LOS ANGELES - Gov. Booth Gardner of Washington yesterday proposed a package of spending reductions and tax increases to address a projected $1.3 billion budget deficit in the state's 1993-95 biennium.

The governor's plan involves solving more than half the projected deficit through increased efficiency, reduced or eliminated programs, and various funding shifts.

In addition, the governor's $16.96 billion proposal for the two-year period that begins July 1 envisions a tax package that would yield $778 million. A proposed increase in the state's sales and use tax to 6.9% from 6.5% would produce much of this money, along with an increase in business and occupation tax rates.

In a news conference yesterday, Gardner said it "would be a retreat" for Washington to address the projected deficit solely through cuts. Such a move would require across-the-board cuts of 12% from all higher education institutions and state agencies, he said.

"This option would seriously endanger public safety, and that's not the kind of state I want to live in," Gardner said.

Based on scenarios including caseload and salary increases, state officials project general expenditures of $17.8 billion from 1993 to 1995 and revenues of about $16 billion, Larry Seale, assistant director for the budget division, said in an interview yesterday.

Gardner is using a projected deficit number of $1.3 billion, rather than $1.8 billion, because his proposal does not include any cost-of-living increases for teachers or state workers.

Part of the projected shortfall reflects the fact that the recession affecting other states "is finally catching up with the state of Washington," Seale said.

For example, the assumed revenue growth rate over the two years is 8.6%, "which is quite low by historical standards," Seale said.

Meanwhile, he added, the state faces escalating costs for items such as health care and a growing prison population. Also, school enrollment "is now picking up" in the lower grades because of the so-called Baby Boom echo, Seale said.

"In the current biennium, we're spending a half-billion [dollars] more than we're taking in," largely by drawing down on prior fund balances and a budget stabilization account, Seale said.

On June 30, 1993, the state projects it will have $153 million as an ending general fund balance and $100 million in its budget stabilization account, Seale said.

Gardner's proposed 1993-95 budget targets $105 million as an ending general fund balance and would leave the stabilization account at zero, said a spokeswoman for the governor.

The spokeswoman added that Gardner's mix of spending cuts and tax increases would total about $1.6 billion, rather than equaling the projected deficit of $1.3 billion. The $300 million difference, she explained, would be available to invest in kindergarten to 12th grade and higher education programs.

The proposed budget will serve as a "benchmark" for legislators to work on in coming months, Seale said. The incoming administration of Governor-elect Mike Lowry is expected to make refined proposals along the way.

Negotiations over the budget usually intensify in March, when the budget division updates its forecast.

In April, in response to revised revenue growth projections reflecting a slowdown. Gardner signed a supplemental 1991-93 budget that incorporated expenditure reductions, selected tax increases, and a $160 million drawdown from the budget stabilization account.

Rating agency officials have noted previously that the recession hit Washington later than the rest of the nation and also was milder than in the United States as a whole.

Moody's Investors Service, Standard & Poor's Corp., and Fitch Investors Service rate the state's general obligation bonds double-A. Washington has about $4.7 billion of GOs outstanding.

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