UPDATE: At the Yes on 1033 party in Bellevue, Eyman wasn't ready to concede tonight, but he admitted that "the numbers aren't looking good."

"We are going to learn from the experience, and will do everything we can to make sure we make the next proposal takes care of the people who did not vote for 1033, we are going to listen to them," Eyman said. "It doesn't sound like as many people voted for it as we would have preferred. They said 1033 isn't the approach we want."

UPDATE: Gov. Chris Gregoire, in a statement, applauded voters' apparent rejection of Initiative 1033.

"Voters understood that this misguided proposal would have precluded our ability to recover from these extraordinarily difficult economic circumstances and would have made providing quality health care and education to our citizens virtually impossible.

"Although we still face a $1.7 billion shortfall that needs to be addressed in the coming legislative session, passage of this initiative would have made the problem in the short and long term significantly worse."

UPDATE: Tim Eyman’s latest initiative, aimed at controlling government spending and reducing taxes, appeared to be losing in early returns Tuesday.

Eyman wasn’t ready to concede. “We’ll see what happens,” he said.

Opponents were close to celebrating early Tuesday night. Scott Whiteaker, the No on 1033 spokesman said they’re optimistic about the preliminary returns, which showed the measure failing by a large margin. At 8:45 p.m., the measure was failing at a rate of 56 percent to 44 percent.

Matt Barreto, a University of Washington political-science professor tracking the results, said he thinks I-1033 is toast. The measure was trailing in a number of Eastern Washington counties and failing by a large margin in King County.

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

If it had been approved, the state projected the measure would divert more than $8 billion from state, city and county general funds into property-tax relief from 2011 to 2015.

Tim Eyman’s latest initiative, aimed at controlling government spending and reducing taxes, was losing in early returns Tuesday.

Tim Eyman said I-1033 is headed for defeat. He blamed the loss of I-1033 on the fact opponents outspent him by millions of dollars. “Voters definitely heard from the no campaign, but I don’t think they heard from our side,” he said, adding he plans to come back next year with another measure.

Early returns showed the measure failing by a margin of 55 percent to 45 percent.

Matt Barreto, a University of Washington political-science professor tracking the results, said he thinks I-1033 is toast. The measure was trailing in a number of Eastern Washington counties and failing by a large margin in King County.

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

If approved, the state projected the measure would have diverted more than $8 billion from state, city and county general funds into property-tax relief from 2011 to 2015.

The loss of tax revenue would have made it more difficult for the state to crawl out of its existing budget hole. And short of lawmakers seeking, and receiving, voter-approved tax increases, the measure would have likely forced deeper budget cuts in the years ahead.

A broad coalition including education, labor and health-care groups, along with top political leaders, opposed the measure. The No on 1033 campaign raised and spent more than $3 million and blanketed the region with television ads warning of Draconian budget cuts if the measure passed.

Eyman, by comparison, raised and spent less than a quarter of the money raised by the opposition. He relied on free coverage by local media and kept his message simple, arguing I-1033 would control government spending and lower taxes.

I-1033 would have largely removed any incentive for the Legislature to boost taxes without voter approval because it essentially requires the state to use the same money to lower property taxes.

Eyman argued that his initiative was the only thing standing in the way of the state Legislature increasing taxes.
And there has been more talk in Olympia lately about a tax increase.

Both Gov. Chris Gregoire and Senate Majority Leader Lisa Brown have said they’re willing to consider the idea because the state is facing a $1.7 billion budget gap in the current two-year budget. The Legislature will have to close the shortfall during the next session, which starts in January.

Jay Manning, Gregoire’s new chief of staff, said during a recent TVW interview that he’d be surprised if lawmakers closed the shortfall “exclusively through cuts.”

On the other hand, 2010 is an election year and Democrats generally don’t like to hand Republicans something as unpopular as a tax increase to bludgeon candidates with during the campaign season.

Taxes aside, the defeat of I-1033 would make it easier for lawmakers to close an even larger budget gap — expected to exceed $5 billion — projected for 2011.

The state estimates it will get an additional $3.3 billion in tax revenue during the next two-year budget cycle that could be used to offset that shortfall.