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State’s budget shortfall might be billions worse

Sat., March 12, 2011, midnight

Gregoire pessimistic ahead of latest economic forecast

OLYMPIA – Washington officials are bracing for more bad budget news next week, and the only real question seems to be “How bad?”

Already expecting a $4.6 billion gap between the cost of existing programs and the expected revenue for the coming two-year budget cycle, state leaders have said that figure could grow by at least $500 million – and maybe as much as $2 billion – when the state economic forecast is released on Thursday.

Gov. Chris Gregoire used the $2 billion figure Thursday in an interview with The Spokesman-Review editorial board, and Republican legislative leaders put it at the top of the range they were hearing discussed during a press conference Wednesday.

In a rare bit of good news, the caseload forecast – an estimate of the number of people who will use state services ranging from public education to welfare to Medicaid – was predicted Friday to decline slightly.

“No matter what, we will still face a very significant revenue shortfall, and time will be of the essence in reaching solutions to our budget crisis,” Gregoire said Friday.

State officials are already looking at an array of budget reductions, such as eliminating or significantly scaling back the Basic Health Plan and the Disability Lifeline, cutting funding to colleges while allowing them more power to raise tuition, and cutting pay to state workers and charging them more for benefits.

But even with all the proposed cuts, closing a $4.6 billion gap was already tough, so the difficulty increases with the new projected deficit.

“I don’t know that we have a Plan B yet,” Senate Majority Leader Lisa Brown, D-Spokane, said Friday.

Two ideas being floated by some House Democrats are unlikely, she said. One would be an accounting maneuver to create a “25th month” by using July’s revenues to pay for expenses in June, the end of the current biennium; the other is “revenue securitization” which basically raises money now by a bond sale based on the promise of future revenue.

The Senate is “not looking at” the 25th month at this point, she said, and securitization “is not where we’re headed … we’re looking at the cut side.”

There are a few things that can definitely be ruled out, she added: “We will not do a sales tax on food. No income tax, either.”

A sales tax on food, levied in the early ’80s when the state faced an economic downturn, was quickly repealed by voters. Income taxes have been tried several times, including last year when an initiative to impose the tax only on “high earners” was soundly defeated at the polls.

Gregoire, too, has ruled out tax increases, saying the voters spoke clearly last fall that government should reduce spending, not raise taxes. The lower revenue projections may persuade legislators to eliminate programs as she’s proposed, rather than trying to pare them back as they did in a supplemental budget that tries to keep the state out of the red through June 30.

Legislators are “going to see my ideas aren’t so hare-brained in the next week,” she told the editorial board Thursday.

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