Facing $2.6 billion shortfall, Gregoire to seek tax increase to balance budget

OLYMPIA — Gov. Chris Gregoire released a state budget today that would gut core services to the poor and suspend programs such as all-day kindergarten as a way to close a projected $2.6 billion budget shortfall.

Major cuts include a sharp reduction in financial aid for college students and eliminating state-subsidized insurance for thousands of low-income workers, as well as aid to people who can't work because of disabilities. The governor is required by law to draft a budget that is balanced using existing revenue.

That doesn't mean Gregoire has to support such a budget. And she made it clear today she plans to dump this proposal and quickly write another one that includes tax increases.

"This document is not true to the values I believe in and which have guided me through a 30-year career in public service," Gregoire said in a letter released by her office. "It is not a budget I can live with, nor is it one I believe Washingtonians can live with."

A second budget is expected to be released by Gregoire in early January. The governor's office, so far, hasn't detailed options for raising more money. However, Democratic leaders in the House and Senate joined the governor recently in calling for new taxes to help close the budget gap.

All this raises a question: Why should anyone pay attention to today's budget?

The governor's office wants lawmakers to read it, see what an all-cuts budget looks like and, presumably, hope it will scare the bejesus out of anyone hesitant to vote for a tax increase.

"Anybody who is going to have to struggle with taking a vote on a tax increase, we've laid out what we think is an honest budget for what a no-new-revenue budget would look like," said Victor Moore, Gregoire's budget director.

Most of the state budget is off-limits to cuts because it's either protected by the state constitution (such as funding for basic education) or by other requirements (such as the state's share of Medicaid, a federal-state insurance program for the poor.)

The cuts outlined in Gregoire's proposed budget are certain to make some lawmakers flinch. It would eviscerate programs that have broad political support and are tough to cut, much less kill.

Her budget would eliminate the Basic Health Plan, a state-subsidized insurance program for the working poor, saving about $161 million over the next fiscal year. About 65,000 people are current enrolled.

Also zeroed out would be the General Assistance-Unemployable (GAU) program, which provides a temporary safety net for people unable to work because of mental or physical disabilities. That would save $207 million.

It would suspend funding for school levy equalization, which provides money to "property-poor" school districts, saving $143 million, and suspend state-subsidized all-day kindergarten, saving another $33.6 million. State-subsidized all-day kindergarten has been offered at a few school districts with the intent of expanding the program.

The budget also would cut $146 million in financial aid for college students and lower the qualifying income threshold from 70 percent of median family income to 50 percent. That means the money would only go to low-income families. The size of the grants would be smaller as well.

All told, the governor's budget would reduce spending by about $1.7 billion. The rest of the $2.6 billion shortfall would be filled by shifting money from certain funds and tapping reserves.

However, Gregoire said she wants to increase taxes to restore money for GAU, the Basic Health Plan, school levy equalization, financial aid for college students and a shortlist of other state services worth about $700 million combined. Gregoire said that, in the end, she expects to purse about $1 billion in cuts.

It's not clear yet which cuts are likely to stick, although Moore cited a proposed $89.5 million cut in funding for colleges and universities as an example.

"That would be tough to restore," Moore said, adding that increasing tuition to backfill the cuts isn't an option.

"They'll just take the cut," he said. "I think you'll see fewer class offerings. I think you'll see bigger class sizes."

The governor also said she's taking administrative action to close all or part of nine institutions to save money. Gregoire said she'd close the Ahtanum View, Larch and Pine Lodge prisons.

In addition a wing at the state prison in Walla Walla will be closed, and the McNeil Island Corrections Center would be downsized from a maximum-security to a minimum-security facility. Those moves and consolidation of inmate beds elsewhere are expected to save $65 million over the next three years.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com