Eyman's I-1033: Complex measure's impact is unclear

Tim Eyman was asked recently if he could imagine a time when he wouldn't feel the need to file another anti-tax initiative.

Eyman, in essence, said no. "It's a tug of war where the other side is always going to be pulling the rope in favor of higher taxes," he said. "There needs to be a counterweight to that."

And so Eyman, who makes his living filing initiatives, has put before voters another measure he argues will stifle any urge by lawmakers to increase taxes at least during the next couple of years, and help rein in government spending.

Initiative 1033 would limit revenue increases for state, city and county governments to the rate of inflation and population growth. Additional money above the limit would be used to reduce property taxes.

It's a complicated measure, and its effects — as is often the case with Eyman's initiatives — are unclear. However, the governor's budget office projects the measure would divert more than $8 billion from state, city and county general funds into property-tax relief from 2011 to 2015.

That's roughly equivalent to state spending on public schools and higher education combined in the current fiscal year.

Bad-timing argument

With governments still struggling from the recession, opponents say the initiative couldn't come at a worse time. They say it would cap government spending at artificially low levels, cripple attempts to restore recent budget cuts and ultimately force even more cuts in areas such as health care, education and law enforcement.

"I'm using the black-hole theory," King County Executive Kurt Triplett said. "The gravity of this is going to slowly start to move us, and then it's going to pull us in and destroy us."

Eyman, who has sponsored eight initiatives approved by voters in the past decade, dismisses such talk as crying wolf.

Government officials "always say it's impossible until the voters vote for it, and suddenly it becomes 'we have no choice, we have to make this work,' " he said. "They've proven time and again they are much more flexible and adaptable than they give themselves credit for."

Support, opposition

A broad coalition, including the Service Employees International Union, the Washington State Hospital Association and the Greater Seattle Chamber of Commerce, opposes the measure.

The Association of Washington Business is neutral, but its president, Don Brunell, said, "In the long run, I think our folks felt this is the wrong time for this initiative."

The state Republican Party has endorsed the measure.

The No on 1033 campaign has raised more than $2.6 million to oppose the initiative and has started running ads on television.

Eyman has raised and spent more than $600,000, with the bulk of it paid out to qualify the initiative for the Nov. 2 ballot, including $510,000 spent on signature gathering.

The last Eyman initiative approved by voters was I-960 in 2007. The measure made it tougher for the Legislature to boost taxes by reaffirming, and broadening, an existing state law that requires a two-thirds vote by lawmakers to approve an increase.

Once an initiative is approved by voters, it takes a two-thirds vote of the Legislature to amend the measure in the first two years. After that, lawmakers can change the measure with a simple majority vote.

Eyman said that leaves I-960 vulnerable to lawmakers in January. He notes that both Gov. Chris Gregoire and Senate Majority Leader Lisa Brown, D-Spokane, recently said they're willing to consider a tax increase.

I-1033 is intended in part to keep lawmakers — who face a $1.2 billion budget shortfall next year — from dumping the two-thirds vote requirement and hiking taxes without asking voters first.

Eyman noted that when the economy was booming during Gregoire's first term, the Democrat-controlled Legislature rapidly increased state spending — by 31 percent, or about $8 billion. Then the recession hit and the state had to close a $9 billion budget shortfall.

"If you don't adopt different policies, they are destined to do it all over again," he said. "What our initiative is trying to do is get them to realize that you ... have to fundamentally do things differently in order to sustain the budgets you are writing."

Incentive disappears

The initiative, according to Eyman, essentially says that, if lawmakers increase taxes without voter approval, they'll have to give it back the following year by lowering property taxes. So it removes the incentive to raise taxes.

Lawmakers still could ask voters to raise taxes, he said, and that revenue would be exempt from the initiative.

Opponents say you only have to look at Colorado to see the impact the initiative would have in Washington.

Colorado voters in 1992 approved a constitutional amendment called the Taxpayer Bill of Rights (TABOR), which also uses a population-plus-inflation formula to limit revenue growth.

I-1033 opponents say TABOR led to sharp drops in funding for public schools and higher education. Colorado voters in 2005 suspended the limit for five years to allow the state to keep money that would have been refunded to taxpayers.

Major differences

However, there are key differences between the two measures. Colorado's applied to all governments including school and fire-protection districts. Eyman's affects only city, county and state government.

In addition, I-1033 can be changed by lawmakers with a simple majority vote after two years. Colorado's law is more difficult to change because it's a constitutional amendment.

Still, Washington is in the middle of its worst economic slump since the Great Depression. Lawmakers last session closed a massive budget shortfall with a combination of federal stimulus money, spending cuts and other one-time fixes.

I-1033 would prevent the state from taking full advantage of a rebound in tax collections as the economy recovers.

State budget writers project the cap would limit revenue increases to about 3 percent annually during the next six years. But, as the economy improves, state tax collections are expected to increase about 5 percent each year on average. The difference would be used to reduce property taxes.

The initiative's foes say that means the state would lose billions of dollars that could be used to help make up for recent cuts in education, health care, criminal justice and other services.

Scott Whiteaker, a spokesman for the No on 1033 campaign, says the limit would lock in "massive cuts (in state funding) to education that have resulted in larger class sizes, fewer teachers and fewer supplies for students."

In addition, Whiteaker said, the initiative would prevent the state from keeping up with the real costs of doing business. Education and health-care costs likely would increase much faster than the growth allowed under the initiative, he said.

State records show health-care expenditures, which are largely mandatory, rose 38 percent from 2003 to 2008. Budget writers project that state revenue increases under I-1033 would be limited to about 17 percent during the next six years.

At the local level, public employees and government services eventually would bear the brunt of the hit from the initiative, city and county officials said.

"For the first year or two, there probably wouldn't be a dramatic impact," Triplett said. "We're looking at flat or declining revenues anyway."

Down the road, however, as the economy recovers, it's not realistic to limit revenue at a level that's lower than the cost of doing business, Triplett said. The county, he said, competes with others to hire the best people.

"If you go to King County's Web site today and see what jobs are available, it's police officers, corrections officers and public health-care nurses," he said. "We can't hire them today."

Andrew Garber: agarber@seattletimes.com or 360-236-8268.