THE BIG PICTURE
House, Senate budgets make cuts to resolve deficit
House and Senate Democrats unveiled their operating, transportation and capital budgets this week in light of a $9 billion state shortfall. Both plans would spend and cut roughly the same amount of money. Both rely largely on federal stimulus money. But the plans differ in how cuts are made. In addition, the budgets do not minimize the effects of carrying forward programs into the next biennium. Without this step of creating long-term budget sustainability, Washington could be facing a similar budget problem in two years.

While neither budget is perfect from AWB’s viewpoint, budget writers do deserve credit for not raising broad-based taxes and attempting to live within our means as a state. AWB’s lead on taxation and budget issues is Amber Carter.


SENATE OPERATING BUDGET
Senate budget plan would cut $3.8 billion
Senate Democrats released their proposed operating budget on Monday, cutting $3.85 billion. This includes $1.3 billion alone in cuts to education ($877 million for K-12 and $513 million for higher education) and $785 million to health care. The Senate suspends the voter-approved teacher COLA raises initiative, I-732, and reduces the class-size initiative, I-728, by 93 percent. The proposal would also result in the layoffs of 7,000 to 8,000 public sector jobs and close facilities like McNeil Island Prison, Green Hill Juvenile Detention Center and the Yakima Valley School for the Developmentally Disabled due to their high operating costs. All told, the cuts, along with $3 billion in federal stimulus money, state reserves and some budget reductions made earlier this year by lawmakers, would fill the $9 billion budget hole. The budget leaves $854 million in savings. Of this, $250 million is in the rainy day fund. This ensures a fiscally adequate state emergency reserve fund for future emergencies.

However, while AWB applauds the Senate’s willingness to create a budget that lives within its means, certain aspects of this budget are of concern. While there are no broad based taxes, the budget does raise costs on some employers, as in the case of the removal of a discount on sellers of wine and spirits. In addition, the budget diverts money from the workers’ compensation trust fund and spends $467,000 on apprenticeship utilization quotas/mandates, opposed by employers as a means to boost union membership with taxpayer money.


Tsunami-size bow-wave if budget passes with funding for Medicare waiver
The Senate budget provides funding for the development of a Medicaid waiver that expands eligibility for Medicaid to all individuals below 200 percent of the federal poverty level as directed in ESSB 5945, sponsored by Sen. Karen Keiser, D-Des Moines.The waiver also eliminates the Basic Health Plan, collapsing it into the new Medicaid program.The approval of the waiver will mean a significant expansion to the state Medicaid program.The bow-wave effect from this action alone could be several billion dollars in new funding requirements for our budget beginning in 2011. For more information, contact AWB’s Donna Steward. 

View the Senate press conference on its budget here.


HOUSE OPERATING BUDGET
House budget would cut nearly $4 billion
On Tuesday, House Democrats unveiled their $32.2 billion operating budget. The budget includes no new taxes, but would cut nearly $4 billion in spending during the next 27 months, including $625 million in cuts to K-12, $683 million to higher education and $814 million in health care. In K-12, the House also suspends the COLA for teachers under I-732 but only suspends half of the class size measure (I-728). The House plan also assumes higher increases in college tuition than there would be in the Senate's plan. The budget leaves $852 million in savings with $250 million that is restricted rainy day money.

As with the Senate’s budget, the House plan is tough medicine for the state’s fiscal ills. The House budget lives within its means, does not raise taxes, does not hurt the recovery by hitting business with new costs. A significant plus is the fact that, unlike the Senate budget, the House plan does not resort to raiding the workers’ compensation trust fund nor does it divert money to boost union membership.


AWB opposes backdoor attempt to increase OIC’s authority over Association Health Plans
On the downside, unlike the Senate plan, the House budget funds a small group market/association health plan study by the Office of the Insurance Commissioner that gives OIC the ability to write rules concerning the gathering of association health plan data.This new authority would cover association health plans such as HealthChoice.It allows the OIC to write rules addressing data collection based solely on a $150,000 budget item. Legislation expanding OIC’s desired authority died at cutoff and this is a backdoor attempt to do the same thing. For more information, contact Donna Steward. This version was corrected at 9:00 a.m. on April 3.

View the House press conference on its budget here.


TRANSPORTATION AND CAPITAL BUDGETS
Transportation budgets released by Senate and House
The Senate’s $4.3 billion and the House’s $4.9 billion transportation budgets face the challenge of bringing to fruition approximately 400 projects set to move through with Transportation Partnership Program and the Nickel Funding Package at a time when gas tax revenues are in decline. In addition, the budgets provide partial funding for some high profile mega projects, including the 520 Bridge and Alaskan Way Viaduct. Tolling is eyed as the likely way to fund the difference on these projects. Additionally, transportation money from the federal stimulus package will also go to funding transportation projects that needed to be started quickly in order to avoid losing the funds. Both budgets emphasize project delivery and the importance of job creation. View the Senate’s transportation budget here and the House’s transportation budget here.


Senate and House unveil capital budgets to fund state infrastructure
The House and Senate both released capital budgets to fund building projects throughout the state, including parks, schools and infrastructure. AWB has serious concerns that the House’s budget shifted the balances of a number of capital budget accounts, totaling $780 million, to the state operating budget. This is contrary to usual practice of keeping this money strictly for capital projects. Read the Senate’s capital budget here and the House’s capital budget here.


MORE BUDGET NEWS
Senate Democrats introduce income tax bill
On Wednesday, Senate Democrats introduced a bill that would impose a 1 percent income tax on people making $500,000 or more a year. The proposal, sponsored by Sen. Jeanne Kohl-Welles, D-Seattle, would apply a 1 percent tax on income for single people with incomes of more than $500,000, more than $750,000 for a head of household, and more than $1 million for married couples. Under voter-approved Initiative 960, any taxes must be approved by two-thirds of the Legislature or go before voters.


Paid Family Leave remains unresolved
While the Legislature is moving in a fiscally responsible way to address the budget shortfall, there is still significant business that remains undone. If these issues remain unaddressed, they can easily come back to bite the state financially in the future. First, despite the fact that Paid Family Leave is suspended by both budgets, the law that authorizes this program remains on the books because the Legislature has not enacted legislation to kill the program once and for all, as AWB has consistently urged. No bill has been passed to formally suspend Paid Family Leave, which may lead to costly litigation because the state is not delivering a program it is legally bound to provide.


WHAT’S NEXT?
Over the next few weeks, the Senate and House will resolve the differences in their plans and release a single budget, which must be approved by both houses of the Legislature. The possibility exists that a ballot measure may be submitted to Washington’s voters for funding some of cuts, especially in education, through tax increases.


WHAT OTHERS ARE SAYING
“While we disagree with some of their decisions, we can’t blame the budget writers who were forced to distribute billions of dollars worth of pain across the state. No Legislature, probably, has been dealt a worse hand since the Great Depression. Let’s hope the 2010 Legislature isn’t dealt a worse hand yet.” – Staff editorial, The (Tacoma) News-Tribune

“A lot of these legislators are having to wipe out 10 years of their life's work here in the Legislature in a single session.” – Sen. Rodney Tom, D-Medina, March 30 

“Both the House and Senate budgets have many moving parts, but the Senate did a better job in overall funding for higher education, cutting $351 million after adding money from proposed tuition hikes. The House's net cut, after a larger tuition spike of 10 and 7 percent annually, for four-year and two-year colleges respectively, is $453 million.” – Staff editorial, The Seattle Times, March 31

"We're settling for the easy way out if we just focus on the reductions being made and not on the opportunity we have to make state government more accountable, more efficient and more responsible to the people.” – Rep. Gary Alexander, R-Olympia, March 31 


RESOURCES
Budget 101
Washington’s budget is comprised of three spending components: The Omnibus Operating Budget pays for the state’s day-to-day operations; the Transportation Budget pays for transportation activities such as designing and maintaining state highways and public transit; and the Omnibus Capital Budget pays for acquisition and maintenance of state buildings, public schools, parks and other real property. To learn more about state budgets, visit http://www.fiscal.wa.gov/.


House, Senate and Governor 2009-11 budget overviews
Read more about the 2009-11 operating, transportation and capital budgets here:

· Senate operating, transportation and capital
· House operating, transportation and capital
· Gov. Gregoire’s proposed operating, transportation and capital plans


CONTACT YOUR LEGISLATORS
Get informed about the budget process. Then, contact your legislators and let them know that you support a budget that is sustainable and that does not raise taxes. Urge them to get our state’s fiscal house in order so we will not have to face the same kind of budget shortfall again in two years.