McClatchy News Service

OLYMPIA — Legislative leaders early today said they had reached an agreement “in principle” on a two-year state operating budget, though they said some details must still be worked out before the deal can be approved by the Legislature and signed into law.

In a joint statement released about 1:30 a.m., Gov. Jay Inslee and leaders of the state House and state Senate said the agreement “ends the threat of a government shutdown on July 1.”

Lawmakers must approve a new budget and have it Inslee sign it by Tuesday, or many state agencies would close or reduce services Wednesday.

About 26,000 state workers received notice this week that they would be temporarily laid off if that occurs.

In their joint announcement, Inslee and legislative leaders said they would reconvene this morning “to finalize details of the two-year spending plan.”

Key lawmakers wouldn’t discuss in detail where negotiations stood late Friday night, nor did they provide additional information in their statement early today. But the two sides have moved closer in recent weeks, with House Democrats abandoning their hopes of a new tax on capital gains and Republicans conceding to raise some new revenue by ending tax exemptions.

In the most recent budget proposals from each chamber, Democrats advocated raising $356 million by limiting or ending tax breaks. On Wednesday, Senate Republicans offered $126 million in revenue from tax exemptions, a shift from their earlier proposals.

Democrats also stopped asking for an increase in some business and occupation taxes, which was part of their initial spending plan that called for $1.5 billion in new revenue.

Senate budget writer Andy Hill, R-Redmond, said negotiators were inching toward deal a even as leaders remained entrenched in Inslee’s office late Friday night. Earlier in the week, Hill expressed confidence that lawmakers would reach agreement and avoid a partial shutdown of state government.

“They’re still talking,” Hill said prior to the announcement a breakthrough early this morning. “This is all good – all good signs.”

In April, lawmakers adjourned their regular 105-day session two days early without a budget deal, and have required two 30-day overtime sessions to continue negotiations. Their second 30-day special session is slated to end late Saturday.

Disagreements between the House and Senate have included whether to cut tuition at the state’s colleges and universities. While Republicans in the state Senate have advocated a 25 percent tuition cut, Democrats say that would hurt higher education institutions, and have pushed for freezing tuition prices instead.

At this point, the Legislature will still need to call a third special session to pass a budget and deliver it to the governor, House budget writer Ross Hunter, D-Medina, said Friday. Inslee must sign a budget into law by the end of the day Tuesday to avoid a partial government shutdown.

Hunter said Friday that the governor’s office had been putting pressure on lawmakers to reach an agreement.

“They’re definitely forcing closure, which I think is a great thing,” Hunter told reporters late Friday.

Despite that pressure, the Capitol was quiet as negotiations dragged on in Inslee’s office late Friday and into today – except for the sound of one lawmaker who showed up to play his violin.

State Rep. Vincent Buys, R-Lynden, said he thought the few people still camped out at the Capitol could use a little extra excitement that evening.