OLYMPIA — With what she called a heavy heart, Gov. Chris Gregoire signed a new budget Wednesday that will slash state spending in public schools, colleges, health care and human services in the next two years.
“We cut and we cut deeply,” she said. “We did not resort to gimmicks or short-term fixes or to new taxes. That in and of itself is historical for the times.”
The plan she signed will spend $32.2 billion between July 1 and June 30, 2013 and erases a projected $5.1 billion shortfall through a combination of $4.5 billion in cuts and transfers from other accounts.
There’s also $738 million set aside in reserves though that amount is likely to shrink when a new revenue forecast comes out today. Everyone expects it will predict another drop in tax receipts.
“I know we’re going to get a bad forecast,” Gregoire told reporters Wednesday.
That’s been the tale since the onset of the recession; lawmakers set aside sizable reserves and watched them evaporate as tax revenues plummet.
In 2007, a $725 million reserve in the two-year budget didn’t last. Neither did the $738 million penciled into the 2009-11 budget.
In 2010, following a round of cuts and tax hikes, there was $459 million in the rainy day fund of the supplemental budget. By fall it was gone — some of it to cover the revenue lost when voters repealed a soft-drink tax. Lawmakers met in a one-day special session to slice spending again to keep the state from running a deficit.
For Gregoire, who announced Monday she won’t seek re-election, this is her last two-year budget, and it is unlike anything she ever envisioned signing.
“I have a very heavy heart today. I am going to undo many of the things I have worked for,” she said. “You know what, when you’re governor and you’ve got an agenda, sometimes your agenda gets set aside because other circumstances overtake them. In this instance, they did.”
Under the new budget, nearly every pipeline of state money will have its flow of tax dollars reduced or shut off.
Most teachers and state employees will earn less pay in the next two years, some retired state workers won’t receive benefit increases and thousands of people will be looking for health insurance or go without because they will be off the rolls of a state-subsidized plan.
Students in two- and four-year colleges will face increases in tuition of 14 percent or more because of cuts in higher education. Hospitals will receive smaller reimbursement for some services they provide and thousands of poor adults will lose their monthly cash grants in the Disability Lifeline Program.
“This is the most complex and most difficult operating budget for our state in anyone’s memory,” Gregoire said. “It was not a year of quick fixes or of postponed promises.
The recession forced a change in state habits and, given the vote in November, along the lines desired by the public.
“At the request of the people, we have said state government can no longer do it all,” she said.
So while there are no new taxes, several existing fees are increased and new ones created.
One of those, the Discover Pass, is intended to bring in enough money to keep state parks open. Starting July 1, most people will need to buy a pass in order to drive into a state park or recreation area.
Gregoire vetoed several sections of the budget but did not nix a diversion of $8 million from a fund used by state Auditor Brian Sonntag to conduct performance audits.
The Legislature rerouted those dollars into the Department of Social and Health Services for fraud investigation and the Department of Revenue for tracking down unpaid taxes.
Sonntag and Mukilteo’s Tim Eyman, whose voter-approved Initiative 900 established the performance audit fund, urged the governor to veto the shift. She said she disagreed with the switch but a veto would have eliminated other valuable programs.
“The Legislature bears total blame for this. They totally tied her hands,” said Eyman, who came to Olympia to present flowers to the governor.
Wednesday marked the end of the bill signing period. In addition to the operating budget Gregoire signed 20 other bills into law.
One of those was the two-year $2.8 billion capital budget.
It contains funding for several Snohomish County projects including $31.9 million for constructing a new Index Hall at Everett Community College, $110,000 for improvements at Legion Park in Arlington, $500,000 for building a new Sultan Boys & Girls Club to replace the one which burned down last year and $250,000 for repairing that city’s leaky man-made reservoir known as Lake 16.
The governor also signed a controversial law to overhaul the state’s 100-year-old program for injured workers.
This legislation will, for the first time, allow older injured workers to forgo receiving monthly benefit checks for life in favor of crafting a settlement for resolving their claims.
It also will freeze the cost of living increases in benefits for one year, increase fraud prevention efforts and require audits of the workers compensation program.
Gregoire also signed a bill that could loosen the state’s grip on the distribution and sale of hard liquor. It calls for soliciting bids from private firms to take over operation of the state’s warehouse and distribution system. Hard liquor would continue to be sold in state-owned and contract stores.
The bill takes effect immediately because she did not veto an emergency clause attached to it by lawmakers. There is concern that if the state now moves swiftly to find a private operator, it will impede efforts by Costco and others to pass an initiative this fall that would all but end the state’s liquor monopoly.
Gregoire didn’t promise the she would not sign a deal before the election but did say it seemed an unlikely prospect.
“I can’t rule it out,” she said. “I can’t see it.”
Jerry Cornfield: 360-352-8623; email@example.com.
Here are some of the biggest chunks of savings assumed in the budget signed Wednesday.
•$1.2 billion saved by suspending initiatives 728 and 732 dealing with class size reduction and annual teacher pay hikes
$344 million saved by ending cost-of-living increases for some state pension recipients
$215 million cut in funding for shrinking the size of K-4 classes
$179 million from a 1.9 percent pay cut for K-12 teachers, classified staff and administrators
$177 million from a 3 percent pay cut for most state workers
$535 million cut from community and technical colleges and four-year universities combined. This will be partially offset with tuition increases
$130 million cut from state Basic Health Plan, which will mean reduced enrollment in the subsidized health insurance program
$179 million cut by eliminating monthly cash grants for enrollees in Disability Lifeline program
To read the budget, go to www.leap.leg.wa.gov.