OLYMPIA — Washington state's proposed reliance on cigarette taxes to fund smaller class sizes could be compromised if smokers actually do what Gov. Christine Gregoire says she would like them to do: quit.

But while nicotine addiction may be more powerful than a desire to economize, some say the more likely scenario is that smokers will buy over the Internet or cross the border for cheaper smokes.

As part of the two-year state budget plan released Monday, Gregoire proposed raising the cigarette tax by 20 cents a pack in the two-year budget period starting in July, saying that will raise $73.2 million over the next two years. The state tax is now $1.425 per pack.

Another 60-cent increase would be imposed in July 2007.

The extra money is intended to allow the state to pay for Initiative 728, which gives school districts grants for class-size reduction.

It also would go toward allowing 6,600 more slots at the state's colleges.

"In the short term, it's a pretty good funding source," said House Finance Chairman Jim McIntire, D-Seattle. "In the long term, it certainly will be a challenge."

However, Leslie Cushman, with the state Department of Revenue, said Gregoire's revenue estimate takes into account likely changes in smokers' behavior and alternate sources of cigarettes.

"We do know that people are quitting at about 2 percent a year, so the revenue forecast and the predictability of this takes all of that into account to the best of our abilities," she said.

Health-care advocates said that even if the state does lose revenue because significant numbers of smokers quit, it will gain even more by having to pay out less to treat sick smokers.

Fourteen percent of Medicaid costs shouldered by states are used to pay for tobacco-related illness, according to the National Conference of State Legislatures (NCSL).

"If I can get a decline in smoking by raising the per-pack price, that's good for Washington state, that's good for our health and that will save money [in health-care bills]," Gregoire told reporters Monday.

So far this year, at least 11 other states are considering cigarette tax increases: Kentucky, Wisconsin, Texas, Ohio, North Carolina, New Hampshire, Mississippi, Iowa, Indiana, Illinois and Connecticut, according to NCSL.

Washington has the ninth-highest cigarette tax in the country. Rhode Island has the highest, at $2.46 a pack.

Some lawmakers said increasing taxes only encourages innovative shopping.

"A lot of people are already jumping the river, going to tobacco shops in Oregon," Rep. Ed Orcutt, a Cowlitz County Republican, said Monday.

Cushman said the state loses about $140 million a year in Internet and cross-border sales.

While the state can't prevent people from crossing the border, Cushman said, the state keeps track of those who buy cigarettes off the Internet.

The federal Jenkins Act of 1949 requires companies to supply lists of customers for tobacco-taxing purposes.

The state then sends letters to the Net buyers and asks them to pay the taxes.

Under an agreement reached last week, virtually all credit-card companies will stop participating with Web sites based in the United States and abroad that sell cigarettes and tobacco products in every state. The card companies also agreed to take action against Internet sellers that authorities identify as violating state and federal laws regulating cigarette sales.

The attorneys general of 10 states, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives and the credit-card companies announced the agreement Thursday.

Smokers could still buy cigarettes over the Internet, but they would have to use checks, money orders or some other form of payment.

ATF said states lose more than $1 billion a year in tax revenue from Internet tobacco sales.

The state also hopes to get about $9 million a year in revenue under a cigarette-taxation agreement reached with the Puyallup Indian Tribe.

If the agreement is approved by the Legislature and signed by Gregoire, the Puyallups would be the 19th of the state's 29 tribes to have some type of tax agreement with the state.

Some contend a pinch in the pocketbook may be the best way to break people of smoking.

For every 10 percent increase in the price of a pack of cigarettes, adult smoking drops 4 percent and teen smoking drops 7 percent, said Paul Billings, a spokesman for the American Lung Association.