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Updated Wednesday, December 19, 2012 at 12:01 AM

Gregoire's budget plan would send another $1 billion to schools

By Andrew Garber
Seattle Times Olympia bureau

OLYMPIA — Gov. Chris Gregoire on Tuesday outlined a way for her successor to spend an additional $1 billion on education, without necessarily breaking any campaign promises.

Democratic Gov.-elect Jay Inslee, during a tight gubernatorial race with Republican Rob McKenna this year, promised not to increase taxes.

"I would veto anything that heads the wrong direction, and the wrong direction is new taxes in the state of Washington," Inslee said after a debate in October.

Yet starting next month, he has to find a way to make a substantial down payment on state Supreme Court demands for increased education funding, as well as to close a big budget shortfall, at a time when the state economy is still struggling.

Gregoire staked out a path she contends would solve Inslee's dilemma.

Her budget proposal would use wholesale taxes on gasoline and diesel fuel to help pay the cost of transporting public-school students, a move critics say could drive up prices at the pump.

She also wants to extend a beer-tax surcharge and a business-and-occupation tax surcharge on certain services for an additional 3 ½ years. State law calls for those taxes to expire next summer.

Those two ideas combined would raise $1 billion for K-12 public schools over the next two years. And Gregoire, in response to reporters' questions, said her plan gets around Inslee's no-new-taxes pledge: "He never said he wouldn't do taxes for transportation. He ... never said he wouldn't continue current taxes."

Inslee during his campaign did say he supports sending a tax measure to the ballot to raise money for transportation, maybe in 2013 or 2014.

But did he want this very public advice from a lame-duck governor?

A source close to Inslee said, "This is clearly a product of the Gregoire administration," noting the governor-elect didn't ask for her education-spending approach.

Other sources close to the budget negotiations also said there was no coordination between Gregoire and Inslee.

The school-bus plan is part of Gregoire's last budget as governor. State law requires her to put together a two-year spending blueprint before leaving office.

Inslee can ignore it if he wants, and his office Tuesday said he plans to come out with his own budget later. "In the upcoming legislative session, Governor-Elect Inslee will lay out his own budget priorities that reflect his vision for state government," according to a statement from Inslee's office.

Setting aside campaign promises, the state Senate could pose a problem if Inslee wanted to pursue Gregoire's plan, which would eventually pay for school buses from the state transportation budget.

Republicans are expected to control the chamber next session, after two Democrats crossed party lines to give the GOP a 25-to-24 vote majority.

GOP Sen. Andy Hill, who's in line to chair the Senate Ways and Means Committee, said he doubts voters believe school buses should be funded from the state transportation budget, and he's concerned a new wholesale fuel tax would be passed on to consumers.

The Redmond Republican also thinks using transportation dollars to pay for school buses could eat up any appetite that voters may have to pay for new highway projects in the future.

However, a similar idea was approved by the state Joint Task Force on Education Funding on Monday.

"I recognize there's going to be a pinch there with other transportation priorities," said Mary Lindquist, president of the state teachers union and a member of the task force, speaking before the governor released her budget, "but the court has been very clear that education is the state's paramount duty."

Under Gregoire's proposal, the fuel tax over the next two years would free up $376 million in state money that now pays for student transportation. That money could go to schools instead.

The entire cost of the school-bus system would be paid out of the state transportation budget by fiscal year 2017. The fuel tax would eventually be as high as 4.62 percent.

In addition, extending the temporary beer tax, and business-and-occupation taxes on doctors, lawyers and others, would raise an additional $636 million over two years, according to the governor's budget office.

Gregoire wants the Legislature to approve the changes instead of putting them on the ballot for voters to decide.

In her budget plan, the governor also proposed moves to deal with a nearly $1 billion shortfall, including shifting money from various accounts, repealing a tax exemption and suspending Initiative 732, which mandates annual cost-of-living increases for teachers.

I-732 alone is worth $360 million over the next two years and has been repeatedly suspended by the Legislature.

Her budget also proposes a new tax on carbonated beverages and repeal of the sales-tax exemption on candy and gum. Voters rolled back a similar effort in 2010.

Times staff reporter Brian M. Rosenthal contributed to this story.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com






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