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Originally published Friday, March 20, 2009 at 12:00 AM

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State voters may be asked to approve tax increase as tax collections fall

The latest state revenue forecast says state tax collections are expected to fall another $552 million below projections between now and 2011, which brings the state budget shortfall to around $9 billion over the next two years.

Seattle Times Olympia bureau

OLYMPIA — Sen. Rodney Tom stood before reporters Thursday, after hearing state tax collections are expected to drop another half-billion dollars, and asked the question of the day.

"Where in the world we can go to get another $500 million?" asked Tom, D-Medina, vice chairman of the Senate Ways and Means Committee.

The latest state revenue forecast says state tax collections are expected to fall another $552 million below projections between now and 2011. That brings the total budget shortfall to around $9 billion over the next two years.

The real problem the Legislature has to solve is about $4 billion, if you take into account emergency state reserves, the federal stimulus money recently approved by Congress and belt-tightening moves already approved by the Legislature.

But that's still an unprecedented shortfall.

Tom said the Senate's proposed two-year budget was largely done before the forecast came out. Budget writers, he said, had already looked at eliminating pay increases for teachers and state workers, gutting money for the class-size reduction initiative, I-728, and getting rid of 10,000 slots for college students.

"There are only so many programs where you can get big chunks of money," he said.

Although the bad news will send budget writers back to find additional cuts, Senate and House leaders said they still expect to release budget proposals next week. The Senate is supposed to go first, followed by the House.

Democratic leaders in the House said the additional shortfall was in line with the cuts they'd been planning. It just means more pain, said Rep. Ross Hunter, D-Medina, who chairs the House Finance Committee.

"As an example, that would be the entire Basic Health Plan we just lost," Hunter said, referring to the state program that provides subsidized medical coverage to lower-income families. "Something of that magnitude — that's 100,000 people getting health care."

Lawmakers still won't discuss in detail what they plan to cut, or what kind of tax package they're likely to send to voters.

Republicans say they're worried that Democrats intend to use budget cuts as a way to frighten voters into approving a tax increase.

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"Today's revenue projection really doesn't change the choice facing the majority party," state Sen. Joe Zarelli, the ranking Republican on the Senate Ways and Means Committee, said in a statement.

"Its members can roll up their sleeves, balance the current budget, reduce discretionary spending in favor of funding essential government services, and quit talking about tax increases," he said. "Or, they can throw their hands in the air, slash funding for what should be the priorities of government and try frightening the voters into approving a bailout."

Tom said that's not the intent.

"We're going to put together a balanced budget," he said. "We need to put together a budget we can leave town with and if the voters do say 'no,' we're going to have to live with that."

The legislative session is scheduled to end April 26. Any public vote on whether to raise taxes would occur after that, possibly in June or November.

A recent poll by Seattle pollster Stuart Elway indicated some support for certain taxes. Sixty-one percent of respondents said they would favor or "accept with reservations" a temporary 1-cent increase in the sales tax, while just over half said they would favor or accept a sales tax increase tied to reducing public-school class sizes.

Lawmakers also are trying to decide how much money to leave in reserve to deal with any additional drops in tax collections after they leave town, and are negotiating with the governor about additional cuts that could be made in the future.

The overall state budget shortfall is the difference between how much tax revenue the state expects to collect compared to the amount of money needed to maintain state services at current levels, and cover expenses such as pay increases for state workers, through June 2011.

Senate budget writers estimate that it would cost $39.3 billion to maintain state services through June 2011 and leave several hundred million dollars in reserve. However, they project the state will collect only $30.3 billion in taxes during the same time period because of the deepening recession.

The Legislature already has taken some moves to rein in expenses, such as a hiring freeze, which is expected to save about $1.3 billion between now and 2011, according to the governor's budget office.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com

Copyright © 2009 The Seattle Times Company

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