Gregoire expects budget fight

OLYMPIA — Gov. Christine Gregoire on Tuesday called for spending about $500 million of a projected $1.4 billion surplus in tax money and setting aside the rest for later use.

The supplemental budget proposal drew fire both from conservatives who say Gregoire is spending too much and from special interests who want her to spend more. The Legislature will take up the budget when it convenes next month.

"From Gregoire and the Democrats' perspective, it's 'are we going to spend it now or are we going to spend it later?' There's no hint of giving it back to the taxpayers," said anti-tax activist Tim Eyman, who has sponsored several successful tax-cutting initiatives. "The $1.4 billion tax surplus is not the government's money, it's the taxpayers' money."

Jon Gould, deputy director of the Children's Alliance, a group representing 128 nonprofit agencies, argued that Gregoire's budget should include more money for health care. Her budget "falls short of meeting some of the most pressing needs of children and families in the state," he said.

The governor said she expects a fight as lawmakers and special interests make their case for a slice of the surplus tax money that's flowing in because of the state's recovering economy. "Let's be honest, I think my biggest battle is with the Democrats," Gregoire said.

The state works on a two-year budget cycle. Earlier this year the Legislature passed a $26 billion operating budget for 2005-07. The supplemental budget is supposed to cover unforeseen costs, such as health-care caseload increases, but it also creates an opportunity to spend money on other things.

Gregoire's budget


Total budget: $504 million increase in spending, added to the $26 billion two-year budget approved last April, plus $905 million set aside in reserve.

Proposed spending: Gregoire wants $281 million to cover things such as social-services caseload increases, K-12 enrollment and a cost-of-living increase for teachers. She also proposes an additional $223 million in new spending in areas such as pensions, emergency preparedness and early learning.

Reserve fund: Gregoire proposes saving $905 million, putting $464 million to use next year to help pay for education and health care, $127 million into a pension reserve account and $113 million into a emergency reserve that requires a two-thirds vote by lawmakers to tap. An additional $201 million would be left as unrestricted reserves that lawmakers could spend with a simple majority vote.

Source: Governor's budget office

This is the first time since the terrorist attacks on Sept. 11, 2001, that the state has had a surplus to fight over. Gregoire said Chang Mook Sohn, the state's chief economist, "says to me all the time, 'You're one of the luckiest governors in history.' "

New general-fund spending


State contribution to pension funds: $49 million

Increase WorkFirst spending, subsidized child care for people on welfare: $46 million

Complete prisoner-tracking computer system: $11 million

Additional K-12 spending to help students who fail all or part of the WASL standardized test: $39 million

Other increases in K-12 spending: $17 million

Create a new Department of Early Learning: $2 million

Higher education increases: $6 million

Puget Sound cleanup initiative: $1 million

Create state-subsidized program to encourage development of biofuels: $18 million

Other economic-development spending increases: $6 million

Expansion of state psychiatric hospitals: $8 million

Miscellaneous increased spending: $22 million

Adds up to more than $223 million because the figures were rounded to the nearest million

Source: Governor's budget office

Gregoire's proposal includes about $223 million in new spending in areas that include early learning, the state pension system and emergency preparedness. An additional $281 million would cover cost increases such as growth in public-school enrollment and health-care caseloads.

But the biggest chunk of money, a little more than $900 million, would be set aside for 2007, when the Legislature meets to write its next two-year budget.

"My goal is to sock away a good amount in savings. Any family would do that, and that's what I'm asking the Legislature to do as well," Gregoire said. "I don't want to make draconian cuts in one year. I don't want to have to look at taxes in one year. I want to keep the economy growing and make sure we're paying the bills."

In fact, the governor's budget writers project that even if the Legislature sets aside $900 million, the state still would face a $480 million shortfall when lawmakers put together the next two-year budget. That figure could change depending on whether the economy keeps improving and whether lawmakers can be restrained from spending more money.

Initiative-proof?

Gregoire's budget puts a lot of the reserves into special accounts, including a proposed new "economic stability account" to send a signal to lawmakers and voters that the money already is spoken for.

"If you look at an ending fund balance and you've got $1 billion there, it's quite a target," said House Appropriations Chairwoman Helen Sommers, D-Seattle.

Making it clear the money is being set aside for a reason should help fend off ballot initiatives and legislators, lawmakers said.

Eyman said the move "strikes me as the anti-Eyman provision," but one that won't prevent initiatives.

Sommers said she largely approves of the governor's proposal. "I agree we should not go in and spend a lot of money."

Senate Democratic leaders also said Gregoire's budget looked promising. "Overall, I'm very supportive of it," said Sen. Margarita Prentice, D-Renton, chairwoman of the Senate Ways and Means Committee.

Both the House and Senate are controlled by Democrats. They'll come out with their own budget proposals this coming session.

Republicans differ

Republican lawmakers had a different take, arguing that Gregoire isn't setting aside enough money in savings. They said the supplemental budget is supposed to be only for unforeseen expenses and emergencies, not new spending.

"A half-billion supplemental budget is a pretty high number," said Rep. Gary Alexander of Olympia, the ranking Republican on the House Appropriations Committee.

Though Alexander frowned on new spending, he said it would be appropriate to use some of the surplus to provide additional tax breaks to businesses. The cuts, he said, would help spur the economy.

Rep. Mike Armstrong, R-Wenatchee, said his biggest concern is that most of the money Gregoire set aside is in accounts that the Legislature can easily spend.

He said more should be put into the emergency reserve, which takes a two-thirds vote to tap. "It's just going to go away," Armstrong said. "We've seen the Legislature do it time and time again."

Seattle Times staff reporter Ralph Thomas contributed to this report. Andrew Garber: 360-943-9882 or agarber@seattletimes.com