The state of Washington is about to become leaner and meaner. The goal is to avoid being just plain mean. It won’t be easy, because the revenue picture is darkening faster than our winter days.
Last Thursday, the state’s chief economist, Arun Raha, released the latest depressing news. The economy is showing signs of life, but this recovery is not only jobless, it’s “revenue-less.” In fact, he had to slash estimated revenues for the next 18 months by $760 million. All told, state leaders will need to cut another $2.6 billion to balance the budget.
But didn’t they just hack out $9 billion last spring? Yes, they did, and $6 billion of that was attributed to lagging government revenues. The other $3 billion was due to increased costs in health care, prisons and other areas.
The stark truth is that barring an unlikely turnaround, the state will probably bring in less revenue for the 2009-’11 biennium than it did for 2007-’09. It’s clear that a significant government resizing is in order. In fact, it’s already under way.
This budget calamity is not unique to Washington state. An Office of Financial Management document has the salient facts.
Forty-eight states are facing shortfalls for 2010. Twenty-five of them recently cut their budgets.
However, the cuts could even be more difficult this time. Federal stimulus aid helped states forgo some chopping last time, but that can’t be counted on again. Washington state tapped federal money last spring to cover 30 percent of its shortfall.
The challenge is that about 70 percent of the budget is essentially protected from cuts. This includes mandated spending for K-12 education, Medicaid, foster care, debt service and employee pensions.
OFM points out that if the state eliminated 23 of the smallest general fund agencies, cut all spending on environmental and natural resource protection and zapped all funding for parks and recreation and arts and cultural organizations, it would save $580 million, or only 22 percent of the cost-cutting needed.
So meatier targets are needed in areas such as Basic Health, mental health and disability services, payments to hospitals, corrections, higher education, non-mandated K-12 spending (e.g., class-size reduction) and across-the-board administrative spending.
These all saw significant cuts a few months back and are candidates again.
Gov. Chris Gregoire needs to put together a supplemental budget soon. She should move fast on any cuts she can make without legislative approval. The Legislature might be tempted to wait for the next revenue forecast, on Feb. 18, before getting serious about cuts. But dithering is costly, because cuts made in March or beyond won’t bring in the same savings as cuts made sooner.
Some Democratic lawmakers acknowledge that they are looking at tax increases to help close the gap. That should only be considered as a last resort, because of the negative effects on an already fragile economy. Scrounging for one-time money should be frowned upon, too, because the revenue picture looks gloomy for years to come.
The budget leaves state leaders with nothing but bad choices, but hand-wringing won’t cut it. It’s time to get busy.