizens with disabilities and, frankly, to the future of our state to have a discussion about alternatives.”

But Republicans were critical. Senate Minority Leader Mike Hewitt, R-Walla Walla, said the state should look for significant reforms. “Instead, her ‘solution’ is to go straight for revenue.

“To talk about raising taxes at a time when people are out of work and can’t afford it suggests an insensitivity to what the citizens of this state are going through,” Hewitt said in a prepared statement.

House Minority Leader Richard DeBolt, R-Chehalis, accused Gregoire of holding key programs for education, public safety and the poor “hostage” in an effort to push through a tax increase when state residents can least afford it. Instead, the state should prioritize programs while “unleashing the power of the private sector to create jobs.”

To get the referendum on a special election ballot for March 13 as Gregoire proposes, the Legislature would have to approve it during the 30-day special session that begins Monday. Because of deadlines for printing a voter pamphlet, legislators couldn’t put the decision off until the regular session begins in early January.

Tim Eyman, who has sponsored a series of tax-limiting ballot measures over the last decade, said the suggestion that the tax would be temporary, and that it could be dedicated to certain programs, was “laughable.”

“That’s not the way Olympia works – they move money from one account to another,” Eyman said.

Some groups denounced the proposed cuts to state services but supported the call for a tax increase to restore some of them. “Harmful cuts that will hurt people of all ages and weaken our economy are not the only option,” the AARP said in a prepared statement.

The Washington State Budget and Policy Center, a progressive group, said the sales tax increase was a short-term solution, but the state needs a long-term reform, such as a capital gains tax that the organization is pushing.

Gregoire said a capital gains tax isn’t really an option for generating revenue in the short-term because without an income tax, Washington doesn’t have an easy way to collect it.


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