In Our View: The Pain Isn’t Over

Gov. Chris Gregoire on Tuesday signed the Legislature’s new operating budget, and, while that formally marked the end of this year’s pencil-pushing work by legislators, the suffering has just begun for both politicians and taxpayers.

For the elected officials, especially Democrats, the consequences of increasing taxes around the state by $800 million will surface in re-election campaigns. And that won’t be the end of the pain for any who are re-elected; the budget-writing torture will continue next year as many of this year’s new spending measures bubble up again while many temporary solutions expire.

For taxpayers, the pain will not be major, more like thousands of paper cuts for each Washingtonian. New taxes are expected to raise $30 million from bottled water sales, the same from candy sales, $60 million from beer drinkers (exempting microbrew sales) and $85 million from new taxes on out-of-state businesses. That last one bothers us the least. It could be argued that in-state businesses need such protection. But we have nothing good to say about the other tax increases, which combine to make the worst solution in these worst of economic times.

Gregoire’s signature on Tuesday tolled the death knell for any hopes of significant reform this year in our state government. The majority party could’ve taken one step in that direction if they had just listened to one of their own, Democratic state Auditor Brian Sonntag. As the Yakima Herald-Republic pointed out recently, Sonntag’s office “has identified $3.8 billion in unnecessary spending in its performance audits — but balancing the budget likely would require challenging existing state labor contracts.” History tells us that labor union contracts are exalted by the majority party as the holiest of sacred cows.

Here are other details about the state operating budget that Gregoire just signed:

Defenders of this budget and the work of the special session argue that the tax increases were needed to retain crucial services. According to Remy Trupin of the Washington State Budget & Policy Center, the new revenue will help preserve “health coverage for 16,000 lower-income children … college financial aid for 12,300 students … child care assistance for low-income families” plus preventive dental care and other health care for low-income seniors and services to at-risk pregnant women.

Critics, though, point out that many vulnerable small businesses will feel more pain. “Service-oriented businesses, such as accountants, barbershops, and real-estate agencies, which already pay the highest (business and occupation) tax rate of 1.5 percent, will now be subject to a 1.8 percent rate, a 20 percent hike,” writes Carl Gipson of the Washington Policy Center. “Expect to see higher prices for services as a result.”

Defenders will point out that, as Trupin wrote, “raising revenue only accounted for 8 percent of the steps the state took in response to the recession. Another 3 percent came from federal recovery funds and 24 percent from transfers and changes, including using the state rainy day fund. The largest share, 32 percent, came from cuts.”

Critics such as WPC’s Jason Mercier report that “to temporarily balance the budget, lawmakers rely on an extension of $480 million in one-time federal Medicaid funds that have yet to pass Congress.” In fact, two-thirds of states “crafted 2011 budgets assuming that more (Medicaid assistance) would come through, according to the National Conference of State Legislatures … (but) it’s not at all clear that the Medicaid assistance will ever materialize.” Gregoire said the federal funding is “a matter of time,” and perhaps more will be on the way. But, like the legislators’ promise that many tax increases will expire in three years, we’ll believe it when we see it.