‘Sin taxes’ fuel Locke budget

Democratic Gov. Gary Locke on Thursday proposed a record $26 billion state budget, financed in part by a $504 million “sin tax” hike that would boost the price of soda, beer, wine and hard liquor.

“This is a good budget for the state of Washington,” Locke said. The alternative to the new taxes, he said, would be deep budget cuts that would hurt schools, higher education, dental care for the poor and state-subsidized health insurance for the working poor.

“What are our values as a state?” the lame-duck governor said at a press conference in the Capitol. “Do we want to become a society of the haves versus the have-nots?”

Republicans criticized the two-year budget proposal, saying that the state can get by without hundreds of millions of dollars in new taxes.

“Washington state can live within its means,” said Governor-elect Dino Rossi, who has held a razor-thin margin of victory over Democrat Christine Gregoire in two counts. A third count – this one by hand – is expected to be done by Wednesday.

“Some of these things are just really unrealistic,” said Senator-elect Mark Schoesler, R-Ritzville. “I’ll bet they’re licking their chops in Idaho at the thought of Washington taxing its products more.”

Locke’s proposal would add a nickel to the price of a can of pop or beer and a quarter to the cost of a bottle of wine. A fifth of hard liquor would cost about $1.50 more.

Asked if he considered soda pop a “sin,” Locke – who drinks a lot of Pepsi – pointed out that soda pop is often full of sugar and bad for people’s teeth. Bad nutrition, like drinking a lot of pop, contributes to diabetes and obesity, he said.

“It only makes sense that the people using these products that exacerbate our (public health) problems help pay,” he said.

Schoesler scoffed at the thought of soda as sin.

“My family doesn’t think drinking Pepsi is a sin,” he said. “I don’t know of any family that thinks of pop as a sin.”

To cut costs, Locke is also proposing reductions in the sentencing and supervision of low-risk criminal offenders.

“The lowest risks would be given less supervision after they serve their sentences,” said Marty Brown, Locke’s budget director. The changes would save the state $73 million over the next two years, according to Locke, a former deputy prosecutor.

Democratic leaders, education officials and social-service advocates quickly embraced the governor’s budget and tax plan, at least as a starting point for discussions with the next governor. Much of the money from the new taxes would be used to reinstate Initiatives 728 and 732, which set aside hundreds of millions of taxpayers’ dollars to shrink school class sizes and guarantee teachers an annual cost-of-living increase based on Seattle inflation. Both were strongly supported by voters four years ago. But two years ago, the state – with Locke’s support – suspended both initiatives, saying they were too costly during a recession.

“I appreciate the governor making it clear that without new revenue, there will be devastating impacts to education,” said Superintendent of Public Instruction Terry Bergeson. The two initiatives, she said, “have been caught in the crossfire of our state’s budget battles for the last several years.”

The state teachers union – which had blasted Locke for abandoning the two measures – on Thursday praised his call for more money for schools. But school employees should get as much of a raise – 4.8 percent over the next two years – as Locke proposed for state workers, Washington Education Association President Charles Hasse said.

Locke also proposed $1.3 billion in assorted spending cuts, including a two-year slide in paying a huge contribution to the public pension system. Fund transfers, tapping the state’s savings, cutting prison sentences and cutting back nursing home rate increases all are proposed.

Even with the new revenue, the governor proposes nearly $300 million in service cuts or limitations, including $78 million from mental health. To avoid taking on $270 million in debt to build a new state prison in Franklin County, Locke is hoping a private company will build the prison and lease it to the state. He also said the state should take bids for a private company to run the prison.

Locke said the additional taxes would help finance class size reduction and 7,200 more enrollment slots in the state’s colleges and universities, sustain programs for vulnerable children and adults, maintain the Basic Health Program for the working poor, and boost Medicaid reimbursement rates so doctors don’t stop treating low-income people.

To raise more money for health care, the governor proposed raising $94 million through a 1 percent gross receipts tax collected from physicians. The money would be plugged back into higher Medicaid reimbursements. It also would finance Basic Health Program insurance coverage for about 17,200 low-income people.

The governor also proposed a $2.9 billion construction budget, primarily for higher education and public safety facilities.

He proposed a transportation budget that speeds up construction of selected projects by providing an extra $60 million.

The revenue plan avoids a general tax increase on the Big Three: sales, business and property taxes. The “sin tax” package does not tax tobacco or gambling, but raises more than $500 million by boosting the wholesale taxes of pop and beer, adding roughly 5 cents to the cost of each beverage, administration officials said. Liquor and wine taxes also would rise.

It’s unclear how much of Locke’s budget proposal will survive surgery by his successor and by the main architects of the budget – state lawmakers. Both houses of the Legislature will be narrowly controlled by Democrats.

As for the next governor, Rossi has ruled out new taxes, and Democrat Christine Gregoire has said she thinks it’s wrong to boost tax revenue when the economy is just now recovering.

Locke said he thinks the budget will be a valuable blueprint.

“We’ve really done most of the homework in terms of scrubbing the budget and looking for savings,” he said.