Nov. 17 Daily News editorial

Washington lawmakers bridged a $9 billion budget gap without increasing taxes during this past legislative session. That wasn’t a lot of fun, but the upcoming 2010 session promises to be even less enjoyable. On Friday, Gov. Chris Gregoire’s budget office projected a revenue shortfall of about $2 billion. And that budget gap is certain to grow, as state tax collections continue to decline in weeks and months ahead.

The prospect of more budget cutting in January is weighing heavily on the Democrat-controlled Legislature. Organized labor is already fuming over the last round of spending reductions. Some labor leaders have suggested they might not be so generous with Democratic candidates’ campaigns next year. The Puget Sound Business Journal quoted Dennis Eagle, director of legislative and political action for the Washington Federation of State Employees, as saying, “At least for the foreseeable future, I don’t think we’ll be making any contributions.”

Such talk has some Democrats entertaining the possibility of tax increases. Gov. Gregoire has opened that door, according to columnist Peter Callaghan of The News Tribune in Tacoma. Gregoire reportedly delivered what we would view as a shot across the bow last week, announcing that she would listen to tax-increase proposals.

Increasing taxes would seem an incredibly counterproductive move at this moment, with the state economy still very much in the tank. Taking money out of people’s pockets will do nothing to prompt the surge in consumer spending that’s need to get the economy back on its feet and moving. But we are not surprised by the talk of tax increases in Olympia or Gregoire’s apparent willingness to back away from her earlier pledge to budget for the current biennium without resorting to a tax hike.

Legislative Republicans were right last spring, when they argued that the two-year budget blueprint signed by Gregoire simply was not sustainable. Thanks in no small part to federal stimulus money, that budget maintained a lot of state programs and services with revenue that will disappear in two years or less. Almost half of the $9 billion shortfall was filled in this way. Lawmakers used some $3 billion in stimulus money and diverted almost $1.5 billion from off-budget accounts.

Now, with state revenues continuing to decline, Democratic budget writers are in a pickle. They can’t cut spending in those places where federal stimulus dollars were applied. The federal government won’t allow it. That was part of the agreement — not to cut state spending where stimulus money was used. This restriction and court rulings related to the state’s obligation to fund basic education really limits the areas in which lawmakers can cut back on spending.

But the choice may not have to come down to either the elimination of critical services or tax increases. Minority Republicans believe there could be significant savings through a restructuring of how state government delivers services, according to Associated Press writer Carl Woodward. Democratic leaders would do well to take a step back and give their Republican counterparts’ idea serious consideration. Clearly, what’s needed here is some new thinking.