Gregoire signs new state budget into law

OLYMPIA — With a warning that Washington's money problems aren't over yet, Gov. Chris Gregoire on Tuesday signed a new operating budget that solves an estimated $2.8 billion deficit with a patchwork of taxes, cuts and temporary fixes.

Gregoire used her veto pen to make scattered changes to the spending plan, which was approved last month by the Democratic-controlled House and Senate. But overall, the second-term Democrat praised state lawmakers for crafting a balanced-budget solution.

The budget relies on a separate $780 million revenue package that increases taxes on service businesses, out-of-state companies and various consumer products, including major-brand beer, soda pop and cigarettes.

But Gregoire noted that some 1,500 workers could be laid off because of budget cuts, and the state is closing or downsizing five youth- or adult-corrections facilities for the first time in years.

Those measures, she said, allowed the Legislature to preserve priorities such as financial aid for college students and the Basic Health Plan for poorer Washingtonians.

"In these tough times, we have had to prioritize services in state government like we never have done before," Gregoire said.

Minority Republicans were less impressed. Senate Republican budget chief Joe Zarelli, R-Ridgefield, said the Democrats' budget relies on too many tax increases and short-term solutions.

"Instead of enabling long-term savings, it repeats the shortsighted approach taken last year — with the same reliance on one-time money and budget tricks that will pass the buck to the next Legislature," he said.

The new operating budget is a tuneup of the two-year spending plan lawmakers approved in 2009. It covers government spending on education, social services, parks, prisons and more through mid-2011.

State government's main checking account, called the General Fund, will be about $31 billion. The spending level was driven by higher costs for current programs along with added policies, including payments to property-poor school districts and additional worker retraining at community and technical colleges.

As approved by the Legislature, the updated budget cut about $755 million from state programs. Another $780 million came from higher revenue, mostly tax increases. It also counted on about $625 million in federal aid and roughly $600 million in fund transfers and reserves.

Gregoire's vetoes — mostly minor changes to policy or spending cuts — reduced the Legislature's planned reserves by about $30 million, leaving about $450 million in the bank to guard against increased costs or lower-than-expected tax collections.

Two of Gregoire's vetoes canceled transfers of money away from the state insurance commissioner's office and a fund for biotechnology research. She also nixed a provision that would have given bars and restaurants a break on liquor-price markups by state regulators, saying that would reduce needed revenue and wasn't fair to all consumers.

Gregoire also warned that difficult fiscal times are still ahead for the Legislature, with a fragile economic recovery expected to continue affecting Washington's sales-dependent tax system.

"There's no question the state government budget is not out of the woods," she said.

Gregoire separately signed into law a $3.7 billion construction budget that finances projects around the state, including $122 million for Puget Sound cleanup and other environmental programs.

She also signed a measure that asks voters to approve a package of energy-efficiency upgrades at public universities and K-12 schools.

The ballot measure carries about $500 million in bond sales, with the money dedicated to retrofitting and renovating aging school buildings. A temporary sales tax on bottled water would be extended to help finance the projects.