Locke Takes The Steam Out Of Tax-Cut Hopes Governor Places $270 Million Limit On Rebates, Transportation Outlays

Gov. Gary Locke on Wednesday threw cold water on bold tax-cut proposals, including a $400 million rebate plan from fellow Democrats.

Both majority Republicans and minority Democrats are putting the finishing touches on major tax-cut packages for the upcoming legislative session, including Democrats’ suggestions for a rebate check for every state resident and for a big reduction in the tax paid on car license tabs.

Both parties also have talked about using part of the state’s projected $860 million surplus for transportation.

But the governor sent up a warning flag.

He said $270 million is the upper limit for tax relief and transportation funding from the general treasury next year. Any combination that reduces revenue by more than that amount would begin affecting the state’s construction budget in prisons, schools, colleges and other state projects, he said.

That’s because the state’s construction bond debt is pegged to a percentage of the revenue coming into the general treasury.

“That’s the limit,” the governor told a news conference. “People need to be very careful in proposals, whether it’s a rebate or whatever.”

He said he has two big concerns: the short-term need to keep the tax cuts and shifts below $270 million so that the construction budget is protected and the longer-term goal of keeping a reserve fund large enough to shield essential state programs when the economy turns sour.

Rep. Hans Dunshee, the ranking Democrat on the House Finance Committee and chief architect of the big rebate proposal, said the $270 million limit was news to him.

“I guess that’s why you float trial balloons and listen for people’s reaction,” he said, adding that the actual amount is negotiable if he can win support for the “just-write-a-check” rebate plan.

“The important thing about this concept is that it is the alternative to the special deals that go on down there that are lobbyists’ sweet dreams,” he said. “The idea is clean and simple. It is prudent. You are giving back a one-time-only check.”

Locke said he will offer a modest package of tax cuts and transportation funding plans within a few weeks, fitting below the bond-debt ceiling. He gave no further details.

On other topics, the governor:

Strongly endorsed the state’s affirmative action preferences for women and minorities in public employment, contracting and college admissions. He said he opposes Initiative 200, which would end those preferences, as California voters did last year in a similar ballot measure.

Announced that public schools will get $54.4 million in technology and construction grants over the next two years. The money comes from the Education Savings Account that the Legislature created at Locke’s request. The account got $47 million from lower-than-expected school enrollment and state caseloads during the last fiscal year. The rest of the money came from agencies’ efficiency efforts.