Washington state legislators will head to Olympia next month attempting to answer a $2.6 billion question: Whats the best way to deal with a 2003-2005 biennium deficit of such enourmous size?


Something they wont lack, though, are suggestions on how to spend the money that is available. Spokane-area business leaders, higher-education representatives, and local-government officials have lined up their priorities for the upcoming legislative session and stand ready to push for projects and issues, many of which they support jointly.


Its all about money. Seriously, says Don Brunell, president of the Association of Washington Business. In this climate we have, where you have a real economic slowdown, were not recovering as fast as other states.


The Spokane Regional Chamber of Commerce plans to reaffirm its support for local projects and priorities it advocated last year, while seeking to preserve the plusses of the business climate, says Todd Mielke, the chambers governmental affairs consultant. Mielke says a rollback of recent increases in workers compensation premiums, reform of the State department of Labor and Industries, and preserving a sales-tax credit on the purchase of manufacturing equipment rank at the top of the chambers priorities.


The chamber will fight to protect that sales-tax credit, Mielke says. Thats a great incentive for businesses that are seeking to expand and a valuable tool for both new businesses and businesses struggling to stay afloat, he says.


The chamber also will lobby for a permanent funding source for local economic development. It wants the Legislature to grant Spokane and other communities the right to ask voters to approve a 0.1 percent local sales tax, which would raise $6 million a year here for economic development, says Jeff Selle, the chambers federal and regional issues manager. The chamber also will support capital funding for college and university projects here, and support smaller capital projects at civic facilities.


Many business leaders here fear that L&Is 29 percent workers compensation rate increase, announced last month, will hurt the economy in the long run, Mielke says. The department originally had proposed a 40.5 percent increase for 2003, but L&I announced it was adopting a smaller increase in response to public testimony urging the department to phase in the boost over a longer period.


In recent years, rates were reduced because of strong investment earnings, but the weak stock market has depleted L&Is resources. Still, business leaders contend sour investments are only part of the problem, and that operational difficulties within the department are contributing to the higher rates.


The rate increase is still unacceptable, and there is still no apparent systemic revisions or reforms to address some of the ongoing, underlying problems, Mielke says. Were looking at how to make specific changes in the current program that I think would bring additional efficiencies.


Claims are handled slowly and inefficiently, and theres a shortage of caseworkers, Mielke asserts.


Even with the increase, L&I says Washingtons workers compensation rates are among the lowest in the nation, but the AWBs Brunell says businesses in the state nevertheless are getting pounded by other obligations to the state.


We have one of the most expensive unemployment insurance rates in the country, he says. We also have a high minimum wage, and that particularly hits farmers and people with temporary employees.


Brunell applauds L&I for reducing the size of the increase, but argues that the smaller increasealong with an average 15 percent unemployment-insurance increase and the threat of higher state and local taxes to make up for city, county, port district, and state budget shortfallsgive employers a tremendous cumulative tax burden in 2003.


Tax reform and minimum wage


Another issue drawing attention from business leaders is tax reform. A citizens commission appointed by Gov. Gary Locke and led by Bill Gates Sr. recently recommended that the state implement an income tax and halve its sales tax to make its tax system more fair and stable.


The current tax system, in place since 1935, is often criticized. It relies heavily on the sales tax, the property tax, and a gross-receipts tax on business called the business-and-occupations tax. Washington is one of only six states without an income tax.


Brunell says businesses pay 51 percent of the states tax base, compared with 26 percent in Oregon, which has an income tax. Although many legislators have said in media reports that a major overhaul of the states tax system is unlikely in the near future, Washingtons lagging economy has Brunell hopeful that lawmakers will consider easing the tax burden on businesses to some degree.


In this state, with the precariousness of the economy, I dont think we can afford to have tax increases, he says.


The AWB also will ask legislators to revamp the states minimum-wage statutes, Brunell says. Business leaders want the minimum wage to vary according to the location of a job and the health of the economy in that area, he says.


There has to be some recognition of regional differences, he says. For example, $6.90 an hour might be appropriate in Seattle, where the cost of living is high, he contends, but not in a town on the other side of the state, where it might be difficult for an employer to pay that much. (The states minimum wage is scheduled to increase to $7.01 on Jan. 1.)


City sets agenda


Greg Sweeney, legislative and public affairs director for the city of Spokane, has his eye on how the statesbudget shortfall will affect its mandates. Washingtons Growth Management Act requires cities to update their comprehensive and shoreline-management plans, but Sweeney says the Legislature hasnt provided the funds to get the job done. After five years developing a comprehensive plan, the city passed it last year. It filed its plan after a state deadline, though, and missed out on some state funding, Sweeney says.


The Growth Management Act requires that cities adopt shoreline-management plans in 2002, but Spokane has failed to do so because of a lack of time, funding, and resources, he says.


We were supposed to do that this year, but there was no funding for it, he says. Those are expensive, time-consuming projects.


The city also will watch for a proposal thats expected soon from the governors water-policy adviser on assigning limited water rights to competing interests.


Were watching that to protect the interests of taxpayers in the city and to protect the citys right to grow, Sweeney says.


Sweeney says a big priority for the city is a piece of legislation initiated by a citizens street funding committee that would change how street repairs are paid for here. The bill would allow for creation of a street utility, which would charge fees to users of the road system, collect street-related funds from outside sources, then use all of those funds to pay for the citys road maintenance and construction needs. Sweeney argues that such utilities provide more consistent and reliable funding for street repairs than hard-to-pass bond measures and gas-tax increases.


Last spring, voters here rejected a property-tax increase to repair Spokanes streets.


The city also will try to protect several capital projects from last year, such as improvements to the Fox Theater, West Central Community Center, and a pedestrian bridge on the Centennial Trail.


In addition, the city will back a $300,000 request from the nonprofit Friends of the Falls to pay for a Great Gorge Park master plan. The park would connect downtowns Riverfront Park to natural areas downstream.


The city and the Spokane chamber also will lobby for funding for a number of regional transportation projects, such as the north-south freeway, further widening of Interstate 90, and initial design funding for the $270 million Bridging the Valley project, which between the Spokane Valley and Athol, Idaho, would reduce at-grade railroad track-road intersections to 16 from 72.


Its difficult to say how much attention transportation issues will get this session, considering the resounding no voters gave Referendum 51 last month. The referendum would have generated $7.7 billion over 10 years to ease Puget Sound-area traffic problems and to fund numerous other projects across the state.


I think it will be extremely difficult to get something done on transportation, Brunell says. I think the voters spoke pretty loudly.


School funds


Educational institutions here are hoping to see capital projects approved and per-student funding brought up to par, say the schools legislative liaisons.


Washington State University at Spokane will ask legislators to approve funds for construction of the $32.5 million Academic Center, which already has gone through the pre-design and design phases, says Bill Gray, campus executive officer and dean of WSU-Spokane. The proposed 91,000-square-foot building would house classrooms, the campus library, and student and administrative offices.


WSU-Spokane also is seeking $600,000 pre-design money to begin work on a new facility here for its College of Nursing, as well as $1 million for smaller projects.


Eastern Washington University hopes to push through about $25 million in capital projects.


It will ask for construction funds to replace the Cheney Hall facility. The new building would house the universitys School of Computing and Engineering Sciences, which includes physics, engineering technology, and computer science programs, and serve as a technology center on campus, says George Durrie, a professor and EWUs legislative liaison.


The $19-million, 57,000-square-foot facility could allow the EWU to double its enrollment in these programs, he says.


EWU also will seek $6.8 million to renovate Senior Hall, a 19,000-square 1920s-era building that houses the Inland Empire School of Social Work and EWUs criminal-justice program.


The Community Colleges of Spokanes largest capital budget request is for $15.7 million for construction of a science building at Spokane Community College, says spokeswoman Anne Tucker. The schools also will lobby for another $8.8 million in repair funds and $2.8 million for other capital projects, such as creation of a student development center at SCC and an addition to the communications building at Spokane Falls Community College. The community colleges also will seek approval to buy 16 acres of property next to the SCC campus for $625,000. The property will be used for future expansion, and parking fees will fund its purchase, Tucker says.


We just dont think its prudent to use state funds right now (to buy land) so were pursuing another option, she says.


Representatives of all the state higher-education institutions here expressed a need to bolster operating funds to serve students adequately.


EWU expects to serve an average of 8,700 full-time equivalency students this year, yet has funding for only 8,117 FTEs, Durrie says. At WSU-Spokane, the state is funding 510 FTEs, while 600 FTEs are enrolled. The funding shortage has resulted in larger class sizes, less course availability, and an inability to provide student housing to all students who want it, say Durrie and Gray.


Were very worried about being directed to take new enrollments with either new enrollment not being funded or being funded at the margin, Gray says.


Shift of power


Three of the four top legislative leaders this session either are from the Spokane area, which Sen. Jim West, R-Spokane, calls a unique situation.


In the Senate, West is the majority leader, and Sen. Lisa Brown, a Democrat, is minority leader. Cathy McMorris, a Republican representative from Colville, is the House minority leader.


West says the trio bring a different perspective to the Legislature having Eastern Washington roots and Eastern Washington philosophies.


West downplays the challenge legislators will face with the budget shortfall.


Weve seen similar budget situations in 1993, and in 1981 and 82, it was much worse. This is difficult, but not insurmountable, he says.


The key is not handcuffing the economy as the Legislature fixes the budget, West contends. He expects the Senate to pass business-friendly legislation and has told senators not to waste time with ideas that dont get the states economy closer to recovery.