Washington state budget (2008-2009)

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The Washington state budget was facing an approximately $8 billion shortfall in the 2009-2010 two-year budget and ranked among the top 10 states in the country in terms of the size of its budget shortfall.[1] State officials anticipated a $6 billion shortfall, but additional data revealed that the gap widened by an additional $721 million in the two-year budget and $1.6 billion more in the next biennium that started in July.[2]

In response, Gov. Christine Gregoire's office was considering what The Seattle Times described as "vast cuts in state spending that Democratic leaders once would have considered unthinkable, including more than $1 billion in funding for public schools."[3] However, in light of decreasing revenues and the increased budget shortfall, the governor had warned that there could be even more budget cuts.

"Everything we feared could go wrong, did," said Arun Raha, the state's chief revenue forecaster. "We are witnessing an unprecedented economic crisis, the likes of which arguably we have not seen since the Great Depression," said Raha.[2]

Impact of budget woes

See also: State budget crisis, 2009-2010
  • State park closures might have risen to 40 after a recommendation by the state House of Representatives for a 13 percent reduction of the State Parks and Recreation Commission's 2009-2011 budget. In December Gov. Gregoire's proposed budget recommended that the State Parks' general fund be cut 10 percent, from about $98.5 million to $88.5 million. Officials estimated the closing of about 15 state parks.[4] At the time, Washington had a total of 121 state parks.[5]
  • Gov. Gregoire proposed a two-year budget that included $990 million in cuts on state health-care spending. The state would receive approximately $2.06 billion in federal stimulus funds for the state's Medicaid program. However, some said that they believed that the large budget cut would only destroy health-care in the state. It “would shred the health care safety net, create 60,000 uninsured people virtually overnight, erode the mental health system, and make damaging cuts to providers such as hospitals and community clinics,” said Randy Revelle, senior vice president at Washington State Hospital Association].[6]
  • The seasonally adjusted unemployment rate in Washington state jumped to 7.8 percent in January from 7.1 percent in December and 4.5 percent in January 2008.[7]
  • On February 18, 2009, all state agencies of the legislative, executive, and judicial branches were subject to an immediate freeze on hiring, personal services contracts, equipment purchases, out-of-state travel, and training. Additionally, Washington Management Service employees were not to receive salary or wage increases until February 18, 2010. There were no exemptions to the salary freeze.[8]

Budget background

See also: Washington state budget

Washington operates on a biennium budget. The biennium includes a 24-month period from July 1 of odd-numbered years to June 30 of odd-numbered years, such as the 2007-09 biennium, which ran from July 1, 2007 to June 30, 2009. According to state law, the governor is required to submit a budget recommendation by December.

Although the biennium includes two fiscal years, an approved budget the legislature can modify the budget through changes to the original appropriations. This can be done in any legislative session. Since 1979, the House and the Senate have enacted revisions annually to the state’s biennial budget.[9]

Budget figures

The state's budget shortfall had increased to $8 billion. In March the state Revenue Forecast Council said tax collections in January 2009 were $63 million short of the amount expected.[1] As of the November 2008 revenue forecast, revenues were projected to increase by five percent, $1.4 billion, in the next biennium, but the planned increases built into the existing budget resulted in a projected $5.7 billion shortfall. There was concern the fiscal problem could approach more than $7 billion in planned spending over expected revenue when the March revenue forecast was released. The governor's set price tag for the 2009-2011 budget was $69,592,333,000.[10][11]

Fiscal year General funds expenditures  % change from previous year
1997-1999 $39,397,275,000[12] --%[12]
1999-2001 $44,535,542,000[12] 13.0%[12]
2001-2003 $49,527,904,000[12] 10.1%[12]
2003-2005 $53,463,296,000[12] 7.9%[12]
2005-2007 $60,517,243,000[12] 13.2%[12]
2007-2009 $69,176,280,000[12] 14.3%[12]

Ideas about why the crisis occurred


Gov. Chris Gregoire 2009-2011 biennial budget proposal
  • State revenues were expected to fall by $721 million through the two-year budget cycle ending June 30, 2009 and by another $1.6 billion for 2009-2011.[13] More than 70 percent of the money the state collects comes from sales and business-and-occupation taxes.[2]
  • The state Revenue Forecast Council said tax collections in January 2009 were $63 million short of the amount expected.[10] According to state officials, weaker consumer spending, particularly on cars and homes, and weaker business-and-occupation tax collections accounted for the drop in state revenues.[13] Taxes from retail firms were down 13 percent, furniture 30 percent, vehicle dealers 27 percent, gas stations and convenience stores 20 percent, clothing 19 percent and building materials 18 percent. Tax payments from car dealers had been declining for 13 straight months.[10]
  • According to officials, the state had seen an increase for state services. Enrollment in public education had increased. There had also been an increase in applications for state-funded health programs and cash assistance. The estimated impact was an additional $175 million toward Washington's $8 billion shortfall.[14]

Proposed actions

Governor Christine Gregoire

In February 2009 Gov. Gregoire signed an "early action" savings bill that gained final passage in the House by a vote of 80-14. The bill cut state spending by about $290 million. The bill focused more on short-term solutions: about $91 million in transfers from other accounts, and about $340 million in federal assistance, some of which was assumed to be coming from the stimulus package.[15][16]

Gov. Gregoire proposed a $33.5 billion two-year budget in December 2008. At the time, the governor proposed more than $3 billion in cuts to help close the gap, including reducing health-care coverage for the poor and suspending pay increases for teachers and state workers. Gregoire had not issued a proposal to increase taxes and had opposed tax increases in the past.[17] According to Gregoire, the state could not touch nearly 60 percent of the budget devoted to items the state was required to provide, such as basic education, federally mandated Medicaid, pensions and debt service. Budget cuts therefore applied to only the remaining 40 percent of the budget.[11]

Republicans

State leaders throughout Washington were looking for sources of revenue; however, Sen. Joe Zarelli, the Senate's Republican budget leader, said "sin taxes," although an easy choice, were not going to solve the problem. Zarelli added that "sin taxes," such as cigarette or liquor tax increases, had often been used in the past and did not have much more revenue to offer the state. Republicans throughout the state also noted that they did not believe that this was a good time to raise taxes. The most effective way to approach the shortfall, they said, was cutting spending. "The only way to get through this is like businesses and consumers are doing it: Choosing not to spend where they don't had to," said Zarelli.[18] Some state Republicans said that they feared the legislature was focusing too much on federal stimulus funds to solve the budget shortfall. "My fear is that we're waiting around, hoping that the federal government bails the state government out," said Rep. Mike Armstrong. "And I'm here to tell you, this is our problem."[15]

Democrats

Democrats said dismal state revenue and low revenue forecasts might lead lawmakers to propose a tax package. Lawmakers said that anything from a new tax, increase of current taxes or eliminating tax breaks were all possible solutions to finding new revenue. Democrats said the continued deterioration of the economy had them worried about balancing the budget through cuts alone. Senate Majority Leader Lisa Brown said that the approved federal stimulus funds might not be enough to pull Washington out of the shortfall. "We're starting to get the impression that even with the federal stimulus, the budget shortfall will be much greater than what the governor was facing when she wrote her budget," she said. House Ways and Means Committee Chairwoman Kelli Linville said that she was concerned that cuts that were too deep would harm the state. "The standard for me about something going on the ballot is we've attempted to do this through cuts. But some of the cuts that are being recommended are the kinds of cuts that irreparably damage our service delivery or individuals," said Linville.[17]

Newspapers

Some newspapers were claiming that the root of Washington's budget dilemma was the lack of a state income tax. The Seattle Post-Intelligencer editorial board suggested the implementation of a progressive income tax. "An economic crisis is, in fact, the best time to make structural changes." Property, sales and business and occupation taxes, they said, were at their limits and the lack of an income tax, they added, "largely accounts for why Washington has a tax system that is much harder on lower-income residents and businesses than most states." The Seattle Post-Intelligencer added that with an income tax the state would not have to undergo such large budget cuts and could implement spending cuts with tax increases like in the 1980s under then-Gov. John Spellman.[19]

Economic stimulus package

Washington was set to receive around $4 billion from the federal stimulus bill. Governor Gregoire and legislative leaders said that between $2.1 billion and $2.2 billion would be allocated towards the state's $5.7 billion budget shortfall. All told, the federal stimulus plan would create or save 75,000 jobs in Washington, based on White House estimates.[20]

According to preliminary reports, Washington was expected to receive:

  • $2.06 billion for the state's Medicaid program[6]
  • $168.6 million for housing and urban development[21]
  • $341 million to fix state roads and highways[22]

Budget transparency

The state has an official spending database online, thanks to the passage of Washington Senate Bill 6818, Promoting Transparency in State Expenditures, a bill that mandated the creation of such a database by January 1, 2009.[23]

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases
State database Searchability Grants Contracts Line item expenditures Dept./agency budgets Public employee salary
Washington State Fiscal Information
{{{1}}}
N
600px-Red x.png
N
600px-Red x.png
N
600px-Red x.png
{{{1}}}
N
600px-Red x.png

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[24]
  • Washington was expected to receive an estimated $2,898,100,490.[25]

Support for creation of the databases

The bill was promoted by the Washington Policy Center, and was based upon legislation developed by Jason Mercier, the Center's Director for Government Reform.[26]

The National Taxpayers Union issued a press release detailing the passage of Washington Senate Bill 6818.[27] NTU also wrote a letter in support of creating a grant and contract database.[28]

Public employee salary information

See also: Washington state government salary

See also

External links

Additional reading

References

  1. 1.0 1.1 Associated Press,"Washington Legislature starts Week 9," March 9,2009
  2. 2.0 2.1 2.2 The Seattle Times,"$8 billion shortfall forecast for Washington state budget," February 20,2009
  3. Seattle Times, "Gregoire looking at massive state budget cuts," December 2, 2008
  4. Whidbey Examiner,"Parks fans worry as state budget tightens," March 4,2009
  5. Associated Press,"Washington could close up to 40 state parks," March 6,2009
  6. 6.0 6.1 Puget Sound Business Journal,"Groups fear Washington state legislators would divert feds’ health-care cash," March 6,2009
  7. Wall Street Journal,"Sleepless in Seattle: Data Point to More Home Price Declines," March 9,2009
  8. State of Washington,"Implementation instructions related to engrossed substitute Senate Bill 5460 for executive branch agencies," February 20,2009
  9. Office of Financial Management,"Washington State budget process," June 2008
  10. 10.0 10.1 10.2 Associated Press,"Washington monthly tax revenue less than expected," February 11,2009
  11. 11.0 11.1 Governor Chris Gregoire,"Proposed 2009-2011 budget and policy highlights," December 2008
  12. 12.00 12.01 12.02 12.03 12.04 12.05 12.06 12.07 12.08 12.09 12.10 12.11 Washington Government, Expenditure History - Operating & Capital
  13. 13.0 13.1 Puget Sound Business Journal,"Washington state's projected budget shortfall balloons to $8B," February 19,2009
  14. Oregon Public Broadcasting,"WA budget gap grows as demand for state services rise," March 6, 2009
  15. 15.0 15.1 Associated Press,"Wash. Legislature cuts spending," February 18,2009
  16. The News Tribune,"Critics say $292M cut from Washington budget won't be enough," February 14,2009
  17. 17.0 17.1 The Seattle Times,"House Dems say they may put tax increase on ballot," February 19,2009
  18. TradingMarkets.com,"Dems Getting Ready to Ask Voters for Higher Taxes," March 9,2009
  19. The Seattle Post-Intelligencer,"Washington Century: Flawed tax system," March 2,2009
  20. American Recovery and Reinvestment Act,"Estimated job effect," accessed March 9,2009
  21. Bellingham Herald,"Feds give $3 million to Whatcom County housing and homeless programs," March 9,2009
  22. Seattle Post-Intelligencer,"State stimulus aimed at roads," March 5,2009
  23. Washington Senate Bill 6818, Promoting Transparency in State Expenditures
  24. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  25. Wall Street Journal,"Stimulus Spending by State," March 12,2009
  26. Washington Policy Center, "Governor Signs Washington Policy Center Proposal for Searchable Budget Website," April 1, 2008
  27. National Taxpayers Union, "Taxpayer Group Applauds Washington State for Passing Spending Transparency Legislation," April 4, 2008
  28. National Taxpayers Union, "Taxpayers Support Creating Grant and Contract Database in Washington," April 10, 2007