The state budget crunch has meant cuts to many programs and services.

Many cities have also felt the brunt of less assistance and it will get worse as the state looks to fill a $1.5 billion budget gap.

But a measure moving through Olympia could hit Kirkland like a sledge hammer.

House Bill 2146 would cut the Annexation Sales Tax Credit (ASTC) by 10 percent in each of the 10 years it is promised to cities.

It would also cap the amount cities receive through the ASTC based on the first annexation year’s tax revenue.That cap would disproportionately hit Kirkland the hardest compared to other cities that have annexed, according to Kirkland City Manager Kurt Triplett.

In fact, it would result in an overall 35-percent cut for Kirkland in revenue from the ASTC or an estimated $14 million.

“It is much more significant than 10 percent to the City of Kirkland,” said Kirkland City Manager Kurt Triplett. “… this bill was drafted in a clunky manner.”

The cap is the biggest issue.

The ASTC was originally supposed to be a percentage of sales-tax receipts received every year, regardless of if sales tax revenues increase or decline. But this bill would cap the ASTC at the dollar amount the city received during the first year of annexation. Cities would not be able to collect any more than that dollar amount during any of the next nine years.

And while the effect of the bill, created by Gov. Chris Gregiore and sponsored by Rep. Ross Hunter (D-Medina), is dramatically less than the governor’s original proposal to cut the ASTC altogether, it would mean tough choices in essential services for Kirkland residents.

“I’m the one that created the (ASTC) for Kirkland and other cities, so I think it is good policy,” said Hunter. “If all we come away with is a 10-percent reduction we should feel pretty lucky.”

However, the cap would hit Kirkland disproportionately hard because its first year of ASTC payments began September 2011 and will end June 2012.

“Our first year is 10 months instead of 12 months,” said Triplett. “We are very unique and that is why we are particularly opposed to this legislation.”

The services hit the hardest would be public safety, as it accounts for 57 percent of the total cost for annexation. Public works services come in a distant second with 14 percent of the expenditure.

As a result of the measure, the city is contemplating if it will reduce services to the entire city, and break promises to the original citizens of Kirkland, or just cut services to the annexation area. The city council has directed staff to take a look at how the bill would effect the city in both scenarios.

“There were promises made by the city and the state to the former city that they would not subsidize that area and there were promises made to the new neighborhoods,” said Triplett. “At some point we need to get to one Kirkland.”

The sales-tax credit was promised to cities as a way to get them to take on unincorporated areas and relieve the stress put on county resources. The result was the annexation of over 102,000 people statewide since 2007, with more to come.

Kirkland’s contribution is the biggest so far, taking on more than 31,000 residents in the Finn Hill, Kingsgate and Juanita neighborhoods to the north of the city last June.

The next biggest annexation to receive the tax credit is Renton with nearly 23,000 residents incorporated during two separate annexations. Burien, which has yet to annex an area of 18,000 people, has threatened to not go through with the plan if the tax credit is reduced.

“(All the cities that have annexed) are all working together as a coalition …,” said Triplett. “We understand there has to be cuts to everything but this disproportionately hits us hard for stepping up to the plate.”

For the cities involved, the measure would reduce an income source already depleted by lower than expected sales-tax revenue.

Kirkland officials project that the recession will result in $800,000 less ASTC income during the first year alone.

The estimate of what Kirkland would get back from the ASTC in 2009, when the city began talks of annexation, has been dramatically revised down from 6-percent growth to now 3.5 percent. Triplett said that the city has worked hard to make cuts based on the decline in growth.

The reduction in revenue from the original estimates, with the addition of the bill, would be $29 million over the next 10 years.

To put that in perspective, the city has planned to build a $37 million public safety building in the Totem Lake neighborhood to assist in the growth of law enforcement services for what is now the 12th-largest city in the state.