Gov. Gary Locke yesterday warned that without almost $600 million in new taxes, the state faces deep cuts to programs that aid the poor, elderly and disabled, as well as college...

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Gov. Gary Locke yesterday warned that without almost $600 million in new taxes, the state faces deep cuts to programs that aid the poor, elderly and disabled, as well as college students.

His office projects the state has a $1.8 billion hole to fill in the next two-year budget. It cannot be closed by cuts alone, he said, without hurting the state’s most vulnerable people.

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“We’ve continued to make cuts over the years,” Locke said, unveiling his last budget as governor. “At some point we have to say, ‘Enough is enough … we cannot cut anymore.’

“This is not a scare tactic.”

Republicans and business groups strongly disagreed with Locke’s budget approach.

“You can’t raise taxes in a recession and expect to come out of an economic downturn,” said Tom McCabe, executive vice president of the Building Industry Association of Washington.

Locke proposed raising almost $504 million from “sin taxes” on beer, wine and liquor, and a nickel tax on the cost of soda pop, which the governor said is bad for teeth. An additional $96 million would come from a 1 percent gross-receipts tax on physician services.

Locke budget highlights

$289 million would be cut from scheduled contribution to public pension system.

$73 million in savings from trimming sentences and post-release supervision of nonviolent and drug offenders.

Drug treatment:
$54 million increase to expand subsidized drug-and-alcohol treatment. The money, shifted from acute-care funds, would add nearly 24,000 patients.

$47 million from administrative savings, including $25 million from better bulk-purchasing contracts for equipment and supplies.

Child Protective Services:
$8.8 million for a new computer system for CPS. Deficiencies in the agency’s antiquated system were blamed for contributing to the deaths of two boys in Kent this fall.

Source: Associated Press and staff writer Jonathan Martin

The budget would pay for new slots for college students, pay raises for thousands of state workers and teachers, and maintain the Basic Health Program for the working poor.

However, even with the proposed tax increase, cuts would have to be made, Locke said, such as eliminating supervision of certain low-risk criminals who have completed prison or jail time. It’s a controversial proposal that has run into heated opposition in the Legislature in the past.

A template

By law, Locke is required to present a balanced budget to the Legislature, even though he’s leaving office and a new governor is scheduled to take office next month. The reality is that the next governor will want to put together his or her own budget. Locke’s budget at best is a template to get the process started.

It’s not clear who will have to deal with Locke’s tax proposal, Gov.-elect Dino Rossi or Democrat Christine Gregoire. A hand recount is expected to be finished next week.

Rossi’s campaign quickly rejected Locke’s call for new taxes.

“Gov.-elect Rossi is committed to doing this within existing revenues because he thinks raising taxes at this point would be bad for the economy, bad for jobs and would hurt families,” said Dan McDonald, a former state senator heading Rossi’s budget staff during the transition.

Without giving details, McDonald said it’s possible to balance the budget without new taxes and without making the types of cuts Locke contends would be needed.

“The strong disagreement is [that] you simply have to raise taxes or the most vulnerable citizens will be left hanging. We don’t agree with that,” he said.

Gregoire, during the campaign, said this is not a good time to raise taxes, given the struggling economy. She did not comment on Locke’s proposal yesterday, but spokesman Fred Olson said Gregoire is in the early stages of looking at the state’s budget.

“She has not decided where she is going to go with new revenue,” he said.

The Democratic chairwomen of the House and Senate budget committees said they’re open to the idea of tax increases.

“He’s given us a blueprint we can work with,” said Rep. Helen Sommers, D-Seattle, chairwoman of the House Appropriations Committee.

State Sen. Margarita Prentice, D-Renton, the new chairwoman of the Senate Ways and Means Committee, agreed.

Sen. Joseph Zarelli, R-Ridgefield, outgoing Republican chairman of the same committee, said given that Locke is leaving office, “to a certain extent this governor is moot.”

2 budgets

Locke issued two budgets yesterday. The first one, required by law, is balanced without tax increases and using existing revenue.

Going that route, he said, would require unacceptable cuts, such as taking more than 17,000 low-income adults off the Basic Health Plan, which provides subsidized insurance to the working poor. The state also would have to freeze college admissions at current levels and continue to suspend Initiative 728, which was meant to reduce school class sizes.

“The next governor and next Legislature have to ask themselves what kind of state do they want,” he said. “Do we just say, ‘Sorry, we’re not going to admit more students to our colleges and universities’ ?”

Locke’s second budget, which included the tax increase, provides more than 7,000 new slots for students in colleges and universities. It also puts money into I-728 and I-732, which was also suspended and was intended to give teachers a cost-of-living raise.

The budget also allocates $19 million for quicker child-abuse investigations and more timely visits to foster children. The money is needed to comply with a critical federal review of Child Protective Services (CPS) and to meet the terms of a settlement in a class-action lawsuit brought by foster children.

Budget cuts, in addition to eliminating supervision for certain low-risk offenders, include deferring contributions to the public pension system and reducing reimbursement rates to nursing homes.

Of the $600 million in taxes, the two biggest are the nickel soda-pop tax, expected to raise about $300 million, and the tax on physicians.

The money from the tax on doctors would prop up the Basic Health Plan and improve Medicaid reimbursements.

Locke’s proposal would allocate $42 million of the money raised to Basic Health, enough to keep the state-subsidized health-insurance program stable with close to 100,000 low-income earners. The remaining $52 million would be used to improve reimbursement rates for doctors treating Medicaid patients.

The state Medicaid money would be matched dollar-for-dollar by the federal government, Locke said.

But the proposal is not sitting well with the Washington State Medical Association.

“We told the governor’s office two years ago that it was a bad idea, and we still think it’s a bad idea,” said Tom Curry, the association’s executive director. “It might up the reimbursements for some, but it’s on the backs of the rest.”

Curry said it doesn’t make any more sense to tax doctors for health services than it would to tax teachers for education or police officers for public safety.

He said the industry is already giving away “a ton” of charity care.

Seattle Times reporters Jonathan Martin and Nick Perry contributed to this story.

Andrew Garber: 360-943-9882 or