Thursday, November 18, 2010

The $5.7 billion problem

At today's revenue forecast meeting, legislators learned just how bad the budget situation will be when they return in January. For 2011-13, they'll have to fill a budget hole of $5.7 billion. That's $5.7 billion out of about $31 billion in state funding, much of which can't be touched because it's constitutionally protected (e.g., K-12 "basic education") or tied to federal requirements (e.g., "maintenance of effort" requirements in higher education).

The more urgent problem, however, is how to handle the current 2009-11 biennium.

For the current biennium, which ends in June, revenue projections have been dropping every quarter: $203 million in June, $768 million in September, and another $385 million today (including $63.5 million resulting from the passage of I-1107). Much of this is due to a lagging recovery in the construction industry, small businesses having difficulty getting access to loans, and people simply not spending money.

This means that since legislators left town in March, revenues have fallen about $1.3 billion. Part of that has already been resolved. There's about $451 million left in our budget reserves. The Governor already ordered $520 million in across-the-board reductions. But legislators will have to find at least $379 million in additional savings.

As Marty Brown, head of Governor Gregoire's budget office, pointed out, this level of reduction could mean the elimination of our state's Basic Health Plan, the Disability Lifeline, or levy equalization for property-poor school districts.

The Governor has asked each caucus in the House and Senate to submit ideas. House Appropriations and Ways and Means committees have already started working on this and will submit their ideas to her office by Monday, November 29th.

It is still not yet decided whether a special session will be necessary.