Tax-package deal could extend legislative session, lawmakers say

OLYMPIA — With just a couple days to go before the scheduled end of the 60-day legislative session, some key lawmakers say a special session is increasingly likely.

Any legislative overtime won't be due to partisan bickering. Democrats hold big House and Senate majorities, as well as the governor's mansion. Republicans are just along for the ride.

Yet, Democratic leaders remain divided on the right mix of taxes, cuts and one-time budget shuffles they should use to fill a $2.8 billion budget gap.

A controversial Senate proposal to increase the state sales tax by three-tenths of a penny may be losing traction as lawmakers try to find a package that can attract majority support. Talks on scrapping the sales tax — and what to replace it with — could be crucial in the session's final days.

The House overnight approved a $680 million tax proposal that was more $200 million less than the Senate version -- thanks largely to the refusal to increase the sales tax.

The two chambers also are divided on cuts to social services, universities and whether to force furloughs on state workers.

A proposed closure of McNeil Island prison and environmentalists' push to boost taxes on oil refineries to pay for stormwater cleanup also could bog things down in the next two days.

"Past a longshot," was how Sen. Rodney Tom, D-Bellevue, summed up the odds Monday for an on-time finish.

The regular session is required under the state Constitution to end by midnight Thursday. A special session, which would have to be called by Gov. Chris Gregoire, would bring inevitable criticism about the extra $20,000-a-day cost to taxpayers for legislators' expenses.

But some Democratic leaders say a brief special session — say about a week — could be justified given the size of the state's budget woes.

"We're dealing with the largest fiscal problem the state Legislature has faced since the Great Depression," said Sen. Ed Murray, D-Seattle, one of the budget negotiators. "I think we need to go into a short special session to get it right."

Election concerns

Some close tax-package votes of the past few days show the high-wire Democrats are walking.

The Senate's tax bill passed 25-23 Sunday, with several Democrats joining Republicans in voting against it.

Democrats in more conservative suburban and rural districts are worried about a voter backlash in November with the entire state House and half the Senate up for election.

One of the "no" votes came from Tom, a lead Senate negotiator on taxes.

"It's the size and the inclusion of a sales tax that I think is very harmful in an economy that is just struggling to find its feet," Tom said.

The sales tax may not survive the final days of the session. It was not in the House tax plan Monday night, and some legislative leaders say the idea is next to dead.

"We currently don't have the votes for a sales tax over here," said House Finance Committee Chairman Ross Hunter, D-Medina. "That's not something that's in our package. I don't think it's likely to come out in the end result. We'll go sit down with the Senate and figure out what we can do."

Senate leaders, meanwhile say they're not wedded to the tax — they just want a tax package that balances the budget and doesn't set the state up for worse problems in 2011.

"It's not like we're carrying the flag for a sales tax," said Senate Majority Leader Lisa Brown, D-Spokane.

Brown said her caucus is concerned with some of the maneuvers in the House budget plan, which relies on more one-time budget transfers and assumes $75 million more in federal aid to avoid tax increases and some cuts to human services.

The House budget and tax plan was concerning even to some its budget writers.

"It's so far from what I wanted to vote for," said Rep. Kelli Linville, D-Bellingham, who chairs the House Ways and Means Committee.

Linville said the House operating budget passed last week assumes more than $850 million in new taxes, yet the latest House tax plan would only raise about $700 million. That's because the conversations about taxes and spending in the House, she said, "have been happening in two separate rooms."

Marty Brown, a top Gregoire aide, said the governor worries that the Legislature's idea of a compromise will be to expand the budget.

"It's a growing concern, that when they decide to spend money on two different things they just add them together," Brown said.

Despite the differences, which will be worked out in negotiations, the two chambers do agree on many elements of the tax package needed to leave the Capitol.

They each want to boost cigarette taxes by $1 a pack, add the sales tax to bottled water and close some tax loopholes primarily benefiting out-of-state companies. Both budgets also propose versions of a temporary surcharge increasing the business-and-occupation tax rate for service businesses, such as marketers, lawyers, accountants and entertainers.

Linville is among those Democrats arguing that a general sales-tax increase would be more fair than picking on various businesses.

She said there is still a possibility lawmakers could see her point.

And despite the general gloom about an on-time finish, Linville said Democrats have plenty of incentive to compromise and get out of town.

"Until midnight Thursday, I'm going to be optimistic," she said.

Staff reporter Andrew Garber contributed to this report.

Jim Brunner: 360-236-8267 or jbrunner@seattletimes.com