An accounting maneuver being considered at the state Capitol might allow Democrats and Republicans to cast aside the biggest point of contention in their ongoing budget negotiations.
Republican lawmakers have been criticizing Democrats for wanting to push a payment to schools into the next budget period. Democratic lawmakers have panned Republicans’ budget for skipping a payment to underfunded pension plans. And state Treasurer Jim McIntire has dismissed both ideas as “felony gimmicks.”
Gov. Chris Gregoire has put forward a third, previously undisclosed alternative with support from fellow Democrat McIntire. While legislative leaders have yet to publicly embrace it, no one is rejecting it either, Senate budget chairman Ed Murray said.
As described by McIntire’s office and others, the proposal would keep sales-tax revenue collected on behalf of local governments in the state’s general fund longer. That could free up $238 million for spending elsewhere.
“It’s a permanent process change, not a one-time change,” said Wolfgang Opitz, the assistant state treasurer. “We don’t put it in the ‘gimmick’ category.”
Local governments would get their money at the same time they do now, Opitz and budget writers say. Several local governments and their lobbying associations say they’re fine with the idea the way it’s being described.
Here’s how the distribution works now: A day after sales tax collections land in the general fund, local governments’ share is transferred to a special account. But it’s not distributed to the cities, counties, mass-transit agencies and others until the end of each month.
The proposal would keep the money in the general fund until the end of the month, transferring it into the other account just before it needs to be sent out to local governments. That would provide about $238 million more cash on the state’s balance sheet at the end of the month.
Opitz said the improved cash flow could be used to increase the amount the state assumes is available to spend in a given budget period. The state normally counts only the revenue it collects during that two-year period – not what is owed in that period and expected to be collected later – but Opitz said it could afford to be a little less “ultra-conservative” if there is extra cash in the account and still have plenty of cushion.
Gregoire’s budget office declined to comment.
Senate budget writers Murray, a Seattle Democrat, and Joe Zarelli, a Ridgefield Republican, confirmed the proposal is under consideration.
“It’s potentially one of the ways that could help us figure out how to get to a final budget,” Murray said.
They and their House counterparts have been meeting this week to resolve differences between a budget supported by majority Democrats and one that Senate Republicans put forward along with three renegade Democrats who give them a majority on budget issues.
The differences between the two plans are relatively small in a budget of more than $30 billion, but they are fiercely debated.
Republicans call for cutting deeper into human-services programs and reducing some pension benefits for future state hires. They say their benefit cut saves enough money in the long run to allow the state to skip a $143 million pension payment now. Democrats protect more programs by putting off a $330 million distribution to school districts, saying the effect on school districts is only a day’s delay.
Today is the 11th day of a 30-day special session called by Gregoire to resolve the standoff.
Zarelli noted that the new proposal would not require a late payment to local governments.
“It would bolster the reserves in the (state) general fund, and because it’s ongoing it, wouldn’t change that over time,” he said.
Counties and cities would stand to lose a relatively small sum in the form of interest – but Victoria Lincoln of the Association of Washington Cities said she has been told lawmakers would make that up to local governments, and she said the association would insist on that.
Otherwise, she doesn’t see a problem with the plan, a sentiment echoed by Pierce County lobbyist George Walk and King County budget director Dwight Dively.
Tacoma lobbyist Randy Lewis agreed, while calling the potential move another reason for cities to want to keep control over collection of other local taxes. Tacoma, Seattle and other cities oppose a proposal by Gregoire for the state to take over collection of local business taxes, similar to how it administers sales taxes.
That idea never found traction in the Legislature, but lawmakers have raised the possibility of grabbing the local share of several taxes that are split between the state and local governments.
Compared with those ideas, the latest proposal doesn’t faze cities and counties.
“From our perspective, if it holds us harmless and helps the state with a cash flow position and minimizes the need to come after some of the other local shared revenues, great,” said Scott Merriman of the Washington State Association of Counties. “We’re all for it.”
Andrew Garber of The Seattle Times contributed to this report.