Budget saves most of surplus

OLYMPIA – Gov. Chris Gregoire, seizing the initiative in her re-election campaign against Dino Rossi, on Tuesday proposed a $144 million supplemental state budget that leaves most of the state’s $1.4 billion surplus socked away for a rainy day.

But Rossi, the Republican former state Senate budget chairman who barely lost to Democrat Gregoire in 2004, pronounced it unacceptable. He noted that the governor’s own budget office is now forecasting a deficit of more than $600 million in the budget cycle that begins in the summer of 2009.

“It’s time to take steps now to rein in spending and show some fiscal restraint,” Rossi said, denouncing what he called out-of-control spending. State GOP Chairman Luke Esser called Gregoire a “Chris Van Winkle” who woke from a long snooze just in time to spend more money.

Gregoire proposed some modest spending in the plan she sent up to the Democrat-controlled Legislature. Nearly every line item relates to her central budget themes of “safety” and “security” – words she used over and over again during a news conference.

Flood relief, campus safety and children’s safety are examples of spending that got her endorsement.

But her main emphasis was a simple idea she will try to use to rebut Rossi: She wants to put most of it in the bank.

“It’s time to get off the roller-coaster” of fattening the budget during boom times and slashing services or raising taxes during lean times, the governor said.

Gregoire described her 2008 budget plan as frugal and smart, combining “targeted investments” and a large savings account – about $1.2 billion of the state’s reserves. But she conceded that even the huge reserves could evaporate in a sagging economy and confirmed that the state faces a potential deficit of more than $600 million in the two-year budget cycle that begins in mid-2009.

Democratic budget leaders in the House and Senate quickly endorsed the governor’s approach, but said their colleagues will surely want to boost spending.

“I will try to hold the line,” said House Appropriations Chairwoman Helen Sommers, D-Seattle, adding “a more realistic goal might be a reserve of $1 billion.”

“There will be immense pressure on us (to spend). We have to be frugal from here on out,” said Senate Budget Chairwoman Margarita Prentice, D-Renton.

The Washington Education Association and others were disappointed that Gregoire left out some of their priorities.

But the reaction from the right was critical. Rossi and minority Republicans said the main two-year budget already spends far too much and that Gregoire’s new spending only deepens the looming deficit.

“Reality hasn’t sunk in,” said Senate Republican budget leader Joe Zarelli, of Ridgefield, who said he’s gravely concerned about the return of red ink.

But Gregoire rejected the criticisms as “all but laughable.” Her voice rising in emotion, she gave an impassioned defense of the Democrats’ spending priorities and challenged Republicans to say where they would cut.

“Cheap shots don’t make a budget,” she said.

Proposing her last budget before facing the voters next November, Gregoire is asking the Legislature to approve more spending for flood relief, small pay raises for teachers and nursing home workers, money for litigation and a variety of small increases for health care, community safety, campus safety and other programs.

Amounts set aside as savings include $430 million that will go into a hard-to-tap “rainy day” fund that voters created last month, and $774 million that lawmakers would leave unspent.

“The goal of this supplemental budget is to invest money to address immediate concerns that cannot wait until the next biennium, and to save the rest of the revenue surplus,” the governor said.

The new spending would go atop the existing $33 billion two-year state budget adopted last spring.