Legislature OKs 'sin' and estate taxes - House, Senate negotiators agree on $26 billion budget

Saturday, April 23, 2005

By CHRIS MCGANN
SEATTLE POST-INTELLIGENCER CAPITOL CORRESPONDENT

OLYMPIA -- With two days to their scheduled adjournment, Democrats agreed on how the state would spend $26 billion over the next two years as the House and Senate approved the last major tax increases for a $481 million revenue package.

Their spending plan invests heavily in the areas Democrats -- who control the House, Senate and governor's office -- outlined at the beginning of the session: education, health care and state employee and teacher salaries topping the list.

"We stuck with our priorities, and we funded them," said House Majority Leader Lynn Kessler, D-Hoquiam. "We'll definitely get out of here on time."

However, the fate of a 9.5-cent- a-gallon gas tax increase hung in the balance. The $8 billion transportation plan would help pay for replacing the Alaskan Way Viaduct as well as 200 other road projects all over the state.

Though it passed the Senate with a bipartisan vote, complications in the House have jeopardized negotiations as time ran out on the legislative session.

The two-year operating budget has come together much more deliberately. Democrats have had to make only small adjustments to three budgets, all based on the same priorities.

Overall, the budget is 12 percent higher than the current two-year budget.

It would:

  • Pay for more than 8,100 new enrollment slots at community and four-year colleges and boost financial aid.

  • Raise in-state undergraduate tuition by 5 percent a year at community colleges, 6 percent at the four-year regional universities and 7 percent at the University of Washington and Washington State University.

  • Finance two voter-approved education spending initiatives that were largely suspended for the past two years, providing cost-of-living increases for teachers and pumping out money for class-size reduction and other locally determined priorities, such as Saturday school. The initiatives cost about $140 million each.

    Remedial education was beefed up. The levy equalization program, which helps property-poor districts, was trimmed. The budget plan pays for raises for public employees.

    A reserve of about $200 million is left unspent, after dipping to as low as $170 million during talks.

    After last-minute bargaining, the number of Basic Health Plan enrollment slots was sustained at 100,000 and co-payments for prescriptions and Medicaid client transportation were dropped.

    The plan restores $80 million in federal budget cuts for community mental health and finances much of the mental health and chemical dependency treatment that Sen. Jim Hargrove, D-Hoquiam, had proposed.

    To avoid multiple tax votes, Democrats negotiated the details in private and agreed to move identical tax packages in both chambers.

    However, mixed support for individual elements of the plan, which they knew they would have to advance without Republican backing, required them to divide it into two main bills: a new estate tax and an omnibus sin-tax package.

    The Senate struck first Thursday, voting to re-establish part of the estate tax that the state Supreme Court nullified earlier this year. The new tax exempts farms and estates valued at less than $1.5 million this year -- $2 million next year. It will generate $138 million in the next two years.

    Later that night, the House passed a grab bag of so-called sin taxes, including a 60-cent-pack cigarette tax increase that would generate an estimated $175 million and tax increases on liquor and on extended warrantees for computers, appliances and other products.

    In close votes late last night, the House approved the estate tax 50-48, while the Senate approved the sin tax package 25-22. Revenue from the estate tax and cigarette tax increase would pay for the expansion of class-size reduction Initiative 728 and higher education.

    Lawmakers hope to vote on the operating budget and transportation plan by tomorrow and complete the scheduled 105-day session on time.

    On Thursday, House Republicans said they would support the gas tax only if the Democrats passed a no-new-taxes operating budget.

    "We can't in good faith go to the citizens and tell them we must have a gas-tax increase to pay for roads when we are needlessly increasing other taxes to pay for a 12 percent increase in the operating budget," said House Minority Leader Bruce Chandler, R-Granger. "These are separate budgets, but it's all taxpayer money and the citizens deserve our best effort to spend their money wisely for all services."

    House Speaker Frank Chopp, D-Seattle, said Republicans were turning their backs on the bipartisan spirit of transportation negotiations.

    "If it comes down to roads versus kids, we will side with kids every time," Chopp said in a statement.

    "But the truth is, this shouldn't even be an issue. The transportation budget was crafted in a bipartisan spirit, and passed out of committee -- and the Senate -- with a bipartisan vote."

    He said Republicans were "reneging on a commitment to pass needed safety and freight improvements for our roads and highways."

    But unlike years past, Chopp has agreed to bring the gas tax to a vote even if he doesn't have the 50 votes -- at least 18 of them Republican -- that he'll need to pass the bill.

    "We'll have the vote," Kessler said. "But whether it succeeds or not, I can't say."


    P-I reporter Larry Lange and The Associated Press contributed to this report.

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