March 18, 2011 in City

Washington state facing deeper cuts

New forecast pushes gap in 2011-13 budget to $5.1 billion
By The Spokesman-Review
 
By the numbers

$80 million: Projected drop in state revenue for the rest of this biennium, which ends June 30.

$31.9 billion: The state General Operating Fund budget for the two-year budgeting cycle.

1,000: Protesters in the Capitol rotunda Thursday to demand the Legislature cut tax loopholes for businesses instead of programs for the poor.

OLYMPIA – The gap between Washington’s projected state revenues and current expenses grew to about $5.1 billion for the coming biennium, prompting a call from Gov. Chris Gregoire for the Legislature to focus on painful cuts rather than budget “trims.”

Announcing a forecast that was about $780 million lower than the one produced just three months ago, the state’s chief economist Arun Raha said several factors are stifling economic recovery in the state: Uncertainty over oil prices, the tragedies in Japan and a slow housing market.

The economic outlook is “clouded with a great deal of uncertainty,” he said, in part because Japan is one of the state’s major trading partners. The current forecast has only “early and rough estimates” of the effects of the disasters in Japan, which is a major market for Washington wheat and apples.

The Legislature will use this forecast to craft a budget of about $31.9 billion for the two-year budgeting cycle that begins July 1. If lawmakers can’t do that before April 24, the scheduled end of the current legislative session, they’ll need a special session.

“We cannot trim our way out of it,” Gregoire said two hours after the forecast was announced. “Cuts will be felt everywhere around the state.”

Legislators aren’t going to be able to raise taxes, and they shouldn’t try some of the budget “gimmicks” being suggested by some Democrats, such as adding revenues from a “25th month” into the 2011-13 budget or borrowing money by selling more bonds, she said. Asked if she would veto any such plans, Gregoire replied: “Don’t bring it to me.”

She said she would consider increasing gambling options in the state, and even a proposal to license and regulate medical marijuana, which supporters say would bring in more revenue. Saving money in the Corrections Department by allowing early release of felons is “the last place I’d go,” she said.

As the economic forecast council was unanimously adopting the projections, some 1,000 protesters gathered in the Capitol Rotunda to demand the Legislature eliminate tax exemptions for businesses instead of programs for the poor. The marbled mezzanine echoed with shouts of “We’ll be back,” as they left with plans to return for more protests against budget cuts the first week of April.

In her budget proposal in December, Gregoire proposed eliminating state programs not required by federal law, including the Basic Health Program and the Disability Lifeline. Legislators balked, saying they’d rather shrink the programs by reducing the income levels that make a person or family eligible, and worked those changes into a supplemental budget that patched the shortfall through the end of June.

With the widening budget gap, Gregoire was doubtful they’d be able to continue that strategy in 2011-13, and she had little hope for the protesters that the Legislature would eliminate significant tax exemptions.

“It’s much easier said than done. How am I going to get a two-thirds vote?” she said. Closing tax exemptions are considered a tax increase, which requires a two-thirds majority in both houses under an initiative the voters passed in November.

Democrats and Republicans who serve on the forecast council clashed over several items involved in that two-year budget. GOP legislators, including the ranking Republican on the Senate Ways and Means Committee, Joe Zarelli of Ridgefield, have called for rejecting contracts the governor’s office has negotiated with unionized state workers, to seek more reductions in wages or benefits.

If the Legislature rejects the contracts, unions receive their current pay and benefits schedule for another year, said Rep. Ross Hunter, D-Medina, the House Ways and Means Committee chairman. That would cost the state more for the year starting July 1.

True, said Zarelli, but it could more than make up for that by demanding lower pay and higher benefit costs in the next year: “The Legislature would be free to do whatever it wants in the second year of the biennium, and … write a budget based on what we can afford to do.”

The contracts already have a 3 percent wage cut after several years without cost-of-living increases, furloughs and increases in health care costs, proof that “public employees have stepped up to the sacrifice,” Gregoire said. Any promise of a better deal in the second year of the budget cycle is “a hard promise to keep,” she said.

Rep. Ed Orcutt, R-Kalama, the forecast council chairman, said the Legislature needs to address budget problems by increasing jobs: “I don’t see enough concern to get Washington working again.”

Sen. Ed Murray, chairman of the Senate Ways and Means Committee, shot back that the state’s economic problems are not the fault of its families or its Legislature: “The last time I checked, the fact that $2 trillion disappeared from the world economy and caused most of the countries’ and most of the states’ budgets to tank was not the fault of the Washington Legislature.”


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