State revenue $1.2 billion worse

Budget: Health program among cuts Legislature will consider this year

November 19, 2010 

The state’s lagging economy has blown another $1.2 billion gap in the state’s revenue expectations, prompting new calls for a special legislative session next month and requests from Gov. Chris Gregoire that lawmakers get moving.

Gregoire and budget director Marty Brown said they cannot make more across-the-board cuts to cover the short-term gap of $385 million. They say they need legislative action to eliminate whole programs – which could include the Basic Health Plan’s subsidized insurance or the Disability Lifeline, which gives cash and medical aid to people who are disabled and temporarily unable to work.

“I have been working with legislative leadership in both parties to collect ideas on how to address our current shortfall. This forecast has added even more urgency to those discussions and I’ve asked them to provide their options to me by November 29,” Gregoire said in a statement. “Quite frankly we can’t cut any deeper without ending significant programs.”

The gap expands the state’s short-term deficit through June to more than $900 million, up from $520 million. Longer term, it widens an expected shortfall for 2011-13 to about $5.7 billion, according to Glenn Kuper, a spokesman for Gregoire’s Office of Financial Management.

And those cuts are going to dominate the 105-day legislative session that begins Jan. 10 – if not every legislative gathering before then.

State budget director Brown said lawmakers must act no later than the first week of session.

Senate Majority Leader Lisa Brown, D-Spokane, and incoming budget chairman Ed Murray, D-Seattle, issued a joint statement calling the $385 million a “serious loss” of revenues on top of $5 billion in spending cuts to public services over the past couple of years and Gregoire’s across-the-board order that started cutting $520 million more Oct. 1.

“We are working with our members on a list of proposals to help close this gap. It’s our understanding that the other caucuses and Gov. Gregoire are doing the same,” the statement said. “When we reach agreement on a way forward, we believe the Legislature should – and will – act immediately.”

But Rep. Ross Hunter, the Democratic chairman of the House Finance Committee, said anything done in a special session has to be “simple and blunt.”

“The problem is, you can’t do something complicated quick. You can’t get people to understand it” and vote for it immediately, he said.

Republicans were ready to go.

“I think the governor just needs to call us in Dec. 1. Put us in a box,” said Sen. Joseph Zarelli, a Ridgefield Republican who leads his minority party on budget issues. “Then that puts the burden on the Legislature and the leadership.”

Gregoire has said she would call a special session only if there is an agreement on a budget-cuts bill that can be quickly passed in a day. But Zarelli said rank-and-file lawmakers could be sent home while leaders negotiate at the Capitol.

State revenue forecaster Arun Raha delivered his gloomy news during the quarterly meeting of the Economic and Revenue Forecast Council on Thursday morning. He said a slower-than-expected recovery in the housing-related part of the economy is partly responsible for a $385 million drop in short-term revenues through June and an additional $809 million drop for the following two-year budget.

The reductions include $281 million in revenue repealed by voters when they approved Initiative 1107 on Nov. 2. The new taxes enacted this year on soda, candy, bottled water and some canned foods will end effective Dec. 2.

Raha said that outlook is “grim” but defended state revenue forecasts that have been reduced by more than $6 billion over the ongoing two-year budget cycle. His forecast leaves $28 billion for the entire period and predicts there will be $33 billion for programs in the 2011-13 cycle, also well below earlier estimates.

“We are essentially in uncharted territory,” Raha said, describing a recession greater than any economic downturn since the Great Depression. “Forecasting is like driving a car forward by looking in the rear-view mirror. If it hasn’t happened before, you won’t see it in the model.”

Raha has described the economy as being “off life support, but still in intensive care.”

The low forecast prompted Gregoire’s budget director, Mary Brown, to vote against accepting the short-term forecast through June. But he was alone in his vote on the council and said it was his idea, not Gregoire’s, to do so.

“It defies logic. The collections are close” to what were predicted in September, Brown told the morning meeting of the council. “I just cannot see an almost $50 million-a-month drop from today to June 30.”

Raha acknowledged that receipt revenue collections were up $20 million above his September forecast, but he said that was due to other factors – early payments of property taxes and unclaimed property going to the state coffers. His concern about housing and other sectors led to the downward prediction, he said.

Brad Shannon: 360-753-1688

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