State's huge budget hole likely to deepen Revenue forecast due today increases anxiety around state

Kathie Durbin

Mar. 19, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- State lawmakers will get the latest bad news about the state's revenue picture today. And what they hear from state economists will help drive the tough decisions budget-writers are making right now in Olympia.

The Senate is scheduled to release its two-year budget next week, with the House budget to follow. Lawmakers have until April 26 to adopt a balanced budget for the next two years.

With a cavernous $8 billion-and-counting budget hole to fill, officials from university presidents to park superintendents are holding their collective breath.

So are teachers, who could lose their cost-of-living pay increases next year; college students, who could be priced out of a higher education; elderly people on Medicaid, who could find the doors of nursing homes slammed shut to them because of reduced state reimbursement levels; and low-income disabled people, who risk falling through the holes in a shredded social service safety net.

Sen. Joe Zarelli, R-Ridgefield, is expecting a gloomy forecast, based on the latest revenue collection report released last Friday.

"It doesn't get better," said Zarelli, the Republican leader on the Senate Ways and Means Committee and a member of the Economic and Revenue Forecast Council. "The upgraded economic forecast tells us that we are going to be down from the February numbers, I would say $300 million to $600 million."

Even so, Zarelli believes the current $8 billion gap is "a manageable problem," and that the deficit could be cut in half for the next biennium with strategic cuts in current and future programs.

Today's revenue report is the one on which the Legislature must base its 2009-11 budget, "so it's pretty darn important," said Sen. Craig Pridemore, D-Vancouver, who also serves on Ways and Means and the Revenue Forecast Council.

For the past two years, as Ways and Means vice chairman, Pridemore wrote the operating budget. But he gave up that position this year and is no longer in the loop. Budget discussions are "being held very close to the vest" this session, he said. "This year, I know almost nothing."

In limbo

For Hal Dengerink, chancellor of Washington State University Vancouver, the uncertainty is frustrating. Gov. Chris Gregoire has told the state's colleges and universities to prepare for cuts of up to 20 percent. But Dengerink can't hire new faculty or decide on course offerings for the next academic year until the Legislature unveils its 2009-11 budget.

At WSUV, the cuts will likely delay the planned expansion of academic offerings. "We had a number of things we were wanting in the way of expanded programs," Dengerink said, including additional courses in environmental science, mathematics and the fine arts.

Those plans are now on hold.

WSU Extension also is preparing for cuts of 18 to 20 percent. But Blair Wolfley, director of the extension office serving Southwest Washington, said he hopes to protect local field faculty members who oversee programs such as 4-H youth development, the master gardener program and food safety.

"There's such a holding pattern right now," he said. "We are hoping to hear something within the next two weeks that is more substantial."

Social service agencies are bracing for the layoff of at least 1,000 workers statewide, as well as cuts in income support and health coverage for tens of thousands of low-income adults. The state Department of Social and Health Services will do its best to protect services for children and vulnerable adults, agency spokesman Thomas Shapley said.

"The last thing we want to cut is direct services," Shapley said.

State workers rallied at the Capitol on Tuesday to protest proposed deep cuts in the state's Basic Health program for the poor and other safety net programs. Slashing enrollment in Basic Health by 42 percent would save $252 million but leave 42,000 people without health insurance.

Anti-tax advocates held a competing rally at which they called for lawmakers to cut wasteful spending rather than raise taxes.

The State Parks and Recreation Commission is preparing for a budget cut of between $10 million and $23 million. The deeper cut would require the state to transfer 13 state parks to local governments and mothball 40 others, including popular Beacon Rock State Park and Maryhill Park in the Columbia River Gorge.

Parks spokeswoman Virginia Painter stressed that no one knows whether the worst-case scenario will happen. "Park managers, and all of us, are in limbo," she said. "We feel like we need to give people as much of a heads-up as possible, but it's just a terrible limbo."

Education plan at risk

Among the critical issues mired in the budget morass is whether the Senate will pass, and the governor will sign, far-reaching legislation approved by the House last Friday that redefines basic education.

Gregoire said this week she would not sign a K-12 education reform bill that fails to specifically address how to pay for changes in the state's definition of basic education, because to do so would invite a lawsuit.

The House legislation would phase in the reform of basic school funding over six years beginning in the 2011-12 fiscal year. Half of general fund growth above 5 percent would be dedicated to paying for the program.

Nine freshman House Democrats, including Rep. Jim Jacks and Rep. Tim Probst of Vancouver, stood in unison at a House Democratic caucus meeting this week to urge Senate leaders to pass the bill for the sake of Washington students.

The state is the defendant in a lawsuit brought by school districts and citizen groups challenging the adequacy of the present school financing system.

Revenue ideas floated

When Gov. Chris Gregoire released her no-new-taxes budget in December, the projected deficit was $5.1 billion, up sharply from $3.2 billion in September.

Her spending plan called for cutting more than $3.5 billion from public schools, higher education, social services, health care, pensions, parks and corrections, and for tapping $600 million from the state's rainy day reserve fund.

Three months later, even after a partial state worker hiring freeze and a $300 million cut in the current budget, the picture is bleak.

"Our updated Washington economic forecast is generally weaker, as a result of the weaker national economic forecast," state economist Arun Raha wrote last week.

Gregoire is holding firm on her pledge to propose no new taxes. But not all Democratic lawmakers have fallen in behind her.

Senate Majority Leader Lisa Brown, D-Spokane, has said she is open to sending tax increases to voters.

On Tuesday, Sen. Rosa Franklin, D-Tacoma, renewed her call for a graduated income tax combined with lower property and sales taxes. Franklin said her proposed constitutional amendment would bring stability to Washington's tax structure and help the state better withstand cyclical budget crises.

But Franklin is the bill's lone sponsor, and her bill failed to get a hearing.

Gregoire has signaled that she would consider a temporary surcharge on college tuition, especially because the increase could be offset by tuition assistance available to college students and their families in the federal stimulus package.

The governor also has floated the idea of asking voters to increase the state's bonding limit to raise money for school and college construction projects as a way to create new jobs. Money for education infrastructure the state had hoped to receive in the federal stimulus package did not materialize.

A new poll by Seattle pollster Stuart Elway indicates that taxpayers may not be averse to tax increases to balance the budget, given the current economic crisis.

"Sentiment has shifted since the beginning of the year," when he conducted a similar poll, Elway wrote in his March newsletter. Though most voters still want the Legislature to focus on cutting state programs, he said, only one-third now believe the budget can be balanced by cuts and spending freezes alone. A 54 percent majority now believe that some taxes will have to be raised.

The poll of 405 registered voters in 12 counties bordering Puget Sound was conducted March 7-9. At least half of respondents said they would favor or "accept with reservations" five of seven tax increases that have been floated in the Legislature. Those include an increase in the cigarette tax, a tax on Internet downloads and a temporary 1 percent sales tax increase to reduce class sizes.

Republicans remain united in their opposition to new taxes to balance the budget. Any new tax would have to be approved by two-thirds of the Legislature or a vote of the people.

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