Published: Monday, October 5, 2009
State has another $2 billion budget problem
Budget picture worsens for lawmakers in 2010
OLYMPIA — Five months ago, staring at a record pool of red ink, state lawmakers balanced the budget by slicing $4 billion in spending from colleges, schools, health care and human services.
They'll soon be wielding that knife again.
In three months, when they return for the 2010 session, they'll need to carve deeper, as much as $2 billion more as the recession continues to leave the state with too little tax revenue to pay for government services, including those pared by earlier cuts.
“It really is going to be another monumental effort,” Victor Moore, the governor's budget director, told the House Ways and Means Committee last Wednesday.
“We're at the point now we have to decide whether we do a service or not” rather then try to make it up by “thinning the soup” through small reductions in batches of state offerings, he said.
A day later, in the Senate Ways and Means Committee, members got their own reality check from their staff.
“We're going to have to cut more,” said Sen. Steve Hobbs, D-Lake Stevens, who serves on the panel.
Lawmakers aren't surprised they're in this position because they know the economy hasn't turned around since the April adjournment.
“We were looking at a trend of declining revenues,” said Rep. Mark Ericks, D-Bothell, vice chairman of the House budget-writing committee.
“Absolutely, there will be pain,” he said. “Ensuring we have a responsible and balanced budget is our job and we will do it.”
Gov. Chris Gregoire will propose a budget in December, and the Legislature will enact its own version in the session set to run through March.
Exactly how much pain will result is unclear because, for the moment, the amount of the deficit is not known.
In April, the Democratic-controlled Legislature passed and the Democratic governor signed a budget for state spending through June 30, 2011.
In it, they plugged a gap of $9 billion, which was the difference between how much the state expected to collect in tax revenues and the cost of maintaining services existing at that time. Those expenses included paying for negotiated pay raises with state workers and teachers and launching new programs such as family leave.
They erased the shortfall with $4 billion in reduced spending on health care, human services, education and public safety and adding in allotments of federal stimulus money and transfers from the capital budget and lottery. Along the way, those raises got nixed and new programs delayed.
Lawmakers left $821 million in reserves but those dollars are now in play because of what's happened since April:
Economic forecasts issued in June and September predict the state will have $924 million less in revenue than when the budget was enacted.
A June report shows rising numbers of students, prisoners and those seeking state-subsidized medical assistance will cost the state $250 million more than expected.
Six lawsuits challenging budget decisions have put roughly $100 million in savings on hold.
The state lost a lawsuit on taxes paid by a food distributor and, pending a reconsideration by the state Supreme Court, owes the firm a $100 million refund and stands to lose $137 million in future revenues.
Cuts vetoed by the governor plus savings that aren't occurring as quickly as hoped add another $250 million to the pile of costs.
All together, it's roughly $1.8 billion in changes since April with the figure likely to grow when the next forecasts of revenues and caseloads come out in November.
Republicans who urged Democrats to save rather than spend money that poured in when the economy was stronger are now shaking their heads and waiting to see how the majority party responds.
“We've made our points on this. We're going to let them do what they're going to do,” said Sen. Joe Zarelli, R-Ridgefield, who is the ranking Republican on the Senate Ways and Means Committee.
Zarelli said the looming deficit might not even exist had Democrats taken his advice to adopt the budget well before April so the cuts would have been in place longer. He's hoping they won't wait to act until the end of the 2010 session.
“The inaction is really what we're paying for,” he said. “The problem we're going to have this budget is probably consistent with savings we passed on by not acting in January 2009.”
As Democrats start their calculations, some will again be trying to raise money through taxes or fees.
Gregoire has said she's willing to read proposals for raising revenue — an attitude she didn't have earlier this year — though she's not having her budget-writing team come up with ideas. Moore said he's putting together a proposal based on spending less rather than turning to new taxes.
Proposals for a sales tax increase, an income tax for high-wage earners and a multi-billion dollar bond measure were debated last session. Ericks thinks they will again.
“I don't hear any members talking about taxes. There are stakeholders who want us to raise taxes,” he said last Thursday. “We're looking at cuts first. That's my perspective.”
Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.
They'll soon be wielding that knife again.
In three months, when they return for the 2010 session, they'll need to carve deeper, as much as $2 billion more as the recession continues to leave the state with too little tax revenue to pay for government services, including those pared by earlier cuts.
“It really is going to be another monumental effort,” Victor Moore, the governor's budget director, told the House Ways and Means Committee last Wednesday.
“We're at the point now we have to decide whether we do a service or not” rather then try to make it up by “thinning the soup” through small reductions in batches of state offerings, he said.
A day later, in the Senate Ways and Means Committee, members got their own reality check from their staff.
“We're going to have to cut more,” said Sen. Steve Hobbs, D-Lake Stevens, who serves on the panel.
Lawmakers aren't surprised they're in this position because they know the economy hasn't turned around since the April adjournment.
“We were looking at a trend of declining revenues,” said Rep. Mark Ericks, D-Bothell, vice chairman of the House budget-writing committee.
“Absolutely, there will be pain,” he said. “Ensuring we have a responsible and balanced budget is our job and we will do it.”
Gov. Chris Gregoire will propose a budget in December, and the Legislature will enact its own version in the session set to run through March.
Exactly how much pain will result is unclear because, for the moment, the amount of the deficit is not known.
In April, the Democratic-controlled Legislature passed and the Democratic governor signed a budget for state spending through June 30, 2011.
In it, they plugged a gap of $9 billion, which was the difference between how much the state expected to collect in tax revenues and the cost of maintaining services existing at that time. Those expenses included paying for negotiated pay raises with state workers and teachers and launching new programs such as family leave.
They erased the shortfall with $4 billion in reduced spending on health care, human services, education and public safety and adding in allotments of federal stimulus money and transfers from the capital budget and lottery. Along the way, those raises got nixed and new programs delayed.
Lawmakers left $821 million in reserves but those dollars are now in play because of what's happened since April:
A June report shows rising numbers of students, prisoners and those seeking state-subsidized medical assistance will cost the state $250 million more than expected.
Six lawsuits challenging budget decisions have put roughly $100 million in savings on hold.
The state lost a lawsuit on taxes paid by a food distributor and, pending a reconsideration by the state Supreme Court, owes the firm a $100 million refund and stands to lose $137 million in future revenues.
Cuts vetoed by the governor plus savings that aren't occurring as quickly as hoped add another $250 million to the pile of costs.
All together, it's roughly $1.8 billion in changes since April with the figure likely to grow when the next forecasts of revenues and caseloads come out in November.
Republicans who urged Democrats to save rather than spend money that poured in when the economy was stronger are now shaking their heads and waiting to see how the majority party responds.
“We've made our points on this. We're going to let them do what they're going to do,” said Sen. Joe Zarelli, R-Ridgefield, who is the ranking Republican on the Senate Ways and Means Committee.
Zarelli said the looming deficit might not even exist had Democrats taken his advice to adopt the budget well before April so the cuts would have been in place longer. He's hoping they won't wait to act until the end of the 2010 session.
“The inaction is really what we're paying for,” he said. “The problem we're going to have this budget is probably consistent with savings we passed on by not acting in January 2009.”
As Democrats start their calculations, some will again be trying to raise money through taxes or fees.
Gregoire has said she's willing to read proposals for raising revenue — an attitude she didn't have earlier this year — though she's not having her budget-writing team come up with ideas. Moore said he's putting together a proposal based on spending less rather than turning to new taxes.
Proposals for a sales tax increase, an income tax for high-wage earners and a multi-billion dollar bond measure were debated last session. Ericks thinks they will again.
“I don't hear any members talking about taxes. There are stakeholders who want us to raise taxes,” he said last Thursday. “We're looking at cuts first. That's my perspective.”
Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.
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