“What does Gov. Gary Locke’s budget procedure, known as Priorities of Government, or POG, spell backward? GOP!” That’s the joke circulating among Democrats as the 105-day state legislative session opens this week in Olympia. The humor masks real anger. On Dec. 17, Locke put members of his own party in a terrible political position by releasing a no-new-taxes plan that would cut $2.4 billion from a $23 billion biennial budget. It is a budget so extreme that one of Locke’s own spokespeople, Ed Penhale of the Office of Financial Management, acknowledges that not even the Republican-controlled Senate can stomach it. “Even [the Republicans] couldn’t pass it,” admits Penhale.
Locke’s budget:
- Eliminates health insurance for 60,000 members of the working poor for a savings of $328 million.
- Lays off 2,500 state workers, saving $100 million.
- Suspends education initiatives that raised teacher pay and reduced class size, netting $545 million.
- Chops $60 million out of children’s programs.
- Ends welfare for adults who are unemployable, saving $40 million.
- Slashes $39 million from community mental-health programs.
- Reduces funding for higher education by $94 million.
LOCKE’S BUDGET DREW fulsome praise from Republicans, business leaders, and newspaper editorial boards across the state. “The whole world is upside down!” says state Sen. Dino Rossi, R-Issaquah, chair of the Ways and Means Committee. Rossi is delighted that the governor “clearly stated, ‘You are not going to raise taxes to close this deficit. If we do, we hurt the economy.'” Says Richard Davis, president of the business-oriented Washington Research Council, admiring Locke’s proposal to the Legislature: “They are using the ‘L’ word—not liberal, leadership!”
Meanwhile, as Democratic lawmakers know full well, Locke’s opposition to new revenue sources leaves them fully exposed politically. They will have to propose new taxes to write a budget that will pass. “Liberal Democrats are mad,” says state Sen. Ken Jacobsen, D-Seattle. Nearly every legislator interviewed acknowledges that Locke’s budget is politically unpalatable, not only to the Democratic- controlled state House of Representatives but also to the Republican-controlled state Senate. The GOP controls the Senate by the slimmest of margins— 25 Republicans, 24 Democrats. Even Rossi admits not all of his caucus will support cuts of this magnitude.
According to the Legislature’s protocol, the House will be the first chamber to pass a budget. That puts the heat on Speaker Frank Chopp, D-Seattle, and Appropriations Chair Helen Sommers, D-Seattle, to find new sources of funding to reduce the terrible impact of Locke’s proposed cuts. “Is [Locke] going to come back with real budget proposals?” Chopp asks pointedly. The governor’s budget “is not implementing the will of the people, not only on education but also on health care,” he says.
While Locke’s no-new-taxes approach might be dead on arrival politically, is it the right thing to do? Is Locke finally showing real mettle as a leader by making tough choices?
Conservatives and business leaders certainly think so. Don Brunell, president of the Association of Washington Business, calls Locke’s budget “cod liver oil for the state’s ailing economy.” He argues, “Unless lawmakers are willing to ‘take their medicine,’ forgo tax increases, and streamline government, our state will miss a golden opportunity to restructure itself to grow, prosper, and provide new jobs.”
Liberals and education and human-services advocates believe otherwise. Locke “bought into living with an inadequate revenue system,” says Jon Gould, deputy director of the Children’s Alliance. “The state needs new sources of revenue, and they need to be more fair [in order to provide] what residents of the state of Washington want and need.”
Gould and others say Locke missed an opportunity to propose bold tax reform. Just two weeks before Locke released his budget, a state tax commission, headed by Bill Gates Sr., the father of the world’s wealthiest man, released a 139-page report detailing a study of Washington’s methods of funding government. Gates blasted Washington’s tax system as unfair, outdated, and regressive. He proposed reducing the state’s sales tax and replacing its property tax with a personal income tax, and he suggested scrapping the business-and-occupation tax, which taxes gross receipts whether a business is profitable or not, in favor of a corporate income tax or a value-added tax. While such major reforms are impossible to pass quickly, Locke certainly could have used the state’s financial crisis to lay the groundwork for reform.
Instead, Locke chose to respond to the crisis by embracing conservative arguments about limiting the size of government. At a press conference last week, Locke said, “Our proposal reflects a return to the fundamentals of what state government can and must do.” He continued, “I don’t believe a general tax increase is the wise thing to do.”
SINCE MOST OBSERVERS believe that Locke’s resistance to new taxes will be swept aside by liberal and moderate legislators’ opposition to draconian cuts, what sort of new taxes are we likely to see? The first word from everyone’s lips is gambling. Numerous proposals would expand the state’s revenues by preying on human greed and stupidity. Most involve the Legislature authorizing some kind of video slot machines. Lottery staffers estimate 8,000 machines could bring in over $270 million in their first year. Since off-Indian-reservation gambling requires a 60 percent majority approval in both chambers, it will be difficult to pass such measures, however.
Other sin taxes that will get a look include new surcharges on tobacco and alcohol.
ENDING TAX EXEMPTIONS that have failed to provide significant benefit is a favorite of the Democratic caucus. There are billions of dollars of loopholes. Democratic staffers say if you eliminate the useless ones, you could raise hundreds of millions of dollars. Each exemption has a constituency that will fight like hell to preserve it, however. “Everybody who ever got an exemption thinks it’s the most important thing in the world,” observes House Appropriations’ Chair Sommers.
Many Democrats also favor extending the sales tax to services provided by architects, lawyers, accountants, and other professionals. The Economic Opportunity Institute, a liberal think tank, estimates that including “five categories of business and professional services (advertising, computer/data processing, miscellaneous business services/consulting, legal, and engineering/architectural) together could raise $714 million annually.” The business lobby will issue dire warnings of further damage to Washington’s economy from such an innovation, however.
Locke himself says he’s open to considering gambling, sin taxes, and ending tax exemptions. “It’s not going to get you all that much money,” he warns. For Democratic legislators, that just begs the question: If the governor knows such unpalatable proposals are necessitated by fiscal and political reality, why the hell didn’t he step up and propose them himself?
