POSTED: Sunday, Mar. 15, 2009

Balancing the state budget: It’s time for a reality check

Federal bailout will help balance state budget, but tough choices loom

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Three billion dollars. It ain’t chump change. Then again, the amount of money that Washington is getting from Congress to help with its operating budget shortfall, projected at roughly $8 billion, isn’t what many legislators had hoped for.

“While people may have been very optimistic that the feds were going to come in with dump-truck loads of money, it isn’t happening,” Gov. Chris Gregoire told reporters last week.

Washington did get a lot of money from the federal stimulus package – almost $5 billion. But about $2 billion is going to highway, water, sewer, school and other construction projects or must be spent on other things that make it of little direct help to the state operating budget. For instance, some of the money is passing through the state treasury but is headed straight to cities, counties, transit districts and others to help with their budget problems.

The state is on a course to spend $8.31 billion more than it expects to collect in taxes in 2009-11. To put it in balance, the Legislature must subtract from spending, add to revenues or do some combination of both.

Moreover, the $3 billion that is helpful to the state is limited to a three-year period, and the Legislature already has spent $340 million of it.

Today marks the beginning of the 10th week of a 15-week legislative session, and work on the 2009-11 budget will begin in earnest after Thursday. That’s when budget writers get the official estimate for how much the state can expect to collect in taxes over the next 28 months.

That’s also when reality sets in, or when it is supposed to. Sen. Craig Pridemore, D-Vancouver, said he thinks many of his colleagues are still in denial about the gravity of the budget crisis.

Today, the state is looking at a projected $8.31 billion shortfall. That means the state is on course to spend $8.31 billion more through June 30, 2011, than it expects to collect from state taxes and fees. That’s about 25 percent of the $31 billion the state would collect in taxes over the next two years.

Not all of that shortfall is spending. Senate Majority Leader Lisa Brown, D-Spokane, said she thinks the Legislature should keep $1 billion in reserves because the economy and state revenues are so uncertain. But since that money must be put in savings, spending cuts will have to be that much deeper.

LOOKING FOR SAVINGS

Lawmakers can cut the shortfall in half with relatively little pain, unless you are a state or public school worker who won’t get a cost-of-living raise for the next two years. They could:

Spend all the federal money. Not give COLA raises to 250,000 state and public school employees. Spend all $700 million in the Rainy Day savings account. Continue spending cuts already made in the so-called “belt-tightening” bill for the current 2007-09 budget, which was signed into law a couple of weeks ago. Skip $400 million in payments into worker pension programs. Take $800 million from other pots of money that are earmarked for building projects. Open 10 more liquor stores and hire more “revenuers” to go after tax evaders.

All those moves, which have been suggested by the governor, minority Republicans or some Democratic budget writers, would whittle the shortfall down to about $4.5 billion.

After that, the cuts get more painful.

Gregoire balanced her budget by getting rid of a couple of programs that provide $339 monthly payments and medical coverage to about 16,000 people who are unable to work because of physical, mental or drug-abuse problems, saving $452 million. She also would save $252 million by cutting the state-subsidized Basic Health Program by 40 percent. Other savings: $400 million in cuts to state colleges, and $300 million in cuts to public schools. In all, she would cut spending by more than $2.5 billion, said Victor Moore, her budget director.

The situation the Legislature faces is only slightly worse. Gregoire assumed the state would get $1 billion extra from the feds; but we’re getting $3 billion. On the other hand, state tax collections are now expected to be about $2.5 billion less than when the governor wrote her budget in November.

If all of the governor’s spending cuts were adopted, the Legislature would have to deal with about a $1.5 billion to $2 billion gap between spending and tax revenues. That assumes Thursday’s forecast lowers revenue collections by another $200 million.

That remaining gap is why interest groups, mostly in the health care and education arenas, are talking about asking voters to approve higher taxes at the ballot – perhaps in June, August or November. They want money to restore services that otherwise would be cut, and their polling shows voters might be inclined to approve temporary taxes, particularly if they were “sin” taxes – cigarettes, liquor, candy and pop.

Republicans, who are heavily outnumbered in both the House and the Senate, say the budget can be balanced without any new taxes. Cuts don’t have to be as drastic or dramatic as getting rid of entire programs, said Sen. Joe Zarelli, top Republican on the Senate Ways and Means Committee.

He was referring to the governor’s proposal to end the General Assistance Unemployable and Alcohol Drug Addiction Treatment Support Act programs, and a House option to save $700 million by axing the Basic Health Plan.

TIME TO TIGHTEN THE BELT

Take more measured steps, Zarelli said. Instead of getting rid of GAU, put a one-year time limit on how long people can get $339 monthly checks and health coverage. Instead of lopping the health plan, scrutinize applications to make sure they qualify for state-subsidized health coverage, he said.

Zarelli said the state should freeze spending at today’s levels. Not all spending can be frozen – utility bills will be higher, landlords will charge higher rent to state tenants – but state agencies should be given the same amount of money they got for the past two years and be told to live with it, he said.

“If business can do it and homeowners can do it, government can do it,” he said.

Jeannie Darneille, D-Tacoma, who is chairwoman of one of three House appropriations committees, said the three leaders of the committees would meet Monday with House Ways and Means Committee chairwoman Kelli Linville, D-Bellingham, to go over their entire list of possible budget cuts, which were supposed to amount to about 20 percent.

“That’s when we’ll learn whether our ideas are deemed brilliantly inspired or absolutely crazed,” Darneille said last week.

Health care advocates have heard that the general assistance and substance abuse treatment programs and the Basic Health Plan might be eliminated, and that state payments to hospitals and nursing homes might be cut by 10 percent to 14 percent.

“If the cuts are like that, they’re drastic,” said Susan Eidenschink of the League of Women Voters, which is part of the Healthy Washington Coalition. “The safety net would be just about demolished.”

Cassie Sauer, a vice president of the Washington State Hospital Association, voiced a similar concern.

“They are very scary about where we might be headed in an all-cuts budget,” Sauer said. “The level of devastation to the health care safety net and to vulnerable people who need health care is immense.”

Joseph Turner: 253-597-8436

blogs.thenewstribune.com/politics

Legislative forum: News Tribune columnist Peter Callaghan moderates a panel discussion with South Sound lawmakers Rep. Skip Priest, R-Federal Way; Sen. Debbie Regala, D-Tacoma; and Rep. Dawn Morrell, D-Puyallup, on Thursday, beginning at 6:30 p.m. at The News Tribune, 1950 S. State St., Tacoma.