$5 billion state deficit likely to force deep cuts in services
With a projected revenue shortfall, legislators, already trying to plug a $201 million hole in the current budget, must plan for even more cuts.
By Jerry Cornfield, Herald Writer
OLYMPIA -- Washington's chief economist Thursday delivered the bad news everyone expected: Tax collections are down, pushing the state's projected budget deficit above $5 billion.
Now lawmakers must erase it, a task they've been dreading, and the governor warned it must be done without any fiscal gimmickry.
"This must be a year of decision, not deferral," she said. "The size of the shortfall means we cannot trim our way out of it. We are going to have to make cuts and they will be felt everywhere throughout the state."
Arun Raha, executive director of the Economic Revenue and Forecast Council, predicted Thursday the state will take in $780 million less in revenue through mid-2013. That widens a hole in the current budget and pushes the projected shortfall in the next one above $5 billion.
Rising oil prices, falling consumer confidence, the tragedy in Japan and unrest in the Middle East are combining to overwhelm small gains in employment and the good news of the Boeing Co. snaring the air tanker contract, Raha said.
So what now?
House and Senate budget writers will use Thursday's forecast in crafting a spending plan for the two-year period starting July 1.
Majority Democrats also must finish blotting out about $201 million in red ink in the current budget that runs through June 30.
They've been drawing up scenarios for possible cuts for both budgets and now will begin making decisions. Time is short as the legislative session is scheduled to end April 24
Rep. Dan Kristiansen, R-Snohomish, expects a special session will be needed.
"We've been dillydallying around. We still haven't finished with this budget deficit," said Kristiansen, emphasizing that Democrats control the tempo.
With the political impossibility of raising taxes and improbability of axing major tax breaks, lawmakers are left to choose state-supported services to trim and health, human service and education programs to eliminate.
"We're looking at a bunch of different ideas; there are a lot of bad ideas in the world; some are less bad than others, some are very bad. We're going to try to do the least-bad set of options we can do," said Rep. Ross Hunter, D-Medina, the chief budget writer for the House Democrats.
There is talk of generating revenue with an expansion of card room gambling or legalizing of marijuana. There are money-saving ideas as well, such as releasing prisoners early. Right now, none of those are gaining traction.
There also are Democrats talking quietly of more controversial means of bringing in money.
One idea, last done in 1971, creates a 25th month of tax collections for the two-year budget cycle by getting a loan and paying it back with money from future budgets. Another idea would be to sell bonds and pay them off with a designated stream of revenue. The state did this in 2002 when it borrowed $450 million through securitization of tobacco settlement payments.
Gregoire warned against pursuing those maneuvers.
"These fixes may look good now, but they won't a few years from now," she said.
Taking an oft-used line of Republicans, she said lawmakers can't "kick the can" down the road and put off the tough decisions in hopes the economy will turn around.
"We cannot wait for better numbers," she said. "In 2009, we hoped that things would turn. In 2010, we hoped that things would turn. Now in 2011 we hoped that they would turn. And they haven't."
One of the many potential targets for cuts is the Early Childhood and Education Assistance Program, which serves about 8,000 low-income preschoolers statewide including 951 throughout Snohomish County.
The nonprofit Volunteers of America serves 134 of those children and provides other state-funded services to seniors, disabled adults and low-income families.
"We're very concerned. So are all of the organizations like ours that provide critical services," said Bob Reese group's regional vice president for Snohomish County said. "It's going to be a tragedy for many people across the state."
It's not easy telling people the faucet of state funds may be turned off. It's become tougher following millions of dollars in cuts made in December and February.
"The public says this is as far as we can go and I say what if we have to go farther," Kristiansen said.
He uses a surgical metaphor when asking representatives of state agencies and interest groups for ideas on where to cut.
"You can live without your tonsils and your appendix," he said. "I say you guys decide what other organs and limbs you can live without."
The Associated Press contributed to this story.
Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.
http://heraldnet.com/article/20110317/NEWS01/703189955/-1/NEWS01
By Jerry Cornfield, Herald Writer
OLYMPIA -- Washington's chief economist Thursday delivered the bad news everyone expected: Tax collections are down, pushing the state's projected budget deficit above $5 billion.
Now lawmakers must erase it, a task they've been dreading, and the governor warned it must be done without any fiscal gimmickry.
"This must be a year of decision, not deferral," she said. "The size of the shortfall means we cannot trim our way out of it. We are going to have to make cuts and they will be felt everywhere throughout the state."
Arun Raha, executive director of the Economic Revenue and Forecast Council, predicted Thursday the state will take in $780 million less in revenue through mid-2013. That widens a hole in the current budget and pushes the projected shortfall in the next one above $5 billion.
Rising oil prices, falling consumer confidence, the tragedy in Japan and unrest in the Middle East are combining to overwhelm small gains in employment and the good news of the Boeing Co. snaring the air tanker contract, Raha said.
So what now?
House and Senate budget writers will use Thursday's forecast in crafting a spending plan for the two-year period starting July 1.
Majority Democrats also must finish blotting out about $201 million in red ink in the current budget that runs through June 30.
They've been drawing up scenarios for possible cuts for both budgets and now will begin making decisions. Time is short as the legislative session is scheduled to end April 24
Rep. Dan Kristiansen, R-Snohomish, expects a special session will be needed.
"We've been dillydallying around. We still haven't finished with this budget deficit," said Kristiansen, emphasizing that Democrats control the tempo.
With the political impossibility of raising taxes and improbability of axing major tax breaks, lawmakers are left to choose state-supported services to trim and health, human service and education programs to eliminate.
"We're looking at a bunch of different ideas; there are a lot of bad ideas in the world; some are less bad than others, some are very bad. We're going to try to do the least-bad set of options we can do," said Rep. Ross Hunter, D-Medina, the chief budget writer for the House Democrats.
There is talk of generating revenue with an expansion of card room gambling or legalizing of marijuana. There are money-saving ideas as well, such as releasing prisoners early. Right now, none of those are gaining traction.
There also are Democrats talking quietly of more controversial means of bringing in money.
One idea, last done in 1971, creates a 25th month of tax collections for the two-year budget cycle by getting a loan and paying it back with money from future budgets. Another idea would be to sell bonds and pay them off with a designated stream of revenue. The state did this in 2002 when it borrowed $450 million through securitization of tobacco settlement payments.
Gregoire warned against pursuing those maneuvers.
"These fixes may look good now, but they won't a few years from now," she said.
Taking an oft-used line of Republicans, she said lawmakers can't "kick the can" down the road and put off the tough decisions in hopes the economy will turn around.
"We cannot wait for better numbers," she said. "In 2009, we hoped that things would turn. In 2010, we hoped that things would turn. Now in 2011 we hoped that they would turn. And they haven't."
One of the many potential targets for cuts is the Early Childhood and Education Assistance Program, which serves about 8,000 low-income preschoolers statewide including 951 throughout Snohomish County.
The nonprofit Volunteers of America serves 134 of those children and provides other state-funded services to seniors, disabled adults and low-income families.
"We're very concerned. So are all of the organizations like ours that provide critical services," said Bob Reese group's regional vice president for Snohomish County said. "It's going to be a tragedy for many people across the state."
It's not easy telling people the faucet of state funds may be turned off. It's become tougher following millions of dollars in cuts made in December and February.
"The public says this is as far as we can go and I say what if we have to go farther," Kristiansen said.
He uses a surgical metaphor when asking representatives of state agencies and interest groups for ideas on where to cut.
"You can live without your tonsils and your appendix," he said. "I say you guys decide what other organs and limbs you can live without."
The Associated Press contributed to this story.
Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.
http://heraldnet.com/article/20110317/NEWS01/703189955/-1/NEWS01
