Sin-tax package passes; budget vote set

OLYMPIA — House and Senate negotiators reached agreement yesterday on a sweeping $26 billion state budget and lawmakers passed a big tax package as they raced to meet a Sunday midnight adjournment deadline.

The Democratic-controlled Legislature pushed through a $481 million package of "sin taxes" and other revenue bills to balance the budget.

Cigarette taxes will shoot up by $6 a carton in July, liquor prices will increase and you'll begin paying sales tax when you sign up for an extended warranty on consumer goods. Estate taxes will be assessed on about 250 large estates each year.

The House narrowly approved the estate-tax plan, 50-48, late yesterday and sent it to Gov. Christine Gregoire for her expected signature. The Senate approved a House-passed package of revenue increases later last night, including the cigarette, liquor and warranty taxes. The Senate vote was 25-22.

Relieved Democratic budget negotiators managed a breakthrough yesterday, the 103rd day of a session that is limited to 105 days. Frustrated Republicans said they were frozen out of budget talks and complained that the taxes were unnecessary and unwise.

"Some things never change," Sen. Mark Schoesler, R-Ritzville, during last night's floor debate. "It's late, it's the dark of night and we're voting on taxes."

Democrats have been working on the plan behind the scenes for four months, dealing with a spending gap of about $1.6 billion and hoping to hold the revenue package to less than a third of that amount.

The budget, covering the two fiscal years that begin July 1, is rich in higher education, health care and education. It also finances the courts, state agencies, the Legislature, parks, prisons and the rest of state government.

Overall, the budget is 12 percent higher than the current two-year budget.

It pays for more than 8,100 new enrollment slots at community and four-year colleges and boosts financial aid. It raises in-state undergraduate tuition by 5 percent a year at community colleges, 6 percent at the four-year regional universities and 7 percent at the University of Washington and Washington State University.

It finances two voter-approved education spending initiatives that were largely suspended for the past two years, providing cost-of-living increases for teachers and pumping out money for class-size reduction and other locally determined priorities, such as Saturday school.

The initiatives cost about $140 million each.

The budget plan pays for raises for public employees.

A reserve of about $200 million is left unspent, after dipping to as low as $170 million during the talks.

The plan restores $80 million in federal budget cuts for community mental health and finances much of the mental health and chemical dependency treatment that Sen. Jim Hargrove, D-Hoquiam, had proposed.

The new budget agreement was being printed up and a vote in the House and Senate could come today, said House Speaker Frank Chopp, D-Seattle.

The House also scheduled a vote today on an $8 billion transportation finance package that includes a 9.5-cent-a-gallon increase in the gas tax over the next four years.

Lawmakers also were taking action on election changes and dozens of other issues. Democrats hailed the new budget deal, which was a compromise between the House and Senate positions that were adopted earlier in the session.

Gregoire's budget director, Victor Moore, said the new plan incorporates the governor's priorities.

"There were painful compromises made, but we didn't have ideological arguments since we were all Democrats," said a satisfied, if tired, Senate budget Chairwoman Margarita Prentice, D-Renton. "Overall, it's a very positive budget, focused on kids and taking care of the important things that matter to people. I'm very proud.

"I know we'll be accused of loving taxes, but you just have to try to remember why we're here — to do what people need."

House Majority Leader Lynn Kessler, D-Hoquiam, called it "a kids' budget, from education to children's health care to taking care of abused kids and foster kids. It shows a soft heart for our children."

Republicans said all of the basics, as well as the two education initiatives, raises and proper funding of public pensions, could have been accomplished within a no-new-taxes budget.

The tax package includes a 60-cent-a-pack increase in the cigarette tax this summer, raising $175 million, and a $1.33-per-liter increase in the liquor tax, generating $50 million.

A new estate tax is expected to bring in $139 million. The state Supreme Court recently threw out the old version of the tax.

Seattle Times staff reporter Ralph Thomas contributed to this report.