I-1183’s passage clouds cities’ fate with state budget

By Kathie Durbin, Columbian staff writer

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The future is murky when it comes to predicting how the city of Vancouver will fare in the upcoming legislative budget-cutting session.

That was the message Mark Brown, the city’s Olympia lobbyist, delivered to council members Monday evening as state and local officials scrambled to figure out how last week’s passage of the state liquor sales privatization measure will affect cities’ bottom lines.

Gov. Chris Gregoire’s October list of potential budget cuts included eliminating $90 million in revenue from two state liquor taxes, revenue that presently goes to Washington’s cities and towns. The state would use that money to help fill a $2 billion budget deficit.

The state’s mayors responded indignantly. On Nov. 2, they sent Gregoire a letter calling those and other potential budget cuts “intolerable” and said they betray the long-standing partnership between the state and its cities.

“For example, eliminating the distribution of state liquor taxes and profits after over 70 years of continuous sharing” is simply unacceptable, they said. Cities and towns would experience a 34 percent drop in state-shared revenue.

‘Everything’s in flux’

Vancouver received $1.3 million as its share of liquor sale profits and $815,000 in liquor excise tax revenue in 2010. Under the governor’s options, that money could go away.

Then came Election Day. By a 3-to-2 ratio, voters passed Initiative 1183, which will get the state out of the liquor sales business by June. If the initiative withstands a legal challenge, that revenue won’t be there for the state to cut. Cities are wondering what the governor will cut instead.

The news isn’t all bad. Eventually, Brown said, cities and towns are expected to pocket even more money from taxes on private sale of liquor. But the timing is tricky, he said, and in the meantime, “Everything is up in the air.”

“We find ourselves in harm’s way,” he told the council. “Everything’s in flux, everything’s in play.”

Other revenue-sharing programs with cities, such as state funds to help cities with new annexations and grants to fight crime, are on the chopping block too. In all, Brown said, $56 million to $83 million in state revenue-sharing with local governments could be lost, or a total of $400 million to $600 million over the next six years.

Lobbyists for Washington cities were meeting to decide on strategy Monday. “Everyone including cities will have to pony up,” Brown said.

Cities have two options, he said. “We can say, ‘Do no harm, leave us alone, don’t balance the budget on our backs.’ Or we can help the governor by saying we could forego some one-time revenue.”

One option is to ask the governor to transfer $30 million set aside for stormwater grants to local governments, moving it from the capital budget to the general fund budget.

The program, which helps cities retrofit poorly functioning stormwater control structures, hasn’t begun yet, so none of the money has been allocated. It’s a program that can wait, Brown said.

Another option is for cities to propose across-the-board cuts in revenue-sharing.

Going forward, he said, it will be critical for the state to provide cities with regulatory relief and flexibility in complying with state environmental rules. Cities must also fight new unfunded mandates or laws that preempt local control.

Brown also dropped a hint about a potential new revenue source for the state.

“There are several legislators who might want to go to voters for a bond issue” to fund both state and local public works projects, he said. If that happens, he said, Vancouver needs to be ready with its own list of projects.