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Originally published Thursday, March 28, 2013 at 11:03 AM

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Gov. Inslee proposes extension of temporary taxes

Gov. Jay Inslee unveiled on Thursday his budget proposal, a mix of extending temporary taxes and ending some tax exemptions to address both the state's projected budget deficit and a court-ordered requirement to put more money into the state's basic education system.

Associated Press

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OLYMPIA, Wash. —

Gov. Jay Inslee unveiled on Thursday his budget proposal, a mix of extending temporary taxes and ending some tax exemptions to address both the state's projected budget deficit and a court-ordered requirement to put more money into the state's basic education system.

Inslee seeks to raise some $1.2 billion from tax changes, with more than half of that coming from extending business and beer taxes that were about to expire. The rest of the money would come from eliminating or lowering tax exemptions, raising new money from bottled water sales, trade-in vehicles and sales taxes on non-residents.

The non-resident sales tax exemption has been around for decades, designed to help retailers - particularly those along the Oregon border - stay competitive with states that don't have a sales tax.

In a prepared statement issued before a news conference, Inslee said with his budget plan, "I choose education over tax breaks."

"I choose fulfilling our constitutional and moral duty to ensure high-quality schools for our children," Inslee wrote. "When we give these tax breaks a hard look, they just don't measure up to our urgent need to better fund education."

Inslee first indicated his support for the idea of extending temporary taxes in January, saying that he didn't consider the move a tax increase, which he has said he is opposed to. At the time, he said the idea was one of many that lawmakers need to be open to as they work to balance the budget.

Lawmakers, who in the midst of a 105-day legislative session, are tasked with patching a projected deficit of more than $1.2 billion for the next two-year budget ending in mid-2015.

That doesn't include money lawmakers will need to spend to improve funding for education as directed by the state Supreme Court earlier this year.

Inslee would separately add some new tax benefits for those in the clean energy sector, high-growth industries and businesses who hire veterans. Inslee's plan would increase government spending by more than 10 percent from the current budget cycle to the next one.

Inslee also calls for the state to once again suspend voter-approved cost-of-living raises for teachers, saving $321 million. He also proposes to save some $20 million by changing how the state assesses K-12 students. He also proposes a one-time $8.9 million reduction on litter prevention and waste reduction programs.

Part of his proposal reduces the tax break on business and occupation taxes by 25 percent for all industries except aerospace and those charged with radioactive waste cleanup by the federal government. Also, a 3 percent pay cut state workers saw would be restored.

Inslee proposed the state make a $1.2 billion down payment in this two-year budget. That amount includes nearly $280 million on programs to expand preschool programs, expand full-day kindergarten and reduce class sizes for kindergarten and first grade for high-poverty schools.

In higher education, Inslee would allow further tuition increases at the University of Washington and Washington State University - as much as 5 percent per year. Tuition at other state universities would go up as much as 3 percent a year while tuition at community and technical colleges would remain steady for the next two years.

A recent proposal by a Senate coalition would have added money to the system and ordered a tuition decrease of 3 percent, although the Senate has yet to fully release its budget.

Inslee also moves forward with Medicaid expansion in his budget, which he says will save the state nearly $300 million.

On Wednesday, leaders with the Republican-dominated coalition in the state Senate said they plan to adopt the Medicaid as part of a budget proposal expected to come out next week.

Officials expect that the Medicaid expansion will save the state money, since the federal government will pick up the tab on new enrollees. Some Republicans have expressed concern that the federal government might not live up to its commitment in the long run, leaving states footing the bill years down the road.

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AP writer Mike Baker contributed to this report.

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