Surplus Gives Lawmakers, Governor Pleasant Choices Democrats, Republicans Have $900 Million To Play With
It’s a politician’s dream.
Buoyed by a vibrant economy, the state treasury now has a projected surplus approaching $900 million.
That sets the stage for a legislative session where lawmakers can do good - shoring up education and other priorities, while putting about $500 million in the piggy bank for a rainy day.
And they also can do well - for themselves in an election year - by granting another round of tax cuts while easily balancing the budget.
Besides being blessed with plenty of money, lawmakers also have some externally imposed discipline to make sure they don’t run amok: the voter-approved Initiative 601, which says government can grow no faster than inflation plus population growth.
The disputes - and they will seem furious at times - really will be about small numbers and shades of differences.
“Our spending plan is only $33 million higher than the one I signed a few months ago,” says Democratic Gov. Gary Locke. “That’s such a tiny percentage increase when you’re talking about a two-year budget of over $19 billion. Somebody should calculate that.”
It’s .17 percent, or one-sixth of 1 percent.
But that minuscule amount highlights a philosophical dispute between the governor and the Republican majorities in the House and Senate. GOP leaders say they have no intention of boosting spending above $19.085 billion.
“Not a penny,” says Senate Ways and Means Chairman James West, R-Spokane.
“Not a nickel,” says House Appropriations Chairman Tom Huff, R-Gig Harbor.
The governor, who notes that his budget still would be $30 million below the level authorized by the voters, says the line-in-the-sand is dumb. Republicans aren’t budging.
House Speaker Clyde Ballard, R-East Wenatchee, and Senate Majority Leader Dan McDonald, R-Bellevue, say the budget-and-tax battle this year is simple and that Locke will have to face facts.
They say you can expect:
Tax cuts. Locke and many minority Democrats are joining the GOP in promising tax cuts for the fourth year in a row. The total will be smaller than in recent sessions, when business and property taxes were rimmed. Locke proposes a $245 million package and most Republicans are between $200 million and $250 million.
Most popular idea: Cut the tax paid on car license tabs. Locke’s $100 million version would eliminate the tax on older model cars valued at under $1,600 and cut $35 from everyone else. Republicans haven’t announced their plan yet, but many legislators say the car tax cut is a done deal.
Popular idea that’s going nowhere: Rep. Hans Dunshee’s plan for a huge tax rebate, perhaps $400 million. Clue to its demise: He’s a Democrat. Clue No. 2: Even Locke says the state can’t afford a giveaway of that size.
The governor also has suggested tax credits for businesses that provide child care for their workers, a tax break to help first-time home buyers, and business tax incentives for companies that invest in economically distressed areas and for the high-tech industry.
Republicans will soon announce their proposals - and the two houses may have somewhat different agendas that will have to be resolved before they worry about doing business with Locke.
A big reserve. West and Huff are putting a big priority on socking away part of the surplus, to be pulled out of savings during the recession that most economists believe to be inevitable. The state has never had such a fund and in recent downturns, lawmakers had to chop popular programs and raise taxes - and frequently got shown the door at the next election.
West and Huff want at least $500 million put aside, although they disagree on how hard it should be to spend it in the future. West wants a two-thirds vote of both houses to remove it from savings; Huff says that would give the minority too much power and that it should simply be left as an ending fund balance.
Locke has proposed a $583 million reserve.
A modest budget. Even the no-net-increase approach gives lawmakers and the governor about $100 million to play with. That’s the amount that is being subtracted from the budget because of lower school enrollment and other painless savings already identified.
Locke, who went first in unveiling a budget plan, suggests spending $105 million more on education, higher education, crimefighting, and other state programs and wants to contribute $25 million of the surplus to transportation.
Some of his budget rewrite is bound to pick up support in the Legislature - most notably for a crackdown on drunken drivers. His biggest conflict, both sides agree, will be over transportation funding, which is handled in a separate budget. Locke wants a funding package that includes a gasoline tax increase; the GOP has turned thumbs down to any tax increase.
West says lawmakers can’t rest easy just because spending is under control. He says it’s critical that the Legislature begin building a reserve fund of at least $1 billion and restrain their yen for tax cuts.
West says tax relief has the same long-term impact as budget increases - it reduces the tax revenue available in the years to come. He says the reserve fund should be protected as the first order of business, and then the rest can be considered.
“In your own personal budget, if you wait and spend all your money on wants and needs, you find nothing left over for savings, despite all your good intentions,” he says.
“Good fiscal discipline dictates you will save before you spend.”
xxxx AT A GLANCE A quick look at budget and tax issues facing the 1998 legislative session: Budget. Lawmakers must rewrite the $19 billion state budget. Predictions are for mostly modest adjustments, with Republicans saying they don’t want the new total to exceed current appropriations. Gov. Gary Locke calls for $33 million in net new spending. Reserves. Leaders want the largest share of the state’s projected $862 million surplus to go into a reserve fund. Locke suggests a $583 million reserve. Tax cuts. Both parties support modest tax cuts, with reduction of the car-tag license tax considered the most likely to pass. Locke’s total package is $245 million, roughly the same ballpark lawmakers are considering. Gas tax. Locke proposes a nickel increase for state and local transportation projects, plus future increases. Budget process. Republican-controlled Senate holds hearings on Locke proposals in a few weeks and will produce its own plan. House then will propose its version and negotiators will hammer out a common plan to send Locke. Roughly the same procedure will be followed for the tax cuts and gas tax.