Proposal taps tobacco settlement

BRAD SHANNON, THE OLYMPIAN

Originally published Tuesday, March 5, 2002

OLYMPIA -- A proposal to trade part of the state's future tobacco settlement dollars for $535 million in cash drew sharp criticism Monday as Senate Democrats outlined their plan to plug a $1.6 billion budget gap.

More details about the plan are expected to be released today.

Attorney General Christine Gregoire, who won the $4.5 billion settlement with tobacco makers, warned that the state's bond rating could be hurt and taxpayers will lose.

But the budget's author, Senate Ways and Means Chair Lisa Brown, D-Spokane, said the plan to "securitize" $1 billion to $1.5 billion of the state's future tobacco-settlement receipts is the only way the state can avoid tax increases or deeper cuts to social programs. It echoes action by six other states, and it is being considered by 11 others, Brown said.

"It's not a long-term solution. However, we think it's a bridge to a long-term solution," said Brown, who also plans to tap the state's shrinking rainy-day fund for an additional $247 million to close the money gap. "It's the rainiest day we've had since 1972.''

"There is just no other way out than this solution Sen. Brown has presented today," Senate Majority Leader Sid Snyder, D-Long Beach, agreed at a press briefing with Brown and Sen. Erik Poulsen, D-West Seattle. "I think this is a budget that everybody hates, that nobody likes.''

Criticism of the proposal was broad and deep, coming from such diverse sources as Republican lawmakers, Democratic Treasurer Michael J. Murphy and Gregoire, also a Democrat.

"I'm not fond of the idea," said Murphy, who had looked into the concept when Gregoire first negotiated the settlement in 1998.

"If the plan is to 'securitize' a future stream of payments and to solve the budget with that, that's mortgaging to buy groceries,'' Murphy said. "It's a one-time fix.''

"It's a bad deal for Washington taxpayers. It's a good deal for the underwriters," said Gregoire.

Until Friday, Gregoire said, she thought Brown had abandoned the tobacco-cash proposal because Washington, based on the experience of states like Wisconsin, might receive only 25 cents to 30 cents on every future settlement dollar it forsakes.

During the next 25 years, the state expects to receive $4.5 billion, an amount that grows to $6.8 billion over 30 years once an inflation factor is added. After looking at what other states have done, Gregoire said. Washington could have to give up in excess of $2 billion of that money to raise what Brown's budget is based on.

It would be better, Gregoire said, for lawmakers to take time to educate voters on the financial problems and to explain the need for both budget cuts and a temporary tax increase to cover the state's roughly $1 billion revenue loss triggered by the Sept. 11 attacks.

Patriotic appeal

"Let's not sell the public short," Gregoire said. "Let's go out there and say to the citizens of the state of Washington, 'Do not let the terrorists of Sept. 11 and its aftermath sell the future of the state of Washington. Don't let them bring us fiscally to our knees and let us not make budget cuts that we'll be paying for forever because we hurt higher education, K-12 or services for the needy.' "

"In general terms, I think it's a completely irresponsible approach to budgeting," said Rep. Barry Sehlin, R-Oak Harbor, the ranking minority on the House Appropriations Committee. "I've heard it referred to as Enron budgeting and I wouldn't disagree with that.''

The top Republican on Brown's budget committee, Sen. Dino Rossi, said, "Essentially, you are borrowing to pay for the groceries, for ongoing expenses."

Rep. Gary Alexander, R-Thurston County, said, "You discount the future earnings of the state of Washington by anywhere from 50 to 70 percent ... Pretty incredible.''

Gov. Gary Locke, who had previously told Gregoire and others that he opposed use of the tobacco money and disliked the idea, expressed support Monday for the overall budget, saying it avoided tax increases.

'Something to work with'

Locke issued a press release in which he said, "Overall, the proposal gives us all something we can work with, and moves us closer to the day the Legislature can adjourn. This is a solid working document for serious negotiation with the state Senate, the state House of Representatives and my office over spending priorities and ways to solve our $1.6 billion deficit."

Criticism for the budget proposal came from many other areas -- from the Washington Education Association, from state employee groups and from social services lobbyists -- because the plan would cut programs deeper than Locke had proposed in December.

But Senate leaders insisted it is the best option available, since they don't believe the House would support a tax increase.

"When I went over this in my caucus this morning, it was a very somber group," Brown said of the reaction her plan had on other Democrats, who hold a narrow 25-24 advantage in the Senate.

"No one was spared the misery of tightening their belts," said Poulsen, who had looked for tax exemptions to close. However, he said he found only three that would generate less than $30 million. Except for 1,000 additional worker-retraining slots in colleges, "there are virtually no enhancements in the budget," Brown said.

Brad Shannon, political editor for The Olympian, can be reached at 360-753-1688 or bshannon@olympia.gannett.com.

The Olympian Copyright 2002

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