2006 PRESS RELEASES

March 20, 2006

Judge Throws Out Illegal Tax Hikes
Coalition to Save Voter Initiated Spending Limits Wins

OLYMPIA—Last Friday taxpayers and voters of Washington earned a victory in their struggle over out-of-control spending by the Legislature, when Snohomish County Judge James Allendoerffer ruled that the Legislature exceeded the state-mandated spending limit, and therefore that some - but not all - of the taxes enacted by the Legislature in 2005 should be put to a vote of the people.

"We are happy to take the first step, but it is clearly up to the voters to follow through if they want to bring fiscal responsibility to our state," said Washington Farm Bureau President Steve Appel.

The Washington Farm Bureau, the National Federation of Independent Business (NFIB), the Washington State Grange, the Building Industry Association of Washington (BIAW), the Washington Association of REALTORS®, and the Evergreen Freedom Foundation filed suit in Snohomish County Superior Court last July, alleging that the Legislature had failed to follow the law in enacting almost one billion in new taxes and spending measures during the 2005 legislative session. Included in the new taxes were a Washington-only death tax, and new taxes on cigarettes, liquor and warranties.

These associations formed the "Save 601" coalition to challenge legislation that essentially repeals I-601 controls on taxing and spending.

"There are plenty of lobbyists asking for government hand-outs, but very few people watching out for the taxpayer," said Tom McCabe, Executive Vice President of the Building Industry Association of Washington.

Passed in 1993, I-601 creates a budget limit and states that when legislative spending exceeds this predetermined limit, new taxes are not effective until passed by a vote of the people. In the past several years, the Legislature has used several creative techniques to skirt I-601, while claiming to voters that they were either improving it or living within its limits. The 2005 taxes and spending crossed the line.

"Instead of repealing 601, the legislature manipulated its protections all the while telling the people it was honoring their will. Thankfully legislators' disingenuous budget gimmicks did not withstand the scrutiny of legal review or the light of day," said Bob Williams of the Evergreen Freedom Foundation, a public interest group recognized as a fiscal watchdog.

The Farm Bureau attempted to file a referendum challenging the bill that removed several I-601limits on taxes and spending, but the Secretary of State refused to accept the referendum because the Legislature had attached an 'emergency clause.' In July 2005 the Washington Supreme Court ruled that the Legislature could prohibit a voter from filing a referendum—and thus prohibit a vote on this important issue—by merely declaring that the new law was an "emergency" or that it was necessary "to support the state government and its existing public institutions." The coalition was undeterred and sought redress in Superior Court.

"The spending limit established for the 2005 budget was $25.1 billion, and the budget adopted by the legislature exceeded that limit by approximately $850 million," said Carolyn Logue, Washington State Director for NFIB.

The spending limit is established each November. Judge Allendoerffer ruled - against the Save 601 Coalition - that the expenditure limit was a 'projection' that could be increased by the legislature when they met in January. "I recognize the potential downside [of this approach]," said Allendoerffer, "is that it provides the opportunity for budget writers to manipulate the spending limit and artificially change it. The plaintiffs [the Save 601 Coalition] allege that this is what happened."

One of the tricks the Legislature used to inflate the spending limit was a budgetary shell game that Allendoerffer called "triangulation." To further increase the spending limit, and for no other purpose, budget writers moved $250 million, on successive days, from the General Fund, to the Violence Reduction and Drug Education Awareness Fund, to the Health Services Account, and back to the General Fund. Judge Allendoerffer ruled that this shell game did not increase the spending limit at all, and therefore the budget adopted by the Legislature exceeded the spending limits.

Judge Allendoerffer quoted from communications between budget writers that termed the I-601 spending limit a "leaky ship," and implied that they could easily bypass it. A sample of these communications are posted here: State's I-601 emails

I-601 states that when the Legislature exceeds the spending limit, new taxes and revenue measures are not effective until submitted to a vote of the people. The two measures that fit this description in the 2005 legislative session were the newly created state death tax and an omnibus tax measure raising taxes on cigarettes, liquor, warranties and coin-operated washing facilities. Unfortunately, the drafters of I-601 specified that the referendum for new taxes would only apply to raising revenues for the general fund. Since the death tax revenues are earmarked for a special fund, the judge ruled that it was not subject to a vote.

"The taxpayer protections of I-601 need to be tightened to avoid a repeat of the legislature's death-tax gimmickry," said Williams. "Otherwise the legislature will continue to circumvent I-601 by enacting 'off-budget' tax increases."

The result was a ruling that the other taxes, and not the death tax, are invalid until approved by a vote of the people. Judge Allendoerffer granted summary judgment to the I-601 coalition, and stated that the revenues raised by ESHB 2314 were ineffective until ratified by a vote of the people.

"We started this action to save I-601," said Appel of the Farm Bureau. "The courts have done as much as they can, and now it is up to voters - this November - to elect people who will reverse the changes and reinstate the only real tool taxpayers have to curb government spending."

News Articles
Some of state's taxes invalid, judge rules
County judge strikes state raise in taxes
Court ties up state tax increases
Judge strikes down taxes in spending-limit lawsuit
Taxes tossed? Snohomish County judge rules against state money-shifting

Additional Information
State's I-601 emails
Budget Shell Games 101
Legislature Continues to Ignore I-601
Hearing set on government refusal to release budget records
New lawsuit filed to preserve I-601 tax and spending limits
Supreme Court strikes blow to people's right of referendum
More groups join fight against legislative abuse of emergency clause
Supreme Court to hear case against legislative abuse of emergency clause
www.save601.org

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