Gregoire, Dems say tax package will be in budget fix

OLYMPIA — Gov. Chris Gregoire and Democratic leaders in the state House and Senate on Thursday said they plan to propose a tax package next year to help close a $2.6 billion budget shortfall.

Democrats have been saying for weeks they were considering the idea. This is the first time leaders have said they'd actually propose taxes. No one would discuss details, and Republicans remain adamantly opposed to any new taxes.

The current support for taxes is in stark contrast to the last legislative session, when Democratic leaders seemed to choke whenever they were asked about the topic, especially early on. Gregoire repeatedly opposed the idea.

Now they're saying the budget shortfall is just too big to handle only through cuts.

Gregoire went first, announcing on TVW — a nonprofit television station largely funded by the state — that "we're at a point now where there's no doubt in my mind I can't live with that budget. I can't cut hospice care. I can't cut maternity care. I can't cut all state need grants. I can't do that."

Leaders in the Senate and House soon followed. "I think most members of my caucus agree with her, that it is too large for cuts alone," Senate Majority Leader Lisa Brown, D-Spokane, said about the budget shortfall. "That would severely damage our quality of life and the things that we value."

House Majority Leader Lynn Kessler, D-Hoquiam, said leadership in the House was on board as well, but she's not sure if the votes will be there among the rest of the House Democrats.

"That's a huge question. We really don't know. But we'll put it to everybody and see what they think," Kessler said.

The Legislature will convene next month to begin considering how to balance the budget.

The governor's office said Gregoire isn't interested in general increases in the state sales, property and business and occupation taxes. Top candidates for new revenue include eliminating tax incentives and loopholes.

Democrats said they're looking at a variety of ways to increase revenue, including closing existing tax breaks and increasing taxes.

"We have a bunch of ideas about the fairness issue and not wanting to make things worse in our state," Kessler said.

Republicans oppose more taxes. "I think it's the wrong direction," said Sen. Joe Zarelli, R-Ridgefield, the ranking Republican on the Senate Ways and Means Committee.

The Legislature can balance the budget without raising taxes in part by finding new, more efficient ways to deliver state services, he argued.

Zarelli said he'd put forward ideas, but didn't know if Republicans would come up with a detailed proposal to balance the budget without raising taxes. "I don't have the staff to write a budget," he said.

Gregoire is required by state law to draft a proposed state budget that balances using existing tax revenue. She's expected to release a proposed budget next week that reduces state spending in the current two-year budget by $2.6 billion through cuts alone. The two-year budget ends in June 2011.

That shortfall is on top of a $9 billion hole the Legislature dealt with earlier this year through budget cuts and a mix of one-time fixes that included $3 billion in federal stimulus funding.

Democratic leaders say the budget has already been cut to the bone and hacking out billions more would result in unacceptable reductions in state services.

To put the shortfall in perspective, even if the Legislature eliminated all funding for the state's two-year colleges and the university system for the coming year, it would still face a $800 million hole.

Victor Moore, Gregoire's budget director, wouldn't discuss tax specifics. The governor will not announce a tax package along with the budget next week, he said.

"We want to have conversations with the Legislature about the package," he said.

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