Finally, real transformation?

In the three months since the Legislature ended an agonizingly indecisive special session, the budget picture it was wrestling with has gotten worse.

State revenues continued to drop in June, by a net $68 million, and it appears unlikely that Congress will approve $480 million in extra Medicaid money that state lawmakers assumed was coming. Another special session will be needed to rebalance the budget in a rational way — meaning not through blind, across-the-board cuts that hurt essential services as much as less important ones.

The outlook doesn’t improve for the 2011-13 budget, where projections show a $3 billion shortfall. And the red ink rises even more beyond 2013.

Gov. Chris Gregoire, along with legislative leaders, has kept her fingers crossed in recent years, hoping the state’s strong exports or an economic turnaround would get revenues rolling again, and that federal aid would continue to help plug the gap in the meantime. They’ve also postponed tough decisions by transferring money from dedicated accounts and delaying pension payments.

Better late than never, Gregoire appears to be making a serious commitment to “rebooting state government.” It’s a concept she has touted before, with little to show.

Gregoire has launched an effort to “transform Washington’s budget,” and has tapped some 35 experts from across the spectrum of interest groups, service providers and ideologies to advise her and her budget staff on the two-year spending plan she’ll unveil in December. She’s also seeking citizen input at a series of public hearings, one of which will take place Wednesday evening at Everett Community College. (See box at right for more information.)

The governor has good ideas for improving on the much-ballyhooed but little-adhered-to “priorities of government” process. A set of eight questions will help guide difficult budget choices, questions focusing on fiscal responsibility (Is the service essential? Can it be provided by others? Should users help pay for it?), efficiency and performance.

Answers will be useful if they provide real direction for how state government can do less overall, while protecting its paramount duty: educating the state’s children. We would include early learning and higher education as imperatives for future growth and prosperity.

Voters may soon implement significant change on their own. Initiatives to privatize liquor sales and re-establish a majority-vote requirement to raise taxes will be on the ballot in November, as will a measure to open the state worker’s compensation system to private competition, and one to tax the income of high-wage earners. Those who signed these intiatives are signaling that they’re ready for serious shifts in how state government operates.

As the governor’s budget process plays out, and she crafts a budget based on it, we’ll see whether she’s ready, too.