WashACE Blog

State Senate Proposes $918 Million in New Taxes UPDATE Make That $950 MM

The Senate is releasing its budget now. Here's a link to the overview. They went higher than I thought they would on taxes.

NEW REVENUE -- $918 MILLION
 
The Senate budget incorporates a net increase of $918 million in new revenue.  The main
components of the Senate revenue package are three pieces of legislation that:  (1) narrow or
eliminate numerous current tax preferences or "tax loopholes" ($518 million); (2) impose a temporary 0.3 percent sales/use tax increase ($313 million); and (3) the cigarette tax by $1 per package ($86 million).       

 Next ... the House at noon.

UPDATE The Senate plan raises $950 million, reduced to $918 after accounting for the costs of the working family tax credit they use to offset the sales tax hike and a tax credit for small businesses that add jobs.

Initiative 985 Widens State Budget Deficit

That's the conclusion reached by the Washington Research Council in a new policy brief. WashACE doesn't take positions on ballot issues, but I thought readers here would appreciate the Council's thoughtful, objective analysis. The looming $3.2 billion budget shortfall represents a serious competitiveness challenge in the next legislative session. Read the WRC brief to understand how I-985 plays into the budget debate.

Here's the crux.

Redirecting a share of motor vehicle related sales tax from the general fund to the new Reduce Traffic Congestion Account would add about $290 million to the budget shortfall  projected for the general fund in the 2009?11 biennium. 

... Last month, following the release of the  Economic and Revenue Forecast Council?s quarterly
update to the forecast of General Fund revenue, Senate Ways and Means Committee staff projected a $3.2 billion shortfall in the General fund by the end of the 2009-11 biennium. (Fully draining the state?s rainy day fund would reduce the shortfall to $2.4 billion.) Prospects for the economy have darkened significantly in the last month, and the next forecast update will
show a much larger shortfall for 2009?11.

Now is simply not a good time to divert money away from the General Fund.

As they say, read the whole thing.

The Washington Policy Center published a "citizen's guide" to the initiative in August.

Reason on the Roads

The Reason Foundation that is. And yet another ranking study, this one on transportation. The 17th Annual Report on the Performance of State Highway Systems (1986-2006) just came out (h/t the Spokesman-Review's editorial page blog).

Here's what Reason says about us:

Washington ranked 39th in overall performance and cost-effectiveness. In last year?s rankings, Washington ranked 32nd overall. Washington is 24th in urban interstate congestion, with 42.76 percent congested. The state ranks 42nd in rural interstate condition and 45th in urban interstate condition. Washington ranks 32nd in deficient bridges?26.18 percent of the state?s bridges are deemed structurally deficient or functionally obsolete. Washington is 13th in the nation in fatality rates per 100 million vehicle miles traveled.

Although we've made progress, infrastucture investment in the state remains well below documented needs. High gas prices, which have reduced gas tax revenues and boosted the costs of asphalt and other construction materials, have guaranteed that there will not be enough money to cover projects already approved by the voters and lawmakers.

Two Ballot Initiatives May Deepen Budget Hole

Credit to Chris Mulick of the Tri-Cities Herald for bringing to light the effects Initiatives 985 and 1029 could have on the state's $2.7 billion budget hole. Both initiatives apparently gathered the required number of signatures for the fall ballot. If both should pass, the budget problems worsen, with the deficit expected to exceed $3 billion. Here's how Mulick reports it.

Preliminary estimates from the Department of Revenue indicate that professional initiative promoter Tim Eyman?s traffic congestion measure? Initiative 985?would cost the state about $290 million during the next two-year budget cycle and the rest of the current one.

And the campaign for Initiative 1029, a home-care worker training measure backed by the powerful Service Employees International Union, believes its measure would cost at least $23 million during that time. That number?s based on a nonpartisan analysis of similar measures before the Legislature this year.

Tim Eyman was quick out of the blocks this morning with an email arguing that I-985 would be good for the state's economy.

Nothing slows down our economy more than traffic congestion.  Nothing would boost our economy more than reducing traffic congestion.  State Auditor Brian Sonntag's performance audit report on transportation confirms that implementing his recommendations will result in a $3 billion boost to our state's economy.    

I-985 will boost our state's economy both by the implementation of its policies and by illustrating the public's support for making reducing traffic congestion the top transportation priority.

Stopping short of claiming that their initiative will be a boon to the economy, SEIU argues that, well, it's about more than the money. From Mulick's story:

Worries about its costs don?t stand up to its benefits, campaign manager Jeff Parsons said.

?How can we not afford to take care of our seniors?�� he asked.?They need to have the best care we as citizens of the state of Washington can afford to give them.��

It's early days yet. And more analyses of the initiatives will be available before the election. It is safe to say, however, that it is about the money. (Cross-posted at Olympia Business Watch)