Pubdate: Sun, 15 Mar 2009 Source: Bellingham Herald (WA) Copyright: 2009 Bellingham Herald Contact: http://www.bellinghamherald.com/ Details: http://www.mapinc.org/media/43 Author: Joseph Turner BALANCING THE STATE BUDGET: IT'S TIME FOR A REALITY CHECK Federal Bailout Will Help Balance State Budget, But Tough Choices Loom Three billion dollars. It ain't chump change. Then again, the amount of money that Washington is getting from Congress to help with its operating budget shortfall, projected at roughly $8 billion, isn't what many legislators had hoped for. While people may have been very optimistic that the feds were going to come in with dump-truck loads of money, it isn't happening," Gov. Chris Gregoire told reporters last week. Washington did get a lot of money from the federal stimulus package - almost $5 billion. But about $2 billion is going to highway, water, sewer, school and other construction projects or must be spent on other things that make it of little direct help to the state operating budget. For instance, some of the money is passing through the state treasury but is headed straight to cities, counties, transit districts and others to help with their budget problems. The state is on a course to spend $8.31 billion more than it expects to collect in taxes in 2009-11. To put it in balance, the Legislature must subtract from spending, add to revenues or do some combination of both. | Moreover, the $3 billion that is helpful to the state is limited to a three-year period, and the Legislature already has spent $340 million of it. Today marks the beginning of the 10th week of a 15-week legislative session, and work on the 2009-11 budget will begin in earnest after Thursday. That's when budget writers get the official estimate for how much the state can expect to collect in taxes over the next 28 months. That's also when reality sets in, or when it is supposed to. Sen. Craig Pridemore, D-Vancouver, said he thinks many of his colleagues are still in denial about the gravity of the budget crisis. Today, the state is looking at a projected $8.31 billion shortfall. That means the state is on course to spend $8.31 billion more through June 30, 2011, than it expects to collect from state taxes and fees. That's about 25 percent of the $31 billion the state would collect in taxes over the next two years. Not all of that shortfall is spending. Senate Majority Leader Lisa Brown, D-Spokane, said she thinks the Legislature should keep $1 billion in reserves because the economy and state revenues are so uncertain. But since that money must be put in savings, spending cuts will have to be that much deeper. LOOKING FOR SAVINGS Lawmakers can cut the shortfall in half with relatively little pain, unless you are a state or public school worker who won't get a cost-of-living raise for the next two years. They could: Spend all the federal money. Not give COLA raises to 250,000 state and public school employees. Spend all $700 million in the Rainy Day savings account. Continue spending cuts already made in the so-called "belt-tightening" bill for the current 2007-09 budget, which was signed into law a couple of weeks ago. Skip $400 million in payments into worker pension programs. Take $800 million from other pots of money that are earmarked for building projects. Open 10 more liquor stores and hire more "revenuers" to go after tax evaders. All those moves, which have been suggested by the governor, minority Republicans or some Democratic budget writers, would whittle the shortfall down to about $4.5 billion. After that, the cuts get more painful. Gregoire balanced her budget by getting rid of a couple of programs that provide $339 monthly payments and medical coverage to about 16,000 people who are unable to work because of physical, mental or drug-abuse problems, saving $452 million. She also would save $252 million by cutting the state-subsidized Basic Health Program by 40 percent. Other savings: $400 million in cuts to state colleges, and $300 million in cuts to public schools. In all, she would cut spending by more than $2.5 billion, said Victor Moore, her budget director. The situation the Legislature faces is only slightly worse. Gregoire assumed the state would get $1 billion extra from the feds; but we're getting $3 billion. On the other hand, state tax collections are now expected to be about $2.5 billion less than when the governor wrote her budget in November. If all of the governor's spending cuts were adopted, the Legislature would have to deal with about a $1.5 billion to $2 billion gap between spending and tax revenues. That assumes Thursday's forecast lowers revenue collections by another $200 million. That remaining gap is why interest groups, mostly in the health care and education arenas, are talking about asking voters to approve higher taxes at the ballot - perhaps in June, August or November. They want money to restore services that otherwise would be cut, and their polling shows voters might be inclined to approve temporary taxes, particularly if they were "sin" taxes - cigarettes, liquor, candy and pop. Republicans, who are heavily outnumbered in both the House and the Senate, say the budget can be balanced without any new taxes. Cuts don't have to be as drastic or dramatic as getting rid of entire programs, said Sen. Joe Zarelli, top Republican on the Senate Ways and Means Committee. He was referring to the governor's proposal to end the General Assistance Unemployable and Alcohol Drug Addiction Treatment Support Act programs, and a House option to save $700 million by axing the Basic Health Plan. TIME TO TIGHTEN THE BELT Take more measured steps, Zarelli said. Instead of getting rid of GAU, put a one-year time limit on how long people can get $339 monthly checks and health coverage. Instead of lopping the health plan, scrutinize applications to make sure they qualify for state-subsidized health coverage, he said. Zarelli said the state should freeze spending at today's levels. Not all spending can be frozen - utility bills will be higher, landlords will charge higher rent to state tenants - but state agencies should be given the same amount of money they got for the past two years and be told to live with it, he said. If business can do it and homeowners can do it, government can do it," he said. Jeannie Darneille, D-Tacoma, who is chairwoman of one of three House appropriations committees, said the three leaders of the committees would meet Monday with House Ways and Means Committee chairwoman Kelli Linville, D-Bellingham, to go over their entire list of possible budget cuts, which were supposed to amount to about 20 percent. That's when we'll learn whether our ideas are deemed brilliantly inspired or absolutely crazed," Darneille said last week. Health care advocates have heard that the general assistance and substance abuse treatment programs and the Basic Health Plan might be eliminated, and that state payments to hospitals and nursing homes might be cut by 10 percent to 14 percent. If the cuts are like that, they're drastic," said Susan Eidenschink of the League of Women Voters, which is part of the Healthy Washington Coalition. "The safety net would be just about demolished." Cassie Sauer, a vice president of the Washington State Hospital Association, voiced a similar concern. They are very scary about where we might be headed in an all-cuts budget," Sauer said. "The level of devastation to the health care safety net and to vulnerable people who need health care is immense." [SIDEBAR] BALANCING THE STATE BUDGET The state is on a course to spend $8.31 billion more than it expects to collect in taxes in 2009-11. To put it in balance, the Legislature must subtract from spending, add to revenues or do some combination of both. POSSIBLE CUTS $415 million Eliminate GAU and ADATSA assistance programs $252 million Cut Basic Health Plan by 40 percent $297 million Don't give state workers raises $389 million Don't give school workers raises $401 million Skip employer payments into pensions $42 million Pay hospitals 4 percent less for state-paid patients $125 million Give poor school districts less money $84 million Eliminate state-paid all-day kindergarten $61 million Eliminate health coverage for illegal immigrant children $123 million Eliminate two teacher training days $52 million Stop sharing liquor profits with cities and counties $364 million Cut class size initiative (I-728) money by 40 percent $86 million Make state workers pay 20 percent of health insurance $80 million Make school workers pay 20 percent of health insurance $163 million Freeze experience pay and raises for state and K-12 workers POSSIBLE TAXES OR REVENUES $700 million Spend all Rainy Day savings account $800 million Shift money from building projects $143 million Open 10 liquor stores, go after tax evaders $2.3 billion Raise state sales tax to 7.5 percent* $180 million Raise cigarette tax by $1 a pack* $277 million Put 5-cent-per-can tax on soft drinks* $466 million Tax bottled water, 1 cent per ounce* $377 million Raise property tax by 22.5 cents per $1,000 in value* $245 million Double estate tax* $980 million Extend sales tax to doctors, dentists, lawyers* $59 million Extend sales tax to candy, gum* $783 million Raise oil barrel tax to 5 percent* * All tax increases require a two-thirds vote by the Legislature or a public vote. All amounts for spending and taxes are for two years. These are only a small sampling of spending cuts and tax raising options available to the state. - --- MAP posted-by: Larry Seguin