Gregoire signals new willingness to talk taxes

As the state's projected deficit grows, the governor's new chief of staff says he "would be surprised" if the shortfall can be closed without new revenue.
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Peyton Manning during a 2009 game for Indianapolis in Phoenix

As the state's projected deficit grows, the governor's new chief of staff says he "would be surprised" if the shortfall can be closed without new revenue.

One-point-seven billion dollars. That'ꀙs the size of the hole that'ꀙs been ripped in Washington state'ꀙs freshly balanced budget, says Jay Manning, Gov. Chris Gregoire'ꀙs newly appointed chief of staff.

Manning used that much larger deficit figure (as of a few weeks ago the number Olympia insiders were using was $1.2 billion) during an interview with me late last week on "TVW'ꀙs 'ꀜInside Olympia.'ꀝ

'ꀜAs far as I know that'ꀙs the hole 'ꀦ so it'ꀙs going to be a big number,'ꀝ Manning warned. 'ꀜThat is going to be the consuming issue for the governor, for me, for our administration, and the Legislature as we go into this short session.'ꀝ

The Legislature reconvenes in January for a 60-day, election-year session. Before that, in November, the governor and lawmakers will get updated revenue and caseload forecasts.

The revenue forecast projects the amount of tax dollars that will flow into state coffers over the next two years. The caseload forecast anticipates how much demand for state services — everything from public education to prison population to welfare rolls — will increase.

A Murphy'ꀙs Law of government is that demand for services goes up when the economy and revenues falter. In other words, after the November forecasts the shortfall could be even bigger.

In December, the governor will roll out her proposed 'ꀜsupplemental'ꀝ budget. Think of the supplemental as the update to the state'ꀙs two-year (or biennial) budget which runs from July of this year to July 2011.

Earlier this year, majority Democrats in the Legislature patched a projected $9 billion hole through July 2011 with a combination of cuts, one-time budget gimmicks, and a big-time bailout from the feds.

There are already signs that Democrats don'ꀙt have the stomach to squeeze another nearly $2 billion out of state spending. In fact, in my interview with Manning he brought up the question of new taxes before I got a chance to ask him.

It is going to be extraordinarily difficult to figure out where these additional cuts come from. The governor last year pushed through a no-new-revenue budget and did that out of concern for what would new taxes do to families, to small businesses here in Washington. This time we'ꀙre facing that question again. What will we do in terms of revenue? Can we cut our way out of this? That discussion is going on as we speak internally and with various people and stakeholders on the outside.

Manning echoes what the governor herself said a few weeks ago, that her door is open to those who want to make the case for targeted tax increases (this could include closing tax loopholes). That'ꀙs a significant change from Gregoire'ꀙs emphatic no-new-taxes pledge during her reelection campaign last fall, and her position during the 2009 legislative session.

But Manning'ꀙs comments provide the strongest signal yet that Gregoire is seriously open to — if not already contemplating — a revenue piece to rebalance the budget. 'ꀜI guess I would be surprised if this $1.7 billion hole in the budget was closed exclusively with cuts,'ꀝ Manning concluded during the TVW interview.

Meanwhile minority Republicans remain firmly planted in a taxes-over-my-dead-body frame of mind and show no signs of budging. Why would they? Democrats don'ꀙt need them to pass a budget.

Even so, one Republican lawmaker is calling for a special session in December to start addressing the shortfall. Sen. Joe Zarelli, the ranking Republican on the Senate budget committee, argues the earlier lawmakers start cutting the better. But as long as the call for a special session is coming from the minority party, it'ꀙs not going to happen.


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