Christine Gregoire wants your money

OLYMPIA — Here’s the question for the day, and probably the next few months: Which taxes will state Democratic lawmakers propose increasing, and by how much?

The governor released a budget Wednesday that closes a projected $2.6 billion budget shortfall without raising taxes, as required by state law. But she abandoned key elements of the proposal before it was even printed.

Instead, Gov. Chris Gregoire released a budget advocating a tax increase to avoid eviscerating programs such as state-subsidized health insurance for thousands of low-income workers, aid to people who can’t work because of disabilities, and financial aid for low-income college students.

“Let me be very clear. I do not support this budget. As required by law, it is balanced. For me, it is unjust,” Gregoire said.

She plans to introduce another budget in early January that would restore what she called several of the most critical programs.

“The only way to do that is to find new revenue,” Gregoire said.

Gregoire would not talk about what taxes she might propose, although she said she didn’t like the idea of a property-tax or business-and-occupation-tax increase. She also expressed concerns about raising the 6.5 percent state sales tax, but she said, “I’m not going to take it off the table.”

She repeatedly mentioned suspending or eliminating tax breaks and loopholes, without being specific.

The state Department of Revenue issued a statement saying the governor “asked the Department of Revenue to look hard at areas of potential abuse where businesses are able to restructure transactions to avoid paying tax.”

An example, according to the department, are companies that have been “exploiting several loopholes in the law” to avoid paying real-estate excise taxes.

The governor said she wants to raise enough money to buy back about $700 million in state services that would otherwise be cut. She hopes some of that might come in the form of federal aid. If not, it could come from higher taxes.

That amount of money would allow Gregoire to restore core state services, such as the Basic Health Plan that provides state-subsidized health care for low-income families. But even after shifting funds and dipping into reserves, about $1 billion in cuts still would be necessary in the two-year budget, which runs through June 2011.

It’s not clear if Democratic lawmakers, who control the state House and Senate, will go along with that level of cuts.

Senate Majority Leader Lisa Brown, D-Spokane, said it’s too early to decide the size of a tax increase or budget cut.

And Democrats will likely be under a lot of pressure from interest groups to raise more taxes to avoid cuts.

“We need to look at the magnitude of the cuts and all the options on the table for revenue. I suspect that after we look at it, we’re going to find more than $700 million in cuts we want to prevent,” said Adam Glickman, a spokesman with the Service Employees International Union, which represents health-care workers.

Republicans said they don’t like the budget Gregoire proposed Wednesday — or her plans to increase taxes.

GOP leaders in the Senate said the governor missed an opportunity to tackle serious government reform that could deliver state services at a cheaper cost.

“She did a slash and burn so that they can come back and ask for some revenue. They have to make people seriously feel the pain,” said Senate Republican Leader Mike Hewitt, R-Walla Walla.

He did not offer an alternative plan, saying Republicans don’t have a staff of analysts to prepare their own budget.

Gregoire said Wednesday that she wasn’t playing games with the numbers.

“You come show me a budget that cuts $2.6 billion,” she said. “I’m trying to tell people the truth. This is not about scare tactics. I don’t believe in it.”

Most of the state budget is off-limits to cuts because it’s protected either by the state constitution (such as funding for basic education) or by other requirements (such as the state’s share of Medicaid, the federal-state insurance program for the poor.)

All told, the budget would reduce spending by about $1.7 billion. The rest of the $2.6 billion shortfall would be filled by shifting money from various funds and tapping reserves.

The cuts outlined in the Gregoire’s budget on Wednesday are certain to make some lawmakers flinch.

It would eviscerate programs that have broad political support and are tough to cut, much less kill.

The budget would eliminate the Basic Health Plan, an insurance program for the working poor, saving about $161 million over the next fiscal year. About 65,000 people are enrolled.

Also zeroed out would be the General Assistance-Unemployable (GAU) program, which provides a temporary safety net for more than 20,000 people unable to work because of mental or physical disabilities. That would save $207 million.

It would suspend funding for school-levy equalization, which aids “property-poor” school districts, saving $143 million, and suspend state-subsidized all-day kindergarten, saving another $33.6 million. All-day kindergarten has been offered at a few school districts, with an intent of expanding the program.

The budget also would cut $146 million in financial aid for college students and lower the qualifying income threshold from 70 percent of median family income to 50 percent. That means the money would go only to low-income families, and the grants would be smaller.

Gregoire said she wants to restore all of those cuts in her second budget.

The governor said she’s also taking administrative action to close all or part of several state institutions.

She wants to close the Frances Haddon Morgan Center in Bremerton and begin downsizing Rainier School in Buckley — both state facilities for the developmentally disabled.

She also called for closing the Ahtanum View, Larch and Pine Lodge corrections centers, and shutting down a wing at the Washington State Penitentiary in Walla Walla. The McNeil Island Corrections Center would be downsized from a maximum-security to a minimum-security facility.

Those moves and consolidation of inmate beds elsewhere are expected to save about $70 million over the next three years.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com

The Legislature’s minority Republicans scored a key moral victory Tuesday with a lopsided defeat of the only statehouse Democrat from largely conservative rural Eastern Washington.

Republican challenger Terry Nealey was easily outpolling Rep. Laura Grant, D-Walla Walla, in the race for the 16th Legislative District, which includes the cities of Pasco and Walla Walla.

Nealey’s margin stood at about 58 percent to 42 percent on Tuesday night, with about 60 percent of the expected vote counted in unofficial returns.

Nealey, a former Columbia County prosecutor, said his victory showed that voters in the district were ready for a change after 22 years of having a Democrat occupy one of their House seats.

Nealey said his campaign focused primarily on the state’s looming budget shortfall, and he credited voter frustration with state and national government finances as a major boost.

“People were both concerned and upset about those issues, and people felt they needed to elect a conservative Republican that would represent their interests,” he said. “And I was the right guy at the right time.”

Grant was running to complete the term of her late father, Bill Grant, who died earlier this year. Laura Grant was appointed to the seat by county officials, but had to run in Tuesday’s special election to keep the job.

Nealey will now finish out the remainder of the term, and must run for re-election next fall. Grant and Democratic campaign officials did not immediately return messages seeking comment Tuesday night.

Republicans also will retain Eastern Washington House seats in two other special elections held Tuesday. The first of those contests was in the 9th District, which includes Pullman and Cheney.

Both candidates in the 9th were Republican, a wrinkle allowed by the state’s “Top Two” primary, which advances the top vote getters regardless of party. Susan Fagan was leading that contest Tuesday night, holding about 55 percent of the vote to Pat Hailey’s 45 percent, with roughly 56 percent of the vote tallied.

The two were vying to fill the seat previously held by Republican Steve Hailey, who died before completing his term.

The final contest saw freshman Rep. David Taylor, R-Moxee, easily retain his appointed seat. Taylor was elevated to the job after Dan Newhouse was appointed Gov. Chris Gregoire’s agriculture secretary.

Taylor faced a nominal opponent in Tuesday’s polling, but that candidate, Democrat John Gotts, abandoned the race and endorsed Taylor weeks ago.

Grant, D-Walla Walla, is running for election to the 16th District seat she was appointed to fill in February after the death of her father, the late Rep. Bill Grant.

The district includes Walla Walla and Columbia counties, as well as Pasco and part of Kennewick.

Recently, some voters have received a mailer paid for by a Republican-funded political action committee saying Grant supported a $2.4 billion tunnel for Seattle while voting down funding to repair Highway 12, which connects Walla Walla and the Tri-Cities.

The mailer claims Grant “sent our money to Seattle.”

It reads in part: “Our State Representative should take our values to Olympia, and work for us. Laura Grant had the chance to ensure the taxes we pay are spent here at home — to fix Highway 12 and make it safer. Instead, Laura voted against money to fix Highway 12 and make it safer.”

Grant said the mailer doesn’t tell the whole story.

The mailer refers to Amendment 465 to Engrossed Substitute Senate Bill 5352. The bill adopted a $5.8 billion 2009-11 transportation budget for the state and included all projects that would be funded during the budget biennium, from chip sealing on rural roads to the controversial Alaskan Way Viaduct replacement in Seattle.

Republicans and some Democrats objected during the legislative session to replacing the existing above-ground highway — which already was crumbling when it sustained damage in the 6.8-magnitude Nisqually earthquake in 2001 — with a costly deep-bore tunnel.

Amendment 465, introduced when the House considered the Senate’s transportation budget on April 10, funneled money away from the viaduct and into other projects around the state — including $50 million to widen Highway 12 between Walla Walla and the Tri-Cities.

The Washington State Department of Transportation has a multiphase widening project in progress on Highway 12, and recently completed a section from Frenchtown to Walla Walla.

Three additional phases between Burbank and Wallula Junction also have been completed, and a rebuild of the intersection with Highway 124 near Burbank is scheduled for 2010, according to the Transportation Department.

Three phases between Wallula and Frenchtown totaling $362 million are either partially funded or not funded.

Grant said she voted against the amendment because she feared it would open the door to have money secured for the district in the future taken away and put elsewhere.

“I consciously voted against this amendment, which was misleading and intended to be political baloney,” Grant said. “It would have set a horrible precedent to take money from a funded project and sprinkle it throughout the state. The next time we had money allocated for a project, others could begin yanking the rug out from us.”

Grant went on to vote in favor of the transportation budget, which did include $2.4 billion for the deep-bore tunnel in Seattle.

She said she did that because it also included money for projects in her district.

“The transportation budget, without this silly amendment, already included over $40 million allocated to continuation of the U.S. Highway 12 project,” Grant said. “The next phases of Highway 12 are not ’shovel ready.’ Indeed, federal money recently was received to begin an environmental impact study. According to the Highway 12 project manager, voting against this amendment was in the best interest of the project.”

While Grant did vote for the overall transportation bill, the mailer omits that on April 22 she voted no on Senate Bill 5768, which actually adopted the deep bore tunnel option, expedited environmental review and put in place a funding scheme that included $2.4 billion in state money.

Grant said she opposed the tunnel and advocated that Seattle pay for cost overruns instead of asking the state for more money.

“I made it clear to the governor and Seattle legislators that I was there to fight for the people of my district, and that’s what I did,” she said.

The mailer was paid for by the Transportation Accountability Project, a group registered as a political action committee with the state’s Public Disclosure Commission.

Although the mailer and PDC filings give a Walla Walla address — 1934 Isaacs Ave. — the phone book shows that’s a Mailboxes Etc. location. The only individual listed on the filings is Jeffrey Davis of Woodinville, near Seattle.

Davis is the project’s treasurer and said Monday that he wasn’t authorized to speak on behalf of the group. Requests by the Herald on Monday and Thursday for interviews with a group spokesman were unanswered.

The sole funding source for the Transportation Accountability Project is GOPAC Inc., a 30-year-old national political organization that describes itself on its website as “dedicated exclusively to electing Republicans to state and local offices.”

The project’s contribution disclosure forms show GOPAC has given $28,500 to the organization since Sept. 29.

Grant’s Republican opponent, Dayton lawyer Terry Nealey, has not received any contributions from GOPAC, the Transportation Accountability Project or Davis, according to his PDC filings. Nealey’s name is not mentioned on the mailer.

– Michelle Dupler: 582-1543; mdupler@tricityherald.com

www.terrynealey.com

Rick Bender, president of the Washington State Labor Council

The labor council provided money for independent ads and an estimated 250,000 telephone calls to voters to help Gov. Chris Gregoire win re-election. Bender said there will be no more business as usual for labor.

Going into its annual two-day convention that begins Friday in Wenatchee, the council is also reviewing policies on grass-roots support and endorsements, likely meaning fewer campaign workers for Democratic Party causes and fewer dollars for the party and state legislative campaign committees run by its caucuses.

Labor support also helped Democrats retain control of both houses of the Legislature last year.

“Our relationship is not like it was before going into the 2008 election,” Bender said. “No question we’ve decided we are going to change the way we’re going to finance these campaigns.”

In the 16th Legislative District, Laura Grant is the top fundraiser in a six-way race for the unexpired term of her late father, longtime Democratic Rep. Bill Grant of Walla Walla. But she has gotten nothing from unions representing teachers, state employees, technical engineers and nonteaching public-school employees, all of which gave to her father a year ago.

“I understand they are in a bit of a predicament. I, of course, need all the help I can get,” Grant said. “Without the support of labor, it’s a difficult race.”

Grant’s record was rated 14 percent favorable to labor issues this year, labor council spokeswoman Kathy Cummings said.

“We’re not holding her out as an example. We’re holding to our new prescribed strategy. We’re looking for champions. She obviously isn’t,” Cummings said.

Meetings between labor leaders and House Speaker Frank Chopp, Senate Majority Leader Lisa Brown and Gregoire are being arranged “to urge them to sort of restore our traditional working relationship,” state Democratic Party Chairman Dwight Pelz said.

“All I can tell you is I understand there are raw feelings, and we are doing everything we can at the Democratic Party to restore the traditional alliance between labor and the Democratic Party,” Pelz said.

Copyright © 2009 The Seattle Times Company

Mike Hope

Doug Ericksen

Kirk Pearson

Dan Kristiansen

Dan Roach