Budget cuts, tax hikes to fix $9.3B Wash. deficit

They're still haggling over the details, but penny-pinching state lawmakers have identified education as a major target for spending cuts in the Legislature's emerging plans to fill a roughly $9 billion budget deficit.

The House, which rolled out its budget plan Tuesday, would dig relatively harder into colleges and universities, while state senators would cut deeper into K-12 programs.

Democratic majorities in both chambers also would skip voter-approved pay raises for teachers, and officials acknowledge that thousands of teachers could be laid off.

The rest of government gets its share of pain as well: The Basic Health Plan would stop growing, hospitals and other providers would get less money to heal the poor, and paroled convicts could be under less scrutiny.

"Nothing was totally spared," said House Ways and Means Chairwoman Kelli Linville, D-Bellingham. "We tried to be surgical about the cuts, but the sheer size of the hole forced us to make very tough decisions."

The estimated $9 billion deficit through mid-2011 is one of the biggest budget holes the Legislature has faced in many years. Now that both chambers have unveiled their draft budgets, top lawmakers begin high-pressure negotiations to find common ground and adjourn by an April 26 deadline.

In the end, voters will almost certainly be asked to raise their own taxes to help avoid the deepest cuts, particularly in education and health care.

An area of relative accord was the massive reliance on one-time money, including $3 billion in federal bailouts, more than $740 million swiped from construction projects, around $400 million each from the Rainy Day Fund and reduced pension costs, and more.

Both chambers also would leave about $850 million in reserves at the end of the 2011 fiscal year as insulation against further economic troubles.

Republican lawmakers quickly accused Democrats of punting their responsibility to deal with even deeper cuts, and giving up an opportunity to fundamentally remake the way government operates.

"We now know where the Enron accountants turned up," said Rep. Doug Ericksen, R-Ferndale. "How do you balance a budget in the future on our kids' backs by borrowing that much money? This has got to be the least innovative and least creative budget that we have seen in a long time."

House Democrats agreed that a heavy reliance on one-time money isn't ideal, but they also said the Legislature couldn't turn the money down.

"Would we say we have to make bigger cuts in education or human services because this is only one-time money? I don't think so," Linville said.

The top difference between House and Senate budget plans is education. House lawmakers generally spent less money on the higher education system, while the Senate leaned more on the K-12 system for spending cuts.

A comparison from Gov. Chris Gregoire's budget office showed the Senate cutting about $877 million from the K-12 budget, after using federal stimulus money to soften the blow. The House, by comparison, pencils out a net cut of about $625 million.

A big chunk of the House budget cuts would come from reducing the state payment under a voter initiative that dedicated money to hire more teachers. Senate budget writers also cut into that pot of money, but went deeper.

In higher education, the Senate cut a net of about $500 million after federal aid was used to backfill steeper cuts. The House cuts about $680 million, but tries to make up some of the difference by allowing colleges and universities to charge higher tuition for in-state undergraduates.

The slice-and-dice approach is clearly a hard one for Democrats to stomach, especially after four years of plumping favorite programs during Gregoire's first term.

Trimming money from higher education was particularly difficult because a flood of people bumped from the recession-hammered work force are expected to seek more training or a college degree, said House education budget chief Kathy Haigh, D-Shelton.

That means college students and professors "will have to be the most resourceful, they will have to do the hardest work to get through these tough times. But I know they can do it," Haigh said.

Other cuts included about $1.5 billion total in health and human services, $107 million in natural resources agencies, and $135 million in various other areas of general government.

The projected deficit of around $9 billion is the difference between how much tax money the state expects to collect over the next two years and how much it would cost to maintain state government's expected growth during that time.

Counting the major influx of federal money, majority Democrats in both chambers are proposing budgets of roughly $35 billion for the 2009-2011 fiscal years. Without the influx of federal dollars, state spending would actually decrease by about $1 billion compared with the current two-year budget, which runs through June.

The prospects for a tax package are clearer now that the Legislature's budgets have emerged from weeks of mostly secret negotiations.

Voter-approved limits on the state's taxing powers require a two-thirds vote for any tax hike, and Democrats can't meet that high bar with their current majorities. That means lawmakers will have to put any plans for raising taxes on the ballot later this year.

A coalition of service unions and health care interests has been leading the discussions on a possible tax package. The rough outlines lean toward a referendum tying higher tax income to specific programs; sales taxes of some sort are a likely source of the money.

The Legislature's budgets won't be based on a tax package succeeding at the polls - if voters say "no," the final budget plans will stand.

"There may be something in education, there may be something in Basic Health, there may be something in long-term care that could possibly go to the voters," Linville said. But "the revenue package is not what we're pinning all of our hopes on."

Some dire consequences of the austere budget plans have already popped up. On Tuesday, a federal judge in Tacoma temporarily blocked the state's plan to reduce the rates paid to pharmacies for Medicaid patients. Pharmacies sued to block the reimbursement rate cut.

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On the Net:

House budget: http://leap.leg.wa.gov/leap/budget/detail/2009/ho0911p.asp