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Originally published March 20, 2013 at 8:38 PM | Page modified March 21, 2013 at 8:46 AM

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Battle lines take shape in Olympia to close shortfall of up to $1.3B

The state revenue forecast contains what passes for good news nowadays — no big drop in projected tax collections. The March forecast kicks off serious negotiations to balance the state budget.

Seattle Times Olympia bureau

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OLYMPIA — The battle over the state budget begins in earnest now.

Legislators generally wait for the March revenue forecast before rolling out their spending plans. And Wednesday, they got what passes for good news nowadays — no big drop in projected tax collections.

In fact, the bottom line improved by a modest $40 million. By comparison, the current two-year state budget is roughly $31 billion.

“From my point of view, we have a hard problem to resolve and this doesn’t make it worse,” said House Appropriations Chairman Ross Hunter, D-Medina.

What’s the problem? An overall budget shortfall of as much as $1.3 billion and a state Supreme Court mandate to increase education funding.

Estimates peg the cost of meeting the court ruling at from an additional $500 million to $1.7 billion over the next two years.

The debate over the coming weeks, and possibly months, will be whether the state can close the shortfall and boost education funding without increasing taxes.

Democrats, who control the House and the governor’s office, have indicated more money will be needed.

Republicans, who lead the Senate, say the state has plenty of money already and note the state is projected to take in an additional $2 billion in revenue over the next two years.

A miniversion of this argument played out at a news conference Wednesday.

Senate Ways and Means Chairman Andy Hill, R-Redmond, said the way the Legislature looks at spending and cuts is different from how the average person thinks about a household budget.

“The analogy I use goes like this: You’ve got a 16-year-old daughter who is now driving a car. We give her $25 a week for gas and she drives to school. ... She comes back and says, ‘Dad, I want $100 a week for gas.’

“I go, ‘OK, that’s a little excessive. We will give you $30 a week, an increase of $5.’ She goes back to high school and says, ‘My dad cut my gas money by $70.’ That is a cut in Olympia,” he said.

Hunter said there’s a different way of looking at things.

He used the analogy of someone who got a cost-of-living increase in salary, but whose health-care premiums jumped by 10 percent, plus a grandmother moved in and maybe a baby joined the household. “And you say, wow,” Hunter said.

His point was that more people move into the state, health-care costs go up and there’s inflation no matter what. In other words, simply maintaining the same level of state services costs more money.

In Olympia, they call it a maintenance-level budget.

Senate Republican Leader Mark Schoesler, R-Ritzville, argues the state cannot use that line of thinking when it comes to the state budget.

“I’d be broke,” he said. “I have to go back and design what it is my farm is going to do every year or I’m gone.”

Republicans reaffirmed their pledge not to increase taxes.

Schoesler said they also would not agree to extending existing taxes that are due to expire next year, something that Gov. Jay Inslee has indicated he’s open to.

The Senate is expected to release its budget within 10 days, with House Democrats following shortly after. Inslee is expected to release a budget proposal at the end of next week, according to his budget director, David Schumacher.

Budget writers had been expecting news Wednesday of a $200 million drop in revenue, or more, in part because of the automatic federal budget cuts, known as sequestration, that kicked in this month, and the expiration of federal payroll-tax cuts.

It turns out that sequestration is not expected to hammer tax collections that hard and the expiration of payroll-tax cuts did not seem to slow consumption.

“I was kind of expecting to see everybody’s paycheck got cut by 2 percent, that consumption would shrink, but it didn’t,” said Steve Lerch, the state economist.

Instead, he said, “They decided to essentially finance consumption by reducing savings rather than cutting back on consumption.”

Andrew Garber: 360-236-8268 or agarber@seattletimes.com

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