OLYMPIA — The state could balance its books by the end of the June by cutting more funds for school children, dropping payments to small school districts, eliminating some health care programs on March 1, and and holding on to checks worth some $253 million for a day.
Those are the main proposals in Gov. Chris Gregoire’s supplemental budget that tries to end the state’s fiscal year out of the red as it faces smaller than expected revenue to cover all its expenses currently on the books
Last week, the Legislature cut some $588 million out of the General Fund 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.
That left about $512 million the Legislature will have to to cut when the Legislature convenes next month. Gregoire’s proposals for those cuts, as announced this afternoon, include:
· Eliminating additional state funds for kindergarten through 4th grade class size reduction efforts for the entire 2010–11 school year, saving $42.1 million.
· Reducing levy equalization payments to eligible districts by 6.287 percent for Fiscal Year 2011, saving $18.0 million.
· 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. This will result in $253 million in savings in the 2009–11 budget.
· Eliminating all subsidized insurance from the Basic Health Plan beginning March 1, 2011, which covers about 66,000 people, to save $26.8 million in General Fund-State and $21.3 million in other funds.
· Eliminating the Disability Lifeline Grant and Medical programs, saving $43.5 million in GF-S and $22.6 million in federal funds.
The biggest savings, which comes from delaying payments to school districts by one day, shifts that cost into the next biennium. It is sometimes called an accounting gimmick, because the state has to make the payment, and is merely shifting it to a new budgeting period.
In practice, the state General Fund would borrow that money from other state funds that have surpluses on July 1 and pay it back over the two-year budget cycle that starts that day. 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 next two years than 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.
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