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Sunday Spin 3: Sin taxes roll in

Voters have a way of complicating the state’s revenue forecast by changing the laws on things that provide revenue. After they passed a law abolishing the state’s monopoly on wholesale and retail liquor sales, the state coffers saw a big bump in booze taxes. In theory that was at least partly because distilled spirits were on the shelves of every supermarket, discount house and big-box retailer, making it more handy to grab a bottle without a special trip to a state store.

That novelty may be wearing off. . . 

To read the rest of this item, or to comment, continue inside the blog.

Economic forecast: An extra $395 million coming in?

OLYMPIA – Washington's projected tax revenues look slightly better than they did four months ago, but aren't expected to add enough money to cover all of the state's expected expenses next year.

State Economist Steve Lerch delivered a forecast with both good and bad news:

— More people have jobs, nationally and statewide, but full-time jobs are decreasing while part-time jobs are increasing.
— Consumer confidence is up, but not back to pre-recession levels.
— Manufacturing levels are expanding in Washington faster than the rest of the country but oil prices are up a bit and could go much higher with increased turmoil in the Middle East.

In terms of dollars, “the good news is pretty small,” Lerch said.

When the pluses and minuses were plugged into economic models, he said the state's general fund – the pot of money that covers the most programs and salaries not connected with transportation or construction – should be about $157 million higher than previously forecast by the end of next June. It could be about $238 million higher the 2015-17 budget cycle that Lerch and his office forecast in February.

Considering the state's projected budget is about $16.5 billion for the next 12 months and about $36 billion for the two-years after that, those are relatively small bumps.

Meanwhile, the state could be looking at more students in public schools, a court order to spend an extra $4.5 billion over the next five years on education, more inmates in prisons, higher pension costs and the possibility of the first cost-of-living adjustment for state employees in years.

David Schumacher, director of the Office of Management and Budget, said Gov. Jay Inslee has ordered state agencies to submit plans for budget reductions of up to 15 percent. Inslee isn’t expecting to cut 15 percent across the board, but looking at options as a way to determine “where the pain will be the least,” Schumacher said.

Medicaid expansion: Info campaign coming

OLYMPIA – Washington’s new state budget signed into law this week relies on the expansion of Medicaid, both to provide health insurance to hundreds of thousands of people and to help balance its bottom line.

But state residents will have to wait until October to sign up for that coverage, and until next January for it to kick in. State officials agree that the program isn’t well understood yet, but say a major information campaign is coming to help people understand how it works and who will qualify.

In general, anyone whose annual income is below 138 percent of the poverty level, will be eligible for free health care under Medicaid…


To read the rest of this item, or to comment, continue inside the blog.

Inslee names transition team

Governor-elect Jay Inslee named a three-person transition team today comprised of a school superintendent, a software executive and a university president as he put out a call for talent "every single place we can find it."

Inslee appointed Washington State University President Elson Floyd, Microsoft corporate counsel Brad Smith and Renton Schools Superintendent Mary Alice Heuschel to lead his search for a new department heads when he takes office in July. The trio of "change agents" represents the kind of state government he said he wants to develop, from both sides of the Cascades, from different industries and from public and private sectors.

Floyd said he welcomed the opportunity to help position the state for economic growth: "We have an incredible talent base here in our state."

At the same time, he put out a call for Democrats, Republicans and independents who want help the state address what he called its great challenges. The state has struggled since the recession with declining revenues that don't cover its planned programs, and now faces a court mandate to increase spending on public schools to meet its constitutional obligations.

In responding to questions that followed his announcement . . .

To read the rest of this item, or to comment, click here to go inside the blog.

Caseload forecast: State will spend a bit less

OLYMPIA — The "other shoe" in the state's budget picture dropped lightly today.

The caseload forecast, which along with last week's revenue forecast helps predict whether the state's long-term finances are in the red or black, had some good news in it. Some of the big costs of state government — the number of kids in public schools, the number of inmates in prisons, the number of families receiving temporary assistance or medical assistance, the number children in foster care — were projected to be lower than forecasters thought in February.

Jason Mercier, director of the Center for Government Reform and a person who understands these numbers far more than Spin Control ever will, says the changes overall add about $56 million to the state General Fund's bottom line. That's a line that's extremely narrow right now, because the Lege didn't leave much in reserve.

Of course, the savings could be wiped out tomorrow, depending on what the U.S. Supreme Court does on federal health care reform.  "For today at least,  however, good budget news," Mercier says.

The full report can be found here.

Gregoire signs budget; tougher decisions ahead

Rep. Ross Hunter checks his hands for tan after Gov. Chris Gregoire says legislators need to show up "tan, rested and ready" in January to cut more than the budget she signed Tuesday.

OLYMPIA – With advice to the Legislature to show up “tan, rested and ready” in January to finish fixing the state’s budget problems, Gov. Chris Gregoire signed the $480 million “downpayment” supplemental budget.

It is, Rep. Ross Hunter, chairman of the House budget committee, said, merely the first supplemental budget of the two-year fiscal cycle.

“Count on it,” Gregoire replied, adding the votes needed to find another $1.5 billion in savings will present legislators with “the worst votes they’re ever going to take in their lives.”

The budget signed Tuesday had bipartisan support in both chambers, but involves a number of fund transfers and accounting maneuvers to accomplish some of the savings…

To read the rest of this post, click here to go inside the blog.

Skip regular session? No way, Gregoire says

Gov. Chris Gregoire at Thursday's press conference.

OLYMPIA — While most of Gov. Chris Gregoire's press conference Thursday revolved around the cuts that could be made or should be made, she did field a few questions a bit farther afield.

At one point she was asked what she thought of House Minority Leader Richard DeBolt's recent suggestion that the Legislature do all the work of cutting the budget, and whatever else might need to be done, in the 30-day special session that starts Nov. 28, then save the taxpayers some money by skipping  the regular 60-day session set to start in January. Think they could do that?

"I do not," she replied. Closing the gap between projected revenues and scheduled expenses will take all of the attention of the special session, even by giving legislators a "jump start" by previewing her budget options a month before they arrive.

"For December, I'm only asking them to focus on the budget…and any crisis we have out there." In January, the Legislature should "turn our attention to how we put Washington back to work."

She also denied a recent sale of bonds for the 520 bridge expansion, which relies on variable tolls that would be outlawed by Initiative 1125 if it passes, was intended as a way around the voters, as initiative sponsor Tim Eyman contended Thursday. The state has already begun work on the project, she said, and needs money to pay for it. "That was intended to pay our bills," she said of the bond sale.

Some (incrementally) good budget news

OLYMPIA — After more than a week of bad budget news for Washington state, the Revenue Department did find a silver lining in at least one dark cloud.

That is, the amount of revenue Washington state collected in fiscal 2011 was up almost 6 percent over fiscal 2010, or $16 billion compared to $15.1 billiion.

It's also higher than the $15.6 billion the state collected in fiscal 2009. But it's less than the $17 billion collected in fiscal 2008, the peak year for state revenue.

Business tax collections, sales tax collections and particularly liquor and cigarette taxes were all up last year. Gasoline taxes were down, and so were real estate excise taxes.

This is unlikely to have any effect on  November economic forecast, which is an attempt to look forward as a way of keeping the state budget under control. But in the two-month leadup to the special session,  it will no doubt play into the political back and forth over what to do about the state's budget through June 2013, through a selective use of statistics

Expect the Democrats to say revenues are down 6 percent from the pre-recession highs, and the state needs to find more revenues to provide needed services.

Expect Republicans to say they are up 6 percent from last year, and the state doesn't need more revenues it needs to live within its means.

It's sort of the 2011 Washington version of the glass half empty or half full argument.

Most of us would skip the argument, drink what's in the glass, and order another round to prepare for the upcoming special session.

WA economic forecast today

OLYMPIA — The state's economic forecast for the remainder of this two-year budget cycle comes out this morning, and the real question here is not "Will it be bad?" but "How bad will it be?"

In June, the forecast all but wiped out the budgetary cushion, aka the ending fund balance, the Legislature thought it left at the end of its special session. Since that time, most economic news has been worse, not better.

Chief Economic Forecaster Arun Raha is scheduled to begin his presentation at 10 a.m. to the forecasting council. He typically gives a midline forecast, as well as a pessimistic and optimistic estimate.

A major drop in expected revenues early in the biennium — that is, in the next six months — could prompt calls from some legislators for another special session to trim the budget. Gov. Chris Gregoire has already ordered state agency leaders to come up with plans to cut 5 percent and 10 percent from the spending plans they were given by the Legislature in June.

We'll have updates for you later in the morning.

Figure out cuts of 5% and 10%, agencies told

OLYMPIA – State agencies will prepare plans to cut their budgets by as much as 10 percent as Washington braces for the prospect that the next state economic forecast could be worse than the last one.
Orders were sent Monday to agencies that rely on the state’s general fund to identify what they would cut if their budget was reduced by 5 percent, and what they would cut if it was dropped another 5 percent beyond that.
Marty Brown, director of the Office of Financial Management, said the instructions are indirectly related to the ongoing federal debate over raising the debt ceiling. But the fact they came on a day when the Dow Jones Industrial Average dropped more than 600 points was a coincidence, he added.
“I wish we were that well-prepared,” Brown said when asked about a link to the stock market plunge…

McIntire to Lege: Get ‘er done quick

OLYMPIA — The Legislature should not dilly-dally with a supplemental state budget that figures out how to reduce expenses through the end of June, State Treasurer James McIntire said Wednesday.

They should pass the revised spending plan by the end of the month "without gimmmicks or delay" to keep the state general fund from running a deficit for the first time in three decades.

In what McIntire himself describes as a strongly worded letter to the heads of the two parties in the two houses and Gov. Chris Gregoire, the state's banker essentially tells legislators not to do what they are want to do, delay tough spending decisions. It could lower the state's bond rating and cost hundreds of millions over the next few years.

"A credit rating downgrade now would take several years to reverse, and would increase interest costs by several hundred million dollars for bond-financed state capital and transportation budgets and for virtually all local K-12 school district bonds, which are guaranteed by the state," he wrote.

Thumbs down, thumbs up on Gregoire budget

OLYMPIA — Reaction to Gov. Chris Gregoire’s budget was swift Wednesday as some of her normal alliles is social service groups and progressive circles denounced it while Republicans gave it qualified favorable reviews.

Fellow Democrats tried to praise her for the effort of compiling a budget that cut $4.6 billion over two years with committing to any of it.

State workers represented by Service Employees International Union, who care for seniors and the developmentally disabled, gathered outside the governor’s office to protest the cuts to key social service programs. They clustered around the exits to the office with empty wheel chairs in which they placed signs predicting the kinds of injuries and problems patients could suffer because of the cuts.

Karen Washington, who works for Chesterfield Services home care in Spokane, said workers who are already struggling to make ends meet, will have their wages and benefits cut, too. In the end, many patients who are able to remain in their homes or with family because of state services will wind up in more expensive settings like nursing homes and hospitals because of the cuts, she said.

Asking the sick and disabled to shoulder so much of the state’s budget problems “is not only not fair, it’s immoral,” Washington said.

Read more reaction inside the blog.


Gregoire budget slashes social programs, schools

Gov. Chris Gregoire and Office of Financial Management Director Marty Brown announce the proposed 2011-13 state budget.

OLYMPIA—Saying the state faces an economic crisis that requires cuts and restructuring, Gov. Chris Gregoire is proposing deep cuts in some of the state programs that enhance schools and serve the poor.

Her proposed 2011-13 budget, the starting point for discussions that will dominate next year’s legislative session, calls for what she calls “devastating” reductions.

“The safety net will be stretched thin in some places and eliminated entirely in other places,” she said in her budget message. “This is a budget that touches every community throughout the state.”

Download on overview of the proposed budget.

Go inside the blog to see some of the biggest cuts.

Gov calls for pension, health care reforms

OLYMPIA — The state should cut off automatic increases to some state retirees and keep others from retiring then being rehired for their old jobs, Gov. Chris Gregoire said today.

It should also revamp health insurance programs to find savings from large purchase and reductions in unneeded services, she added.

Gregoire unveiled several proposals Monday afternoon that she said could spell big savings over the next two-year budget cycle and beyond. It’s part of a slow roll-out of her fiscal 2011-13 budget, which will continue Tuesday and wrap up with a full budget book Wednesday.

Among the proposals floated Monday were an end to automatic increases to most of the retirees on the state’s oldest pension systems, PERS 1 and TRS 1. The increases were passed by the Legislature in 1995 as protection against inflation, but with inflation low, Gregoire is calling for the state to go back to the old system of letting the Legislature vote on any adjustments it sees fit.

Revenue down. Chance of special session up

OLYMPIA — The revenue forecast is grim. The chance for solving the problem with across-the-board cuts is almost non-existent. The chance of a special session of the Washington Legislature is growing, by the day if not the hour.

You can read about it in today’s report on the quarterly revene forecast by clicking here.

But the chance that a special session will be a one- or two-day affair, in which legislative leaders agree on the solution ahead of time and come to Olympia to merely ratify it…well, that’s considerably less than the chance for a special session.

Gov. Chris Gregoire wants proposals from the leaders of both parties in both chambers by Nov. 29, which is the Monday after Thanksgiving. Legislators are due in Olympia the first full week of December for a committee week.

But even if their leaders think they’ve got a solution, there’s nothing that binds the Legislature to keeping to a one-day, two-day or even one-week time line. They’ve got 30 — count ‘em, 30 — days once a session starts.

The only thing that may break things up could be a desire get out for the Christmas holiday.

Most years, legislators are asked to name a song that they think will exemplify the theme for the session. “I’ll be home for Christmas” may become the theme song of a December special session.

Gives us an F, give us a MAP…

For weeks, the prospects for another special session in Washington state to deal with a budget crisis revolved around an acronym that became a four-letter word: FMAP.

Pronounced EFF-map, never fuh-map, it stands for federal medical assistance percentages, but was generally referred to as extra Medicaid money. It may have been the most important word in state politics last week as Washington got perilously close to a special session or across-the-board budget whacks. How that happened provides state officials with a valuable lesson in what not to do.

WA budget woes: cuts can only go so far

OLYMPIA — One of the state’s top budget hawks points out today that Gov. Chris Gregoire’s ability to order across the board budget cuts only goes so far if the federal government doesn’t come through on Medicaid funding.

In other words, if Congress punts on FMAP, a special session would be needed to allow the state to have something in the bank at the end of the biennium, Jason Mercier of the Washington Policy Center says.

That makes the prospect of a special session more likely if Congress doesn’t vote to approve some $480 million to Washington state for higher federal medical assistance percentages, Mercier contends.

The Office of Financial Management confirms that Mercier is right about the limits on why a governor can order cuts in the face of budget problems. The governor has the authority to order cuts to avoid a projected deficit, Glenn Kuper of OFM said. There’s some leeway for the size of a deficit based on economic projections or forecasts, so if all the signs point to a downturn, the ordered cuts could take that into account.

But the governor can’t order cuts to create a surplus, which is really what an ending fund balance is — the money left over at the end of one budget cycle that carries you into the next budget cycle, when expenses are immediate but income might be slow in showing up.

The state budget has an ending fund balance of about $450 million, which was going to be provided by the FMAP money. Gregoire said last week that she was willing to wait until Congress goes on its August recess to see if the two chambers can pass FMAP before deciding on what route to take.

That’s still her plan, Gregoire’s staff said today. Without FMAP across-the-board cuts are a real possibility but a special session isn’t automatic, spokeswoman Karina Shagren said. The governor won’t call the Legislature back unless she gets some assurances they’ll be in and out in one or two days.

“The last special session, though, lessened her confidence that the state Legislature can follow that timeline,” Shagren said.

OFM will be watching projections in August as Congress approaches its recess, and should have updated figures available for Gregoire to consider when making the decision. The next state Revenue Forecast isn’t until Sept. 16.