OLYMPIA, Wash. - After unveiling a pared-down budget proposal, Gov. Chris Gregoire said it wasn't time to talk about the alternative: raising taxes.

But lobbyists, political activists and top lawmakers have already started the chatter, with ideas in the works to close tax loopholes and put more taxes on the ballot, tying specific programs to their own sources of money.

"We don't agree with this, that from square one, we cannot raise a dime of new revenue," said Cassie Sauer, spokeswoman for the state Hospital Association.

Gregoire unveiled her promised no-new-taxes budget on Thursday. It would cut expected spending by more than $3 billion, raid several smaller state bank accounts, use some borrowed cash and rely on a federal bailout for expensive social programs.

After announcing her proposal, Gregoire said she'd like others to wait until spring before talk of any taxes gets serious.

By that time, she said, lawmakers will have a chance to sift through their own budget-cutting plans, get a new forecast of expected state income, and find out how much money the Congress and President-elect Barack Obama are willing to send to Olympia.

Interest groups who say they can't tolerate Gregoire's proposed spending cuts, however, don't think they can wait. Calls for new money began popping up almost immediately, beginning a public debate that will drag on for months.

The Sierra Club, for example, quickly pitched closing tax exemptions for old-line energy industries in favor of "green" initiatives and spending on state parks.

The Washington Federation of State Employees, whose members would suffer layoffs and flat pay under Gregoire's budget, also called for shrinking tax loopholes.

"It always, always falls on state workers. Why can't some of those exemptions be rolled back?" federation director Greg Devereux asked.

Sauer, the hospitals spokeswoman, said Gregoire's budget would amount to "shredding the safety net" for the most vulnerable Washingtonians, including the mentally ill. Voters should have a say about whether they want to keep programs that are on the chopping block, she said.

"There's a possibility, that when you tell people what's at stake, their feelings may change about targeted revenue," Sauer said.

The Legislature, controlled by Democrats, convenes Jan. 12 to begin its work on the two-year budget. Unlike Gregoire, majority lawmakers have not explicitly ruled out some form of tax increase.

Sending taxes to the public for approval may be the only option available for raising new money. Voter initiatives require a difficult two-thirds vote in both chambers of the Legislature to raise taxes, but the hurdle is removed if lawmakers put taxes on the ballot. That also applies to shrinking any tax exemptions.

Senate Majority Leader Lisa Brown, D-Spokane, has challenged the law in court, claiming it is unconstitutional. But at a recent forum hosted by Greater Spokane Inc., Brown said she's not counting on a court ruling as part of her budget plans.

"I think success only lies in a dialogue with the public, and in probably placing some proposals forward to the public," Brown said. "And if they say no, then we go back to the drawing board."

House Majority Leader Lynn Kessler, D-Hoquiam, agrees such a step might be necessary. But she echoes Gregoire's stance on the timing, preferring to wait a while before talk of taxes really heats up.

"I don't think we're going to say 'no way, no how.' We're just not talking about it now," Kessler said. "We want to do our budget drill and see what we can accept, and what we can't. And then we can talk about other options."

Asked Thursday whether she would approve of lawmakers putting taxes on the ballot, Gregoire quickly excused herself from the conversation.

"They're free to do that. They're not coming to me," she said. "If that's what they choose to do, that's what they choose to do."

Christy Margelli, executive director for the Washington Tax Fairness Coalition, said Gregoire's budget "highlights the magnitudes of the cuts and how deep they'd have to be to core services.

"We really do need to have a vigorous debate," she said. "We need to put it all on the table."

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