1. The house Democrats in Olympia passed their budget proposal yesterday, which drops their original demand for $500 million in extended business and occupation taxes, but comes with $255.6 million in revenue from closing a list of seven tax exemptions, including: a preferential business and occupation tax rate for resellers of prescription drugs worth $27.8 million; a sales tax exemption on bottled water worth $49.3 million; a sensible break for the wood products industry that's being misused by the oil industry for $40.8 million; and a couple of tax breaks for high-tech companies like Google and Microsoft worth about $80 million combined. 

Two hundred and five million dollars of the money from the ixnayed tax breaks is going to supplement the $700 million the Democrats have proposed spending on K-12 education, plus it will provide additional higher ed funding. Meanwhile, $50 million of it—from closing the non-resident shopper sales tax exemption—is going straight to the general fund.

The Republican-dominated Majority Coalition Caucus has held a hard line against taxes all session—they consider closing tax breaks to be tax increases.

Their response to date on the Democratic proposal—which scales back revenue (in addition to dropping the B&O surcharge, the Democrats initially proposed closing $500 million in tax loopholes) and thus scaled back spending (from $1.2 billion on K-12 to $700 million)—has been limited. Yesterday, for example, the MCC held a bizarre (and painfully brief) press conference where they mis-characterized the Democratic proposal to close tax breaks as a voter referendum. 

Fizz wonders if the referendum idea is the GOP's behind-the-scenes counterproposal, and if Sen. Rodney Tom (D-48, Medina)—the one who misspoke yesterday—inadvertantly revealed his hand to the press.

In another oddity from the press conference, Tom stumbles for a second, talking about an "agreement" before umming and urring and settling on "comprehensive solutions we presented to the house."

Go to the 30 second mark here.

2. Footnote on the house vote yesterday: While the legislation to close tax loopholes passed along partisan lines, another component of their budget proposal, which they voted on ealier in the day, to close a tax break for telephone companies worth $109 million, passed with full Republican support in the house.

3. A November surprise for embattled incumbent Mayor Mike McGinn?

The transportation leaders in the state legislature—senate transportation committee chairs Sens. Curtis King (R-14, Yakima) and Tracey Eide (D-30, Federal Way) along with house transportation chair Rep. Judy Clibborn (D-41, Mercer Island)—sent a letter to state Office of Financial Management director David Schumacher last month that may confirm what McGinn always said about tunnel cost overruns—that the state isn't going to pick up the tab. 

You'll remember that the state, initially banking on $400 million in tolling revenue, scaled back their projections to $200 million (making up the difference by claiming they'll get $200 million from the feds) before scaling it back even further to $165 million. That projection put the state on the hook for $35 million, which pissed off a crowd of non-Seattle legislators. 

However, King, Eide, and Clibborn informed OFM that they're expecting the full $200 million from tolling, meaning they have no intention of authorizing $35 million to pick up the tab on extra costs for Seattle's tunnel project.

According to predictions, the only way to generate that kind of money (and even that prediction is, as we've reported, extremely optimistic) is substantially higher tolling, which Seattle worries will cause unacceptable levels of traffic diversion onto downtown city streets. However, if the city doesn't want the extra pileup, they'd better start thinking about where that $35 million is coming from.

We have a call in to OFM to get their take on the letter.

On May 15, the transporation chairs wrote:

"...a decision was made on the Alaskan Way Viaduct Replacement Project to continue to require a total of $200 million in toll proceeds ... due to a drafting error [the original document] incorrectly indicates an overall contribution of $165.2 million from toll proceeds on the project. ...The document should have shown ...  an overall ontribution to the project of $200 million, rather than $165 million. ... We intend to correct this..."