OLYMPIA — The state Legislature kicked off three months ago amid widespread predictions that the Democrats in charge would increase taxes, spend more money, and cater to the demands of political allies.

The predictions were right.

The Legislature passed a $26 billion operating budget, a nearly $3 billion increase over the current one, and an $8.5 billion transportation package — the largest in state history. To pay for it all, lawmakers made it more expensive to smoke, drink, drive and, for some people, to die.

Tax increases will raise the cost of cigarettes by 60 cents a pack, liquor by $1.33 a liter and gasoline by 9.5 cents a gallon over the next four years. In addition, lawmakers reinstated an estate tax on the wealthy.

The Democrats also handed labor unions and environmentalists some of their biggest legislative victories in years, boosting unemployment benefits for thousands of seasonal workers, approving the first-ever collective-bargaining agreement with state employees and passing one of the nation's toughest car-emissions standards.

And, with the exception of a dragged-out fight over the gas-tax increase, they did it all with an ease that hasn't been seen in years.

Democrats hold the strongest majorities they've had in a decade in the House and Senate. Plus, there's a newly elected Democrat in the governor's office, Christine Gregoire.

"This was the best Democratic session I've seen in a decade," said Sen. Erik Poulsen, D-Seattle.

Republicans are already predicting a voter backlash. "I think this session is going to be a defining moment in how people look at the two parties," said Rep. Mike Armstrong, R-Wenatchee.

But Gregoire and the Democrats are betting voters will agree with their assessment that this was one of the most productive sessions ever. Democrats say their work will lead to safer roads, more jobs and better schools.

The transportation package, which needed bipartisan support in both chambers, was by far the biggest thing to come out of this year's session.

The Seattle delegation, whose members hold some of the most powerful Democratic leadership positions in the Legislature, used its muscle to help craft and jam through a package that pours billions into central Puget Sound transportation projects.

The transportation budget includes $2 billion for the Alaskan Way Viaduct in Seattle, $972 million for Interstate 405 on the Eastside, and $500 million toward replacing the Highway 520 bridge over Lake Washington.

"It was a Seattle session," Poulsen said.

But Republicans said the big-spending Democrats had dealt a severe blow to taxpayers and the business climate.

"Today, the taxpayers lost and the special interests of Washington won," Rep. Doug Ericksen, R-Bellingham, said during Sunday's budget debate.

At the start of the session, some Republicans predicted a repeat of 1993 — the year Democrats led by then-Gov. Mike Lowry pushed through the biggest tax increase in state history and a major health-insurance overhaul that was widely opposed by business.

The following year, Democrats were trounced at the polls and Republicans seized control of the Legislature. Some Republicans say Democrats can expect the same in the 2006 elections.

"I think there's a direct correlation between this session and 1993," said Armstrong.

Gregoire acknowledged that the Democrats took some big political risks.

"We could say, 'What will be the impact in the voting booth in some number of years?' or we could [focus] on what was really at stake here, and that is the lives of hundreds, even thousands of people if the viaduct went down or [Highway] 520," Gregoire said.

The session got off to an ugly start in January, as the Legislature became the temporary battleground in Washington's closest-ever governor's race, which Gregoire won by a mere 129 votes over Republican Dino Rossi.

Thousands of Rossi supporters protested outside the Capitol, chanting "Re-vote, re-vote" on the second day of the session as Republicans tried to block a vote declaring Gregoire the governor.

The election feud — and a pending court challenge — remained a constant undercurrent in Olympia. But the Democratic majorities weren't about to let it stall their agendas.

The first bill to reach Gregoire's desk was a labor-backed measure requiring that at least 15 percent of all work on major public construction projects be done by apprentices.

The Democrats also wasted little time passing several health-care bills that supporters had been pushing for years.

They passed a mental-health-parity law that requires some insurers to cover mental illness the same way they cover physical ailments. And they approved a measure allowing uninsured people, private businesses and labor unions to buy prescription drugs through the state's bulk-purchasing program.

Environmentalists are praising this session as one of the best ever for them.

Aside from the so-called "clean car" bill, which requires the state to adopt California's emissions standards, lawmakers also approved a landmark bill requiring that new public buildings be constructed with higher environmental standards.

The $26 billion, two-year state operating budget pushed through by Democrats represents a 12 percent increase over the current budget. To help pay the tab, Democrats also passed a $480 million revenue package that includes about $400 million in new taxes.

Teachers and state workers do well in the budget. It includes several hundred million dollars for pay raises and benefits. In addition, the budget funds Initiative 728, a measure passed by voters in 2000 aimed at cutting school class sizes.

The budget also allows colleges and universities to boost enrollment by several thousand students and provides money to help expand several university branch campuses, including in Bothell and Tacoma, into four-year institutions.

Lawmakers made the task of increasing taxes easier this session by overhauling Initiative 601, which had required a two-thirds majority in the Legislature to raise taxes. The new law, signed by the governor, suspended the supermajority requirement and allowed the Legislature to increase taxes with a simple majority.

No one contends that the Democrats' budget is sustainable. Even before the plan was approved, projections showed the state could face another $1 billion shortfall two years from now.

It's true the Democrats addressed some pent-up needs, said Senate Majority Leader Lisa Brown, D-Spokane. "But I don't think this has been a Democrats-gone-wild session."

Indeed, Democrats didn't get everything they wanted. A bill banning discrimination against gays narrowly died in the Senate after getting to the floor for a vote for the first time in state history. And a bill to give employees up to five weeks of paid family leave passed the Senate but died in the House.

Until the transportation package passed on the session's final day, most business leaders were ready to give the Democrats failing grades.

Though they were spared any major general tax increases, business leaders said the smorgasbord of "sin taxes" will still be a drain on the economy. But what really enraged businesses was the Legislature's decision to again mess with the state's unemployment-insurance system.

Two years ago, after a decade of trying, businesses pushed through a major unemployment-insurance overhaul. The changes, which didn't take full effect until this year, were projected to save businesses $100 million a year.

But the 2003 overhaul, which revamped how benefits are calculated, also took a big bite out of unemployment checks for construction workers, farm laborers and other seasonal employees.

So after a big lobbying push by labor, Democrats passed a bill to restore much of those lost benefits for at least the next two years. Business leaders urged Gregoire to veto the measure, but she signed it last week.

Carolyn Logue, lobbyist for the state chapter of the National Federation of Independent Business, said small businesses have little to celebrate. On top of the unemployment-insurance changes, she said, businesses will be hit hard by the gas-tax increase, and lawmakers did nothing to help them rein in health-care costs.

But Duke Schaub, lobbyist for the Associated General Contractors of Washington, said the $8.5 billion transportation package might have saved the session for big business. He said it will create thousands of new construction jobs and give the economy a major boost. "We're going to take a hit on unemployment insurance, but this will no doubt make up for a lot of that," said Schaub.

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com

Andrew Garber: 360-943-9882 or agarber@seattletimes.com