Gregoire releases budget proposal that addresses $1 billion shortfall

In her final budget proposal before leaving office, Gov. Chris Gregoire Tuesday proposed a balanced solution to the state’s nearly $1 billion 2013–15 budget shortfall, relying on a mix of spending cuts, reform savings, fund shifts and revenue adjustments, according to a press release from the Governor's Office.

December 18, 2012 3:24 pm

In her final budget proposal before leaving office, Gov. Chris Gregoire Tuesday proposed a balanced solution to the state’s nearly $1 billion 2013–15 budget shortfall, relying on a mix of spending cuts, reform savings, fund shifts and revenue adjustments, according to a press release from the Governor’s Office.

The state’s 2013–15 budget cycle begins July 1, 2013.

Gregoire also released her plan for making a $1 billion down payment toward meeting the court-mandated increase in basic education funding. In addition, she laid out capital and transportation proposals to meet critical infrastructure needs in communities across the state.

“My goal with this budget was to give our incoming governor and the Legislature a balanced and sustainable plan that addresses our fiscal problem and preserves services that are pivotal to our future prosperity,” Gregoire said in the press release. “Nothing will do more to ensure a bright future for our state than the many enhancements we are proposing throughout our education system.”

As required by law, according to the press release, the governor’s staff prepared a 2013–15 operating budget based only on existing revenue. Besides forcing the closure of a number of state parks and leaving vital programs such as College Bound Scholarships with critical funding shortfalls, a budget built only on existing revenue would:

  • Eliminate the State Food Assistance program and other services for vulnerable citizens.
  • Reduce levy equalization support to local school districts by $100 million.
  • Impose $52 million in across-the-board cuts to public colleges and universities.

“We have cut billions of dollars in spending and made major reforms since the start of the Great Recession,” Gregoire said. “A budget that relies only on existing revenue would not only jeopardize essential services — I’m convinced it would also hinder our economic recovery.”

Instead, the governor is proposing a more balanced approach, according to her office. Built through the Priorities of Government budget process, her plan includes new spending reductions and captures significant savings from reforms at both the state and federal level.

The state is saving $20 million thanks to last year’s creation of the Department of Enterprise Services, which merged all or parts of five agencies. The state is also projected to save nearly $140 million through its Medicaid expansion efforts under the federal Patient Protection and Affordable Care Act. The governor’s budget trims funding for local government programs by $57 million and saves $360 million by suspending Initiative 732 on annual cost-of-living raises for teachers.

The governor’s operating budget does include several modest revenue solutions. Gregoire is proposing to repeal a fuel use tax exemption that primarily benefits refiners and is projected to cost the state $63 million in lost revenue during the 2013–15 biennium. Her budget also raises $276 million by extending the Hospital Safety Net Assessment, an inpatient fee created in 2010 to leverage higher Medicaid matching funds.

While generally holding the line on spending for most agencies, the governor is proposing spending increases in a few key areas. For example, she is calling for $50 million to increase enrollment slots in the state’s early childhood education system and $20 million to expand STEM (science, technology, engineering and math) opportunities at public colleges and universities. The governor’s budget also includes $19 million to address a critical funding shortfall in the state parks system.

In addition, the governor is proposing her largest investment yet toward cleaning up and protecting Puget Sound — $501 million worth of projects spread across her operating, capital and transportation budgets.

After months of deliberation, the governor is putting forward a  plan for addressing the McCleary decision, in which the state Supreme Court found the state for years has failed to meet its constitutional obligation to provide adequate funding for basic education. In response to the ruling, the Legislature has committed to increase state support for basic education by $3.4 billion by the 2017–19 biennium.

Gregoire is proposing a $1 billion down payment on that commitment in 2013–15 — a 12.3 percent increase over the current K-12 budget. Her proposal would:

  • Reduce class sizes in grades K-2.
  • Step up the phase-in of full-day kindergarten programs across the state.
  • Improve professional development for teachers and principals.
  • Increase funding for maintenance, supplies and operating costs.
  • Fully fund the state’s new pupil transportation funding formula.

As the governor has been saying for months, the state cannot make these required enhancements through even deeper cuts to other state services. Therefore, she is proposing what she feels is a reasonable and sustainable revenue solution, according to the press release.

First, the governor is proposing a wholesale excise tax on gasoline and diesel fuel that would increase gradually over the next three biennia to eventually fund the entire pupil transportation budget. By using transportation taxes to fund pupil transportation, state General Fund dollars will be freed up to cover the other K-12 enhancements. To pay for those enhancements for the next two biennia, the governor is proposing to extend for three and a half years two temporary taxes that the Legislature enacted in 2010 — a business and occupation surcharge on certain services and a beer tax surcharge.

For the 2013–15 budget, the wholesale fuel tax would raise an estimated $367 million and the temporary tax extensions would raise $636 million.

“My proposed budget offers both a solution to the current budget shortfall and a solid start on meeting our obligations under McCleary,” Gregoire said. “This plan is a sensible, sustainable budget for Governor-elect Inslee and the Legislature to consider next month.”

The budget proposals are the last for Gregoire, who steps down Jan. 16 after serving eight years as governor.