State budget outlook: $492 million shortfall

2015 numbers: Forecast raises questions about promises from candidates

Staff writerAugust 7, 2012 

A new budget outlook for state government shows red ink to the tune of $492 million by June 2015 – if teachers get pay raises, public employees see an end to pay cuts, and health care costs keep rising.

The outlook, produced by Gov. Chris Gregoire’s budget office, assumes $1.5 billion in increased revenues in the next biennium. The shortfall would be even deeper – more than $1 billion – if the state’s rainy day fund, or Budget Stabilization Account, is not tapped.

State budget director Marty Brown said there were no surprises in the preliminary numbers, which will be followed by a more refined look in November.

On the cost side, the big outlays include ending temporary pay cuts for state employees ($171 million) and K-12 schoolteachers ($166 million), reinstating cost-of-living raises for school employees under Initiative 732 ($292 million), making large increases in pension contributions recommended by the state actuary ($366 million), and accommodating expected growth in medical assistance programs ($280 million).

The governor’s Office of Financial Management has typically done outlooks, but the work is getting more formal this year because of legislation, sponsored by Democratic Sen. Jim Kastama of Puyallup, requiring the state to show its future budgets could be balanced with available revenues.

The results cast doubt on both gubernatorial candidates’ claims that they can increase school funding but not raise general taxes. Republican Rob McKenna said last week that he can balance books in 2013-15 and put $1.7 billion more into K-12 schools and higher education by 2015 without raising taxes.

Democratic Party nominee Jay Inslee has made similar claims, saying he would put more money into K-12 schools by increasing economic growth, trimming spending, closing a few tax breaks and controlling health care costs.

Gregoire disputes that it can be done, and the outlook from the governor’s Office of Financial Management shows deficits just to carry on what the state is doing now. Those budget numbers do not add money to answer the state Supreme Court’s ruling this year that said the state was not meeting its constitutional duty to amply fund basic education.

But the budget outlook does show that implementing a K-12 school funding reform bill passed a few years ago would cost $1.05 billion.

Brown noted Monday that one big obligation has been taken off the table in the new outlook – the cost of class-size improvements under the mandate of Initiative 728. Lawmakers repealed that requirement this year. That cost at one time had been estimated at $1 billion in the current biennium.

OFM’s new preliminary outlook assumes revenue growth of 4.5 percent into the second biennium that begins July 1, 2015, and ends June 30, 2017. It also assumes medical inflation of 4.32 percent a year, which McKenna says he wants to trim and which Gregoire has been reducing for some programs.

bshannon@theolympian.com 360-753-1688 www.theolympian.com/politicsblog @BradShannon2

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