Late maneuvers cap debate-filled session

OLYMPIA – By the time the Legislature wrapped up 90 days of heated and sometimes confusing debate over taxes and spending early Tuesday, it had raised taxes on a wide array of consumers and businesses, cut some programs, boosted others, moved hundreds of millions of dollars around, and penciled in hundreds of millions more by betting on the federal government to come through.

But the final hours of the special session did not go smoothly, and at one point Monday night the governor made a rare visit to the Senate floor to keep the state from facing cash flow problems in the fall. The Senate had not passed a bill to move some $230 million from the state’s rainy day account into the general operating budget, and without it, the state’s cash reserves could dip perilously low at some point before the two-year budget cycle ends in June 2011.

“I have a problem,” a visibly angry Gregoire said as she stormed past reporters, into the wings of the Senate chamber and Senate Majority Leader Lisa Brown’s office at 11:12 p.m.

The Senate was about to adjourn without voting on the bill because tapping the rainy day fund requires a three-fifths majority, and Democratic leaders didn’t think they had the votes.

Without it, the state would have to count on Congress coming through, on time, with more money for Medicaid costs and various parts of the new federal health care reform law. Gregoire and Democratic legislators were already expecting the money, despite warnings from Republicans it was bad fiscal policy. But there was a nuanced difference, the governor said after getting votes from previously reluctant members of her own party: She wanted them to “book” the federal money but not spend it, leaving it in the treasury when the state starts the next budget cycle.

It was a fitting end to the double session – the initial 60 days, plus a 30-day special session – which revolved around an operating budget that was out of balance by an estimated $2.8 billion and some very sharp disagreements about the causes and fixes.

Taxes will show up as early as May 1 for smokers, when the price of a pack of cigarettes goes up $1, and business taxes on the service industry – which includes lawyers, accountants, real estate agents and a host of other white collar and blue collar jobs – along with some canned food processors and some out-of-state firms also rise. In June, taxes on bottled water, candy, gum and mass-production beer go up, as do taxes on other out-of-state companies doing business in Washington. In July, a tax is levied on soda.

Some of the taxes are set to expire in 2013. But the state’s most active initiative promoter, Tim Eyman, has plans to cut them off before then. Tuesday he filed eight different initiatives to let voters cancel various taxes if his signature gatherers can get them on the November ballot.

The budgets have good news and bad news for the Spokane area. There’s an extra $3.5 million for construction of the Biomedical and Health Sciences facility at the Riverpoint campus, about $800,000 for an extra 500 low-income adults to get health care, $250,000 to increase the number of residents at the Medical School, and $400,000 plus some 5.5 acres of state land for an Aerospace Technical Center near Spokane International Airport. The Department of Corrections is ordered to close the Pine Lodge Center for Women in Medical Lake, although Brown said she’s going to try to delay the closing date while looking for some alternatives that could have local law enforcement officials using some of the facility.

Throughout the session Republicans and some conservative Democrats disagreed loudly with the majority Democrats over taxes and spending. If the state is spending more than it is taking in, it should first stop spending so much, Republicans said. Democrats replied that they had cut spending last year, and to take the full $2.8 billion in cuts would devastate the budget.

That generated debate over whether the state had cut as much as Democrats claimed – or really anything at all when various things were put on the scales. The answer was nuanced, just as the explanations of accounting for rainy day and federal funds.

Much of the debate revolved around the operating budget, which pays for most programs and about half of all state salaries; but if other funds for special programs or projects get added in, the state is spending more overall. For example, the state’s capital projects budget passed Monday will spend an extra $452 million.

Republicans repeatedly said that the state should face tough economic times just like a business, cutting spending, concentrating on essentials and producing jobs that would bring in more tax revenue. But the state also has more demands, not fewer, because of the recession, Democrats said: More children are in public schools, perhaps because fewer parents can afford private school; prison populations are up; more college students are seeking aid.

The final judgment will come from the voters this fall, when all of the House and half the Senate are up for election. Gregoire said Democrats who voted for the tax or budget package should be proud, not defensive, that they voted to save important state services. Republicans have already said they’ll run against the budget and taxes in the fall.

“I made it clear I would be out there supporting them,” she said of Democrats in the coming campaigns. “What happens in November is very dependent on what happens to the national economy as well as the state economy.”