Governor lays out plan to erase red

OLYMPIA – The state could balance its books through the end of June by cutting more funds for schoolchildren, dropping payments to small school districts, eliminating some health care programs on March 1, and holding on to checks worth some $253 million for a day.

Those are the main proposals in Gov. Chris Gregoire’s supplemental budget plan released Friday, as she suggests ways for the Legislature to end the state’s fiscal year with its general fund out of the red.

Last week, the Legislature cut some $588 million in spending that was in the general fund, a budget that pays for a wide range of programs and salaries, through June 30. But economic forecasts in November suggested the state had a gap of about $1.1 billion between expected revenues and projected costs, so legislators will need to make about $512 million more in cuts when they convene next month.

Gregoire’s proposals for those cuts include earlier cuts to some programs she said the Legislature should eliminate for the upcoming 2011-’13 budget period, including:

• Eliminating additional state funds for kindergarten through fourth-grade class-size reduction for the 2010-’11 school year, saving $42.1 million.

• Beginning March 1, eliminating all subsidized insurance from the Basic Health Plan, which covers about 66,000 people, to save $26.8 million in the general fund and $21.3 million in other funds.

• Eliminating the Disability Lifeline Grant and Medical programs on March 1, saving $43.5 million in the general fund and $22.6 million in federal funds.

• Reducing levy equalization payments to eligible school districts by 6.3 percent for fiscal year 2011, saving $18 million. Those payments are mostly given to Eastern Washington districts that are property-poor and have assessed home values lower than the state average.

The budget also proposes shifting part of the June 2011 apportionment payment to school districts from the last business day of June 2011 to the first business day of July 2011. That one-day delay provides $253 million in savings in the 2009-’11 budget by shifting that amount to the 2011-’13 biennium.

The state general fund would borrow the money from other state funds that have surpluses on July 1 and pay it back over the two-year budget cycle that starts July 1. The general fund borrows and repays other funds throughout the year because of cash-flow problems, but because the state must close its books for the 2009-’11 biennium on June 30 without a deficit, state officials said it is easier to repay that money over the two years of the new biennium than in the remaining months in this biennium.

It’s a gimmick, several state officials conceded, but it allows the state to end the biennium without a deficit.

Rep. Gary Alexander of Olympia, the ranking Republican on the House Ways and Means Committee, said he supports many of the governor’s suggestions for cutting programs in March that she wants to cut in the next biennium, such as Disability Lifeline and Basic Health. Those cuts are “inevitable,” he said, and making them sooner increases the savings to the state.

But he doesn’t support shifting the June apportionment payment to schools to July 1. He likened it to another accounting gimmick the state used several decades ago in an economic downturn, when it continued to count revenue from the month after the biennium closed to pay for expenses incurred earlier. Expenses continued to outpace revenues and slide forward, and it took the state years to recover from the so-called “25th month,” Alexander said.

“One of our objectives … is to develop a sustainable budget,” he said.