Good news about the state budget is raising new doubts that lawmakers will ask voters for a half-cent increase in the state sales tax.
OLYMPIA — Good news on the budget front has raised doubts that state lawmakers will push ahead with a proposal to ask voters for a half-cent increase in the state sales tax.
Lower demand than expected for state services and a slight uptick in tax collections have produced a nearly $400 million windfall that takes a chunk out of what’s been considered a $1.5 billion hole in the budget.
The additional money represents more than three-quarters of the $500 million the proposed temporary sales tax would raise for the current budget.
“It’s not clear to me that something will go to the ballot,” Senate Majority Leader Lisa Brown said Thursday, though she did not rule it out.
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She also held out the prospect of eliminating some tax exemptions to raise money for the budget. Doing so would require a two-thirds vote in the House and Senate. That’s a high hurdle, but Republicans in the House have said they are willing to eliminate certain tax breaks, while the Senate GOP has hinted at that possibility.
Senate Ways and Means Chairman Ed Murray, D-Seattle, said there’s tension in the Senate Democratic caucus between lawmakers who think a sales-tax increase should go to voters “and those who believe given the modest improvement we should not risk a sales tax.”
The governor’s office wouldn’t say where Gov. Chris Gregoire stands, saying she wants to see how the budget negotiations pan out. Gregoire was the first to propose asking voters for a sales-tax increase that would expire after three years.
The shrinking budget shortfall could have other implications as well.
Murray said he expects education budgets will benefit. “Given the modest improvement, it’s possible for K-12 and higher education to miss the bullet and not be cut in a significant way,” he said.
On the other hand, some moderate Democrats say their leverage to push through major budget overhaul is slipping away.
“You can feel it in the air that people want to get out of town, and I think there will be a lot of pressure to vote for a budget even if it’s not sustainable,” said Sen. Jim Kastama, D-Puyallup, who is part of a loose coalition of moderate Democrats pushing for long-term changes to the budget.
For example, moderate Democrats and Republicans include eliminating the class-size-reduction initiative, I-728, as well as I-732, which provides cost-of-living raises to teachers.
Lawmakers have repeatedly suspended the initiatives because of budget shortfalls but have kept them on the books in case they figure out a way to pay for them. They’re projected to cost more than $1 billion in the next two-year budget.
Also the Senate recently approved a proposed constitutional amendment that would require the Legislature to pass a balanced budget — and prohibit spending or other actions that would create a future shortfall. But it’s not clear how the measure will fare in the House.
Rep. Deb Eddy, a moderate Democrat from Kirkland, agreed she could feel momentum slipping, noting some of their leverage was tied to the push for a sales-tax increase. Moderates argued budget changes were needed before asking voters to increase taxes.
If the sales tax-proposal goes away, “a good deal of the steam goes out of reform,” Eddy said, but added that could change as the budget is hashed out in the final weeks.
Brown, however, disagreed that the push for such changes is slowing. She noted several measures, including the proposed balanced-budget amendment, have passed the Senate and said support for such legislation is more broad-based than a few moderate Democrats.
Sen. Joe Zarelli, the ranking Republican on the Senate Ways and Means Committee, argues the need for budget changes has not diminished. While the state shortfall has shrunk, the budget remains in bad shape and the economy is still struggling, he said.
The state’s interim chief economist, Steve Lerch, on Thursday projected it will be late in 2014 before the state recovers all the jobs lost during the recession. He also warned there is still a significant risk of economic turmoil in Europe dragging down the U.S. economy.
The budget has been helped by reduced demand for services, including fewer people than projected tapping health-care programs for the poor, which has saved the state around $340 million, according to Senate budget writers.
In addition, the state is expected to collect around $45 million more in revenue than expected between now and June 2013.
Lerch’s forecast shows a revenue increase of about $96 million, but $51 million was part of the budget proposal adopted in December 2011 that transferred unclaimed securities to the state’s general fund.
The goods news combined means that a shortfall once projected at $1.5 billion is now around $1.1 billion, depending on how much lawmakers decide to leave in reserve. Gregoire wants to leave $600 million. Others want to leave less.
Andrew Garber: 360-236-8266 or firstname.lastname@example.org