Supplemental budget part II

Lawmakers met last Saturday for a special session to get a head start on addressing the $1.1 billion shortfall in the current 2009-11 biennium.

Legislators got about half way there and today Governor Gregoire released her proposal for an additional supplemental budget to balance the rest.

From the Governor's press release:
Many of the proposed reductions are similar to those in the 2011–13 budget the
governor unveiled Wednesday but they take effect sooner, including:

• Elimination of additional state funds for kindergarten through 4th grade class size reduction efforts for the entire 2010–11 school year, saving $42.1 million.
• Reducing levy equalization payments to eligible districts by 6.287 percent for Fiscal Year 2011, saving $18.0 million.
• Shifting part of the June 2011 apportionment payment to school districts from the last business day of June 2011 to the first business day of July 2011. This will result in $253 million in savings in the 2009–11 budget.
• Elimination of the Basic Health Plan beginning March 1, 2011. All insurance subsidized through the Basic Health Plan will be eliminated, which affects 66,000 individuals, saving $26.8 million in General Fund-State and $21.3 million in other funds.
• Elimination of the Disability Lifeline Grant and Medical programs, saving $43.5 million in GF-S and $22.6 million in federal funds.

Legislators won't take action again on the budget until they come back to Olympia in January for the 2011 session.

Transportation budget: good news*

Compared to the drastic cuts expected in the operating budget, the separate state transportation budget looks great. But in these times of budget challenges, “great” is a relative term, as you'll see below.

While the operating budget dominated media headlines yesterday, the governor also released her proposed 2011-13 transportation and capital budgets at the same time. The good news is that her $5.4 billion in proposed transportation construction spending will create or sustain about 22,000 jobs for an industry that’s been particularly hard hit by the economic downturn. Funding will continue to support major regional projects such as the bored tunnel in downtown Seattle, the SR 520 bridge replacement, I-5 HOV lanes in Tacoma, the North Spokane Corridor and many more.

One especially bright spot is the investment in rail projects. In January, Washington received nearly $600 million from the feds for use on high-speed rail along the I-5 corridor, followed by $31 million in October and $161 million just last week. (More info on rail projects here.)

*But here comes the not-so-good news. Revenue forecasters have adopted a new economic model that should more accurately predict fuel consumption trends, and the first use of this model shows $642 million less in revenue over the next 10 years than previously predicted. The ferry system expects to see significant shortfalls soon, which led to the governor recommending service reductions and delayed boat-building. Additionally, many of the projects made possible by the 2003 and 2005 fuel-tax increases are finished or nearing completion, meaning that construction activity will turn down in the coming years unless a new package of projects (and funding) is approved.

The Legislature will use the governor’s budget and proposed project list as the basis for deliberations this session, before passing a final budget in the spring. Read more about the governor’s proposal here.

Government-streamlining measures introduced by Hudgins helping state save money

A report presented to the House General Government Appropriations Committee this past week demonstrates the impact a simple money-saving idea can have on a state budget still reeling from recession.

In an effort to implement new print management strategies, last year, Zack Hudgins hatched the simple idea: saving money at the State Printer (DOP) by simply reducing the number of envelopes used by state agencies. In total, the state made use of 309 different sizes, shapes, and colors of envelopes to conduct business and communicate with citizens. Thanks to Hudgins’ efforts, that number is now nine.

Along with a few other print management and streamlining processes the DOP estimates the state will save the state $1.5 million this coming biennium.

“This is no time for business as usual in state government,” said Hudgins. “With jobs, health care, and human services all on the chopping block due to the economic downturn, it’s important to scrutinize every tax dollar, where it goes, and if it’s being used most efficiently. This certainly won’t solve all our problems, but this could mean saving some from falling through the cracks.”

“If this $1.5 million saves even a dozen families from losing their state-funded health care, or helps more students reach their goal of higher education, then it’s worth it to me. Our state government can’t and shouldn’t always run like a business, but this is one of those instances when smart business practices make sense.”

Rep. Hudgins has built a legislative career on taking a harder look at streamlining government and ending inefficiencies. He plans to continue this effort into the 2011 legislation session, beginning January 10, 2010.

Passing down the page jacket

As the League of Education Voters recently pointed out, serving as a page in the Legislature is a great learning and life experience.

Reuven Carlyle can attest to that. Serving as a page in the House was the beginning of Carlyle's run with state government. After serving as a page here, he went on to page in the other Washington for some memorable state figures -- Sens. Warren Magnuson and Henry Jackson. Carlyle is appealing to students to apply and get involved:

"Walking on the floor as the House debates important issues, like education funding and graduation requirements, is an experience pages won’t forget. These youth will become our next generation of leaders and lawmakers."

Photo from Carlyle's blog -- reuvencarlyle36.com

Summary of Governor's budget proposal

This morning Governor Gregoire announced her 2011-13 biennial budget proposal. The governor's supplemental proposal will come out later this week and will start many of her proposed 2011-13 reductions early.

The General Fund-State deficit for next biennium (2011-13) is $4.6 billion, or $5.4 billion if you add in the $881 million ending fund balance. Gregoire's proposal makes $3.6 billion in reductions, suspends $1.1 billion in initiative spending and makes about $700 million in transfers from other funds.

Here's a summary of some of the major actions proposed:

Pensions/Compensation/Health Care:

• Eliminating the PERS/TRS 1 uniform COLA ($368 million)
• Cap the state’s contribution to higher education retirement plans ($57 million)
• Close the retire-rehire exemption in higher education
• Caps the state’s contribution for employee health care benefits to $850/month
• A late-breaking agreement with employee organizations (not yet ratified) calls for a 3 percent reduction in compensation, taken through more flexible arrangements than the current furloughs. This translates into about a 5.2 hour reduction/month. About 90 percent of the state workforce will be impacted. ($176 million)

Fund Transfers:

• Use of Rainy Day Account (Budget Stabilization Account) - $290 million
• Suspend GF-S Transfer to Education Construction Account - $204 million
• Extension of Liquor price mark-up - $85 million
• No reversions sent to Education Savings Account - $45 million
• Treasurers Service Account - $20 million

K-12:

• Eliminate K-4 enhancement ($216 million)
• Eliminated Highly Capable ($18.6 million)
• Suspend Initiatives 728 and 732 (the class size and teacher COLA initiatives) ($1.1 billion)
• Suspend annual bonuses for National Board certified teachers ($99.5 million)
• Suspend annual increment salary increases (steps) for teachers ($56.3 million)
• Suspend planned increase of all day K ($57 million)
• Delay implementation of new basic education formulas until the 2013-15 biennium – HB 2776 (about $710 million)

Higher Education:

• Continue 4.2 percent reductions from the current biennium to all higher ed institutions ($102.2 million)
• Reduce State Work Study program ($20.8 million)
• Suspend small scholarship programs ($15.6 million)
• Increase tuition by 11% at UW/WSU/WWU; 10% at community and technical colleges; 9% at other regional universities, and offset state funding with tuition ($344.7 million)

Early Learning:

• Reduce 3-year-old participation and re-direct some of that funding for 4 year olds ($9 million)
• Eliminate the Career and Wage Ladder Program ($3 million)

Health Care:

• Eliminate the Basic Health Plan ($230.2 million)
• Eliminate Disability Life Medical ($147.2 million)
• Eliminate the Children’s Health Program ($59 million)
• Eliminate Medical Interpreter Services ($11 million)
• Eliminate state funding for family planning grants ($9 million)
• Reduce optional Medicaid services such as non-emergency dental and maternity care to high-risk mothers ($48.2 million)
• Reduce grants by 50 percent to community health clinics ($12.8 million)
• Reduce local public health funding by 11 percent ($7.5 million)
• Reduce federal qualified health center funding ($85.1 million)
• Eliminate the Medicare Part D co-payments ($16.4 million)

Human Services:

• Eliminate the Disability Life grants ($180.1 million)
• Eliminate the State Food Assistance Program ($45.6 million – net; $15 million goes to food banks)
• Eliminate the child support pass through ($18.8 million)
• Eliminate state funding for refugee employment services ($10 million)
• Eliminate state funding for naturalization services ($5.6 million)
• Reduce in-home Medicaid personal care hours ($97.5 million)
• Reduce funding for 26,000 clients of community mental health services ($17.4 million)
• Reduce residential and outpatient chemical dependency programs ($14.1 million)
• Suspend mandatory training for home-care workers ($29.1 million)
• Increased fees for licensure of adult family homes, nursing homes, boarding homes, etc. ($15.4 million)

Public Safety:

• Close McNeil Island by April 2011 ($17.6 million)
• Close Maple Lane School by June 30, 2011 ($3.3 million)
• Eliminate Tolling for offenders on community supervision ($6 million)
• Eliminate the Auto Theft Task Force ($3.6 million)
• Reduce staff and programs in the Dept. of Corrections ($51.6 million)
• Reduce parole services for juvenile offenders ($5 million)

Natural Resources:

• Make the Parks and Recreation system self-funding ($47 million)
• Impose cost-recovery fees for water rights, commercial fishing, hydraulic projects, and silviculture burning permits ($11.3 million)
• Reduce funding for agricultural fairs ($3 million)

House Majority Leader Pat Sullivan released a statement saying:

“We will be carefully considering this proposal in the days and weeks to come. But any of the choices we make will have a serious negative impact on the social structure of our state, the education of our children, and the future of our economy. We are out of good options.

Clearly, we will pass a balanced budget before the session ends, just as we always do. And, just as always, it will not look exactly like the one the Governor has proposed today.

How it will differ I clearly can’t say at this point. But it is important to remember that our enemy is the recession, not the people of our state. The steps we take must reflect the kind of state we want Washington to be in the future.”

We're $3.2 million up!

The latest Economic & Revenue Update is out.

According to our state's economists, when you exclude non-economic factors, last month's collections were $3.2 million above what was forecasted. (Counting non-economic factors, we're $24 million up.)

Of course, that's bittersweet news since the forecast from November lowered revenue projections so much legislators had to come in for an emergency budget-cutting special session.

Still, $3.2 million up is better than $3.2 million down. We'll take it.

Want change? You got it. The Governor's multi-billion dollar reform ideas

In the past two days, Governor Gregoire has outlined several major proposals to restructure and rethink some of the services our state provides.

At yesterday's press conference, she outlined major pension and health care reforms that will save tens of billions of dollars over the next 25 years.

By eliminating the automatic pension increases paid to TRS 1 and PERS 1 employees, Gregoire says the state would immediately cut its unfunded liability in half and save $2 billion over the next two biennia. She proposes other changes such as eliminating the no-penalty provision for future new hires and closing the retire-rehire exception for certain retirees in higher education. In total, Gregoire's pension plan would save $11.3 billion over 25 years. (Note: Rep. Reuven Carlyle introduced a bill yesterday that would also address some of the retire-rehire issues in higher ed.)

Her health care proposal aims to save $26 billion over the next ten years by focusing on reducing health care cost inflation to no more than 5 percent per year, paying for Medicaid and other health care services based on outcome instead of number of office visits, and better leveraging the state's purchasing power by consolidating health care purchases into a single agency.

In today's press conference, Gregoire suggested major agency consolidation plans that she says will reduce overhead costs and minimize duplication across agencies. She anticipates savings of about $30 million in the next biennium and a reduction of 125 employees. She wants to:

• Consolidate the state's 11 natural resource agencies into five
• Merge the Departments of General Administration, Personnel, Printing, and portions of the Department of Information Services and the Office of Financial Management merge into a new Department of Enterprise Services (Gregoire alluded to more details in January about other broad changes regarding DIS's IT management)
  
• Consolidate the state’s Human Rights Commission, Office of Minority and Women’s Business Enterprise, Commission on African Affairs, Commission on Hispanic Affairs and Commission on Asian Pacific American Affairs into a single Office of Civil Rights
• Eliminate 36 more boards and commissions (dozens were already eliminated last session)
  
• See whether anything comes of discussions between the Department of Corrections and the Washington Association of Sheriffs and Police Chiefs about short- and long-term strategies to maximize each correctional systems’ (state and local) strengths and integrate certain services
  

The Governor will release her budget proposal tomorrow. Her budget is expected to reflect savings from these proposals.

For more information, you can see yesterday's press conference on the Governor's pension and health care reform ideas here.


Today's press conference is here.