Gregoire warns agencies of deeper cuts

10 percent: Economic uncertainty may mean deeper reductions

August 9, 2011 

Rattled by global economic uncertainty, Gov. Chris Gregoire has asked state agency leaders and front-line workers to start getting ready for budget cuts as deep as 10 percent, or $1.7 billion, in January – in case state revenue plunges again.

Marty Brown, the governor’s budget director, sent a cautionary memo Monday to agency budget directors, outlining each agency’s share of the potential cuts. Gregoire sent her own email message to line workers, asking for their help to find ways to deliver key services while streamlining government even more.

“Part of the key to fighting this recession is to continue working to get ahead of it,” Gregoire’s message to workers said. “For every two steps forward in the recovery, it seems we are taking one step back. Though our revenue collections have continued to show slight improvement this biennium, our near-term outlook has weakened.”

Gregoire asked agencies to identify a first tier of 5 percent cuts and a second tier of 5 percent more, or 10 percent total.

And it appears at first blush that agencies would have to revive ideas for cuts that proved too unpopular or horrific to follow through on before – such as the state’s funding of prescription drug services to adult Medicaid clients who are not being cared for in hospitals or nursing homes.

Some budget leaders in the Legislature welcomed the early move to get ready for a possible downturn and possibly more cuts.

“I think this is a good thing. I think it is good for us to come together and make the reductions where we think they can have the most impact,” said Rep. Gary Alexander of Thurston County, who is House Republican lead on the budget and had urged earlier action during past budget fights. “That may mean a special session – if we’re going to do something other than across the board reductions.’’

Rep. Jeannie Darneille, a Tacoma Democrat and vice chair of the House Ways and Means Committee, agreed it is good to start looking at options. But Darneille was skeptical that another round of deep cuts could be made without a serious look at raising revenue.

“It’s (been) the governor’s desire for us to move forward without discussion of revenue options. But I believe the time has come,” Darneille said. “I don’t think we left a lot of meat on the bones in our analysis of those budgets.”

Gregoire did not mention taxes or a special session but said her moves were a precaution and step toward getting ready. The next quarterly state revenue forecast is due Sept. 15.

“The uncertainty our state could experience as a result of downgraded credit ratings, federal debt concerns, European markets and the lingering effects of the tsunami in Japan, are causing us to be extra cautious,” Gregoire wrote.

Her decision was based on conversations with state forecaster Arun Raha and Federal Reserve predictions for slower economic activity, according to Brown, the budget director.

Doug Porter, director of the Health Care Authority, which oversees Medicaid, said he plans to revisit cuts that were considered a year ago but eventually avoided.

Porter’s share of cuts would be $224 million at the 5 percent level and $445.5 million if 10 percent is needed, and the main places available to cut are the Basic Health Plan, which subsidizes health insurance for the working poor, and Medicaid, which pays for medical care for the poorest.

Among those choices is prescription drug coverage for adults. Others considered for elimination but spared this year were interpreter services for immigrants who need communication help at the doctor’s office; and physical, speech and occupational therapy programs that were downsized instead of killed.

“If I’m going to hit a target of $400-and-some-odd-million, there is no way I can avoid going back to those ugly cuts like prescription drugs for adults,” Porter said. As outlined by DSHS before it shifted Medicaid to the Health Care Authority, the Medicaid drug subsidy cuts would affect adults who were not receiving care in a hospital or nursing facility.

The biggest cuts statewide would be at the Department of Social and Health Services, which has a $5.7 billion budget and would have to lop $573.1 million. “It is far too early in the process to know what might be put on the table,” DSHS spokeswoman Kathy Spears said in an email. “But we certainly understand that if state revenue continues to decline, another round of difficult decisions will be needed.”

At the Department of Corrections, the share of cuts is $105 million at the 10 percent level. Spokesman Chad Lewis said $6 million newly appropriated for safety improvements in prisons after the death of a guard this year would not be touched, but it is possible the agency would look at reducing its caseloads for supervision of offenders in the community or in the number of inmates.

Lewis said the agency has closed three prisons since 2008, stopped supervising 10,000 of the lowest risk offenders released into the community and cut 1,200 positions. “All the good cuts have been taken. There is nothing left but bad choices,” he said.

In his memo to agencies, budget director Brown asked budget leaders “to think in terms of service outcomes, not just dollar amounts” as they try to find ways to make government even more streamlined and efficient.

And in an interview, Brown said discussions about early action on the budget began just before Congress reached a debt-limit deal last week in Washington, D.C.

“I think part of it is just the total lack of certainty of what is coming from D.C. It’s affected the economy, but it’s also going to affect the federal reimbursements at some point. We just have to start planning bigger,” Brown said ominously.

Brad Shannon: 360-753-1688

UPDATE clarifies that Corrections closed three prisons, not two, since 2008. They were McNeil Island west of Tacoma, Ahtanum View for aging and ill inmates near Yakima and the Pine Lodge prison for women at Medical Lake near Spokane.

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