SAN FRANCISCO — The Washington Legislature rebalanced the state’s 2009-11 biennial budget Monday night, closing a $2.8 billion gap with the help of almost $750 million in new taxes.
Lawmakers also added $542 million of bond-financed spending to the state’s $3.7 billion capital budget, which runs through fiscal 2011. The bonds, which would be backed in part by a tax on bottled water, must be approved by voters in November.
The amended capital budget increases funding for energy-efficiency improvements at public schools, affordable housing projects, storm water retrofits and a Puget Sound environmental cleanup in an effort to spur job creation.
Lawmakers rebalanced the $31 billion general fund operating budget with a combination of tax increases, spending cuts, reserve spending, and federal aid the state hopes to get. The adjustments were necessary because the state’s revenues are coming in about $1.8 billion below forecast, and spending is about $1 billion higher than forecast.
“We believe the approach we’ve taken is balanced,” said Rep. Kelli Linville, D-Bellingham, chairwoman of the House Ways and Means Committee.
Gov. Chris Gregoire and lawmakers negotiated the terms of the deal and the Democratic governor is expected to sign the legislation, a spokesman said.
Republicans lambasted the plan for increasing taxes, cutting spending too little, and relying on one-time budget fixes.
“The majority party has put forth a budget that is completely unsustainable by using budget gimmicks, fund transfers, cost shifts, and one-time money, along with new taxes, to make up the state’s $2.8 billion shortfall,” said Rep. Gary Alexander, R-Olympia, the ranking GOP member of the Ways and Means Committee.
A $757 million package of tax increases forms the biggest single component of the budget-balancing legislation. Democrats said more than 40% of the tax increases would be temporary and would expire at the end of fiscal 2013.
Under the plan, Washington would temporarily increase business and occupation taxes on certain service industries to raise $246 million a year, beer excise taxes to raise $58 million, and soda pop taxes to raise $38 million.
The legislation would raise about $332 million a year in permanent revenues. The biggest single increase, $155 million a year, comes from the elimination of business and occupation tax exemptions created by a recent state Supreme Court decision.
The business and occupation tax is a gross receipts tax and the state’s main form of business taxation. Washington doesn’t have a corporate income tax. It also has no personal income tax.
The package would also raise revenues by forcing out-of-state businesses to pay the business and occupation tax if a company has more than $250,000 in Washington sales and by expanding sales tax to cover bottled water, gum, and candy.
The budget plan would cut spending by $755 million, though Democrats say that figure is misleading because it ignores billions of dollars of cuts implemented to balance the budget last year.
“We have cut,” said Sen. Ed Murray, D-Seattle, the Democratic caucus chairman. “For every dollar we have raised, we have cut $5.”
The rebalancing plan would also include $690 million of transfers from other funds, including $229 million from the state’s rainy-day fund. The transfer would drain the official reserve fund, but Democrats said their plan would leave an unreserved general fund balance of $484 million at the end of the biennium. That’s equal to about 3% of annual expenditures during this biennium.
