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Originally published April 10, 2013 at 7:12 PM | Page modified April 10, 2013 at 7:28 PM

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House Dems’ budget targets state’s tax breaks, avoids social cuts

Besides adding more money to basic education, legislators must patch a projected deficit of more than $1.2 billion for the next two-year budget ending in mid-2015.

The Associated Press

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OLYMPIA — Democrats in the state House proposed a budget plan Wednesday that would eliminate a variety of tax breaks to help pay for education and avoid some of the cuts to social services recently approved by the Senate.

Similar to a budget proposed by Gov. Jay Inslee, the plan by House Democrats would increase government spending by more than 10 percent, compared to the Senate plan that increases it by about 7 percent. The two-year budget would spend $34.5 billion, more than $1 billion beyond a plan approved by the Senate.

Under the House proposal, lawmakers would increase K-12 education funding by $1.9 billion, with $1.3 billion dedicated in response to a state Supreme Court ruling that says the state isn’t adequately funding basic education. The Senate plan proposes a $1.5 billion K-12 funding increase, including $1 billion toward the court requirements.

House Majority Leader Pat Sullivan said the Senate proposal simply pushes some education costs to future years.

“We feel that we should actually fund that program right now,” Sullivan said. “You can pay it now or you can pay it later.”

Along with permanently extending some business and beer taxes to raise nearly $600 million, House Democrats support closing or narrowing 15 tax exemptions on things ranging from repealing preferential business tax rates for travel agents and insurance agents, to repealing the sales tax exemption on janitorial services. The plan would also repeal the sales tax on bottled water, and it would also repeal the sales tax break for residents who live in states that don’t have a sales tax.

Rep. Reuven Carlyle, D-Seattle, said that last year’s ruling — known as the McCleary case — required them to take a close look at the more than 600 tax exemptions that currently exist.

“It is a new era,” said Carlyle, who is chairman of the House Finance Committee. “It is time to acknowledge that some tax exemptions provide a better use of money for McCleary, for schools and for families.”

The nonresident sales-tax exemption, which has been in place for decades, was designed to help retailers — particularly those along the Oregon border — stay competitive with states that don’t have a sales tax. The Senate plan does not repeal the exemption.

Republican budget writer Andy Hill, of Redmond, wouldn’t speak to specifics about the House plan, but insisted that the public doesn’t want tax increases.

“The Senate budget lives within its means,” he said.

Other exemptions for landline phone service and the estates of married couples are targeted, partly in response to court rulings. Those changes raise $270 million. The budget also relies on $750 million in fund transfers, mostly from the so-called “rainy day” account.

“This budget sends a very clear message: Educating our children is more important than preserving tax breaks,” Inslee said in a written statement.

House budget writers avoided some of the Senate’s deep cuts in social services, such as keeping more funding for a child-care program for the working poor. However, they continue to assume tuition increases between 3 percent and 5 percent per year.

As the budget passed by the Senate last week did, the House proposal repeals the voter-approved cost-of-living raises for teachers, saving the state more than $320 million.

“Sometimes the real world intervenes with what you’d like to do and what’s actually possible,” said Democratic Rep. Ross Hunter, of Medina, the top budget writer in the House.

As the Senate did, the House also moves forward with Medicaid expansion under the new federal health care law, with the assumption the move will save the state $265 million.

The House plan does not try to move some part-time government workers into the federal health-care exchange. The Senate plan proposed that shift, booking savings over $120 million.

Lawmakers are nearing the end of a 105-day legislative session that is supposed to end on April 28. In addition to adding more money to basic education, they must patch a projected deficit of more than $1.2 billion for the next two-year budget ending in mid-2015. The House and Senate will have to work out their budget differences before the end of the regular session if they want to avoid going into special session. Democrats have a 55-43 majority in the House.

The Senate is controlled by a coalition of 23 Republicans and two Democrats, though seven other Democrats voted on the budget that passed the chamber last week on a 30-18 vote. House leaders say their budget proposal could come up for a vote on Friday or Saturday, and then negotiations between the two chambers will begin next week.

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