New economic reality prompts new budgeting process

This morning Governor Gregoire rolled out a new approach for "Transforming Washington's Budget."

The 20-page plan is worth checking out as it lays out a more detailed set of questions that agencies will have to answer if they want funding for the services and programs they currently provide. The questions are grouped into the areas of efficiency, performance and fiscal responsibility.

Niki Reading from TVW was there for the Governor's press conference. She reports the Governor's new approach is prompted by the slow economic recovery and its anticipated long-term impact on our budget, starting with a projected $3 billion shortfall for the 2011-13 budget. In Gregoire's opening remarks she said:

"We are seeing hopeful signs in our economic recovery but quite frankly, we are also seeing that things are not going to get back to the way they were anytime soon.”

The plan lays out some major reform ideas to be considered including the privatization of our state ferry system and moving more people with developmental disabilities from state-operated residential centers to home- and community-based settings.

The Governor has created a committee to provide input on these and other budget ideas. A cross-section of right- and left-leaning economists are on the roster, as well as chief budget writers from all four legislative caucus including House Ways & Means Chair Kelli Linville.

The Governor's budget office also plans to engage the public with a series of budget hearings across the state. The first is in Tacoma on July 19. Additional dates and locations will be announced soon.

Gregoire made an important point that this is not the first stab at major budget reforms, but it is a continuation of re-assessing how we "invest scarce dollars among so many competing demands." The 20-page plan includes numerous examples of spending reforms and efficiencies put in place during the previous legislative session including transferring certain state parks to local governments, cutting back on health care coverage for low-income families and consolidating correctional institutions.

Linville: reforms underway, more needed

State government needs to realign itself with today’s new economic reality—that’s the message Rep. Kelli Linville (Bellingham) delivered in an op-ed over the weekend to the Bellingham Herald.

The Ways & Means Committee leader notes that reform is actually an ongoing practice in the budget process, although it rarely grabs the headlines. Reforms in recent years for long-term care, childhood vaccine purchasing, business permitting, and the juvenile justice system have sought to wring more value from taxpayer dollars.

That being said, the severity of today’s worldwide economic crisis means reforms must go even further, Linville says. “The Legislature's top priority now is realigning government with today's new economic reality so that it works better for the people we represent,” she writes.

To that end, the Ways & Means Committee is engaged in a substantive reform effort this legislative interim. As we mentioned earlier today, the committee is meeting to discuss reform efforts on education, health care, performance-based contracting, information technology and more. In May, the committee held two reform work sessions (agenda one, agenda two) open to all members of the House, where budget and audit experts presented potential reform methods, and legislators discussed their own reform ideas.

Interested in receiving notice of meeting dates and agendas? Sign up for the committee’s email list here.

State, local budgets to take hits because of … Canada?

Canadian visitors shopping for Washington souvenirs will soon find them costing less as of July 1. In fact, nearly every retail item will be cheaper for them.

Our northern neighbor British Columbia (and also Ontario) is set to change methods of taxing, and in doing so has made residents eligible for sales-tax exemptions when visiting Washington state. The provinces are ditching their provincial sales tax in favor of a harmonized value-added tax, in conjunction with the Canadian federal government.

Washington state law allows tax exemptions for residents of states and provinces where the sales tax rate is three percent or less. Since the new Canadian taxing structure isn’t technically a sales tax anymore, BC will join our southern neighbors in Oregon as being tax-exempt here.

This could be a boon for northern Washington retailers that might see an influx of Canadian shoppers, but it will certainly hamper the budgets of local governments and the state. Officials learned of this news on Tuesday afternoon, just a few weeks before the new tax is set to take effect, catching them by surprise. The City of Bellingham, for example, could see anywhere from a $400,000 to $1 million budget hit each year. Canadian visitors will continue using local infrastructure but their tax revenue will now be gone, essentially forcing local jurisdictions to do more with less. The impact to the state's revenue is unclear at this point.

For more, check out coverage on both sides of the border, at the Bellingham Herald and Vancouver Sun. See Bellingham Rep. Kelli Linville’s thoughts on the matter here. You might also recall efforts last year to end the out-of-state tax exemption—more on that here.

(Photo by Jessica Rabbit @ flickr)

Ways & Means meeting today

Today is the sequel to last week's House Ways & Means meeting as the members continue discussions about how to make our state government more effective and efficient.

It's not really a new conversation, and Washington is already a noted leader in "results-based governance." But the recession and its $12 billion impact on our state budget has put new life and urgency into finding ways to cut costs and streamline operations.

After trying to rebalance our 2009-11 budget in a short 60-day session, and anticipating continued economic fallout in next year's 2011 session, Rep. Kelli Linville, chair of the Ways & Means Committee, is devoting the interim to finding smart reforms and gathering ideas from legislators.

You can tune in to today's meeting at 1:30 on TVW.

Rolling out the budgets

Budget day in the House started off with a 12:15 press conference on the 2010 supplemental operating budget.

In dealing with a $2.7 billion budget gap for the remaining half of the 2009-2011 biennium, the House proposal outlines $465 million in fund transfers including use of the Rainy Day Fund, $1.25 billion in reductions, and $857 million in anticipated new revenue.

Additional details can be found here, here and here.

A revenue package is expected to come out later this week.

Coming up later: the proposed supplemental Capital and Transportation budgets. Stay tuned...!

Newest revenue forecast signals we should be on our way up soon

Earlier today the Economic and Revenue Forecast Council presented the latest state revenue forecast. These forecasts give legislators a sense of how much revenue the state is bringing in and is critical to helping craft the state budget. The Council presents a forecast every few months.

This forecast has two components: the final numbers for the 2007-09 biennium, which ended on June 30 and changes to the 2009-11 biennium, which we are now in. Together, for both biennia, we're down an estimated $238 million from what we expected in revenue.

Dr. Arun Raha, the director of the council, pointed out it seems likely the recession has ended, though recovery will be slow and unemployment will remain high for some time.

Washington is expected to outperform the nation in the recovery, and national and state experts agree that Washington is poised to be one of the five states to lead the economy back up.

Legislators will be back in Olympia in January and, as usually is done in even-numbered years, will draft a supplemental operating budget. The 2010 supplemental budget will have to address the revenue situation, as well as caseload increases, etc.

At this morning’s meeting, Victor Moore, director of the Office of Financial Management, estimated that by January we'll face a $500 million to $1 billion budget problem.

You can watch Rep. Ross Hunter and Marty Brown talk about the upcoming budget challenges on last night's The Impact. Hunter sits on the revenue council and is chair of the House Finance Committee. Brown is the policy director for Governor Chris Gregoire.

Tonight, TVW will air an interview with Rep. Kelli Linville who chairs the House Appropriations Committee. Also interviewed will be Victor Moore.

House budget proposal balanced, but cuts deep

As she released her 2009-2011 Operating Budget proposal today, House Ways and Means Chair Kelli Linville said her committee members “rose to the challenge presented by this global recession.”

“This is not the budget we’d all hoped to offer today,” said Linville. “However it reflects the reality of the economic situation we’re in today.”

“We worked to cushion the blow to our families and businesses,” she said. “We fully-fund Apple Health for kids, protect the safety net for our most vulnerable citizens, and prioritize basic education.”




“We have a great partner in the White House,” said Rep. Mark Ericks, vice-chair of Ways and Means. “The federal recovery dollars sent by President Obama allowed us to protect investments in education and health care we wouldn’t have been able to otherwise. Yes, they are one-time dollars, but they allowed us to buy some time for the kids in our state while our economy recovers.”

For the full story, click here. Additional info here and here.

Budgets, budgets, budgets

It's the week people have been waiting for. The budget proposals everyone has anxiously been looking for are being printed and readied for prime time.

Rep. Judy Clibborn, chair of the House Transportation Committee, will roll out the House 2009-2011 transportation budget proposal today at noon. The budget will then be heard in her committee today at 3:30.

(Her rollout follows today's 10:30 rollout of the Senate's operating budget proposal.)

Rep. Kelli Linville, chair of the House Ways & Means Committee, plans to rollout the House operating budget proposal tomorrow at 10.

Rep. Hans Dunshee, chair of the House Capital Budget Committee, will have our capital budget proposal out on Wednesday afternoon.

House budgets coming next week

With four weeks left in the session, it's time for the 2009-2011 budgets to be released. The House transportation budget will be unveiled by Chair Judy Clibborn next Monday at noon in House Hearing Room A, followed by the operating budget on Tuesday. Ways and Means Chair Kelli Linville will roll out that proposal at 10:00 a.m., also in HHR A.

Details are still sketchy, but given the dismal economic situation our nation is suffering, nobody is expected to be very pleased with the budget plans.

House passes further belt-tightening measures

Responding to the economic crisis facing the state and nation, the House just passed SB 5460, further reducing government spending for the remainder of the fiscal year that runs through June.

The mostly administrative spending cuts cover everything from a freeze on management-level salaries and hiring, to some equipment purchases and travel. The savings are estimated at $6.7 million in state funding.

"This bill is about balancing the budget. And it leads the way by cutting ourselves first," said Chair of the House Ways and Means Committee, Rep. Kelli Linville. "Every bit helps as we try to fight our way out of this global financial crisis."