House Dems outline plan to close $5 billion state budget shortfall

OLYMPIA — House Democrats on Monday proposed digging the state out of its $5 billion hole with a broad swath of budget cuts, double-digit college-tuition increases and the privatization of the state's wholesale liquor operation.

But, even with all the cuts, the budget would preserve a couple of key social programs for the poor and disabled that Gov. Chris Gregoire had put on the chopping block.

The proposal would cut spending by $4.4 billion, raise $300 million with the liquor-privatization plan and bring in several hundred million more from reserves and by raiding accounts outside the state general fund.

"We've had to make very difficult cuts," said House Ways and Means Chairman Ross Hunter, D-Medina. "Nobody should think any of these decisions are easy."

Nearly $500 million in cuts to higher education would be offset partially by tuition increases: 13 percent per year for the next two years at the University of Washington, Washington State University and Western Washington University. Smaller, yet still double-digit, increases are proposed for the other schools.

The proposed two-year, $32.4 billion budget, which runs through fiscal year 2013, would spend less than the past two biennial budgets. Those budgets included billions of dollars in federal bailout money that's now expiring.

The biggest surprise in the budget proposal — the liquor-privatization plan — came with few details.

Under the House plan, the state would establish a competitive bidding process in which the state would partner with a private company to handle the wholesale distribution of the liquor business. The winning company would make a substantial payment to the state upfront — to the tune of $300 million — and then annual payments and profit-sharing after that.

The state would retain control of retail sales, through its liquor stores.

Hunter said the proposal is a "work in progress" and that, if the Senate or Gregoire disagrees, they would scrap it.

House Republicans criticized Democrats for not cutting deeply enough and said they'll come out with their own budget Wednesday. "I've seen go-home budgets before, and this isn't one of them," said Rep. Gary Alexander, R-Olympia.

However, Democratic leaders say they already have the votes they need to pass their proposal in the House. They want to vote on the budget Friday.

In addition to controlling the governor's office, Democrats hold a 27-22 majority in the Senate and a 55-42 advantage in the House.

The Senate, which is trying to forge a bipartisan budget with Republicans, is expected to release its proposal early next week. Both chambers then will try to compromise with the governor.

Key differences

House Democrats didn't go for any of the big budget gimmicks floated earlier in the session, such as borrowing money, or using the so-called "25th month" in which lawmakers use 25 months of tax collections to pay for 24 months of spending.

There are some key differences between the House budget and the one proposed by Gregoire in December.

Gregoire's budget would eliminate the state Basic Health Plan, which provides subsidized health insurance for the working poor, and Disability Lifeline, which gives cash grants to unemployable disabled people.

The House budget saves the Basic Health Plan at a reduced level for the next two years. At the end of that period, the federal government is expected to pick up all the costs as part of the national health-care overhaul. The budget also would retain Disability Lifeline but would turn the cash grants into a housing program.

In addition, the budget would cut higher education more deeply than the governor and then partially offset the reductions with bigger tuition increases than Gregoire proposed.

With the steeper tuition hikes, the result is a smaller budget reduction overall for many state universities and colleges than proposed by the governor, said Mike Reilly, executive director of the Council of Presidents, an organization of the presidents of the state's six four-year schools.

In K-12 education, House budget writers proposed cutting less than Gregoire overall, largely sparing programs for highly capable students and bonuses for teachers who earn the prestigious National Board Certification. The Democrats didn't propose any cuts to the assistance fund that reduces the gap between school districts that can raise a lot through local property-tax revenues and those that can't.

They also kept $25 million to help high-poverty schools reduce early elementary-school class sizes, even as they proposed eliminating the much bigger fund that has allowed all schools to do that.

But they proposed some reductions that Gregoire did not, especially in state testing and online and home-school programs.

The budget would eliminate $1.2 billion in funding for two education initiatives dealing with teacher pay and class sizes. But that was already a given, considering the programs have been suspended for the past two years.

It would end cost-of-living increases for retired workers in the state's older, closed Plan 1 pensions, and extend to nonunion workers a 3 percent pay reduction through furloughs. Union workers already have agreed to the pay reductions.

Several other social-service programs also would be reduced, including food assistance for the poor and personal-care services for the sick and disabled.

"Still pretty horrible"

The budget seemed in line with expectations of some of the interest groups watching the Legislature as it prepares a new two-year budget.

"The good news is it's not worse than we expected. The bad news is it's still pretty horrible," said Nick Federici, a lobbyist with Washington Low Income Housing Alliance.

Federici wants lawmakers to send voters a ballot measure that would close tax breaks to raise enough money to pay for some of the services they're cutting.

Senate Ways and Means Chairman Ed Murray, D-Seattle, said he hadn't gone through the House budget in detail but hadn't seen any big areas of concern so far. "I believe we're not far apart in many areas, which will expedite our ability to come to an agreement," he said.

The regular legislative session is set to end April 24.

The Associated Press

and Times reporters Linda Shaw and Katherine Long contributed

to this report.

Andrew Garber: 360-236-8266

or agarber@seattletimes.com.