Gregoire presses for health-care action

OLYMPIA — The uncertain future of the federal health-care overhaul has wrinkled Washington state's hopes of landing a $1 billion bailout to fix its budget deficit this year, Gov. Chris Gregoire said Monday.

That change could bring stronger momentum for tax increases and budget cuts at the Legislature, now a quarter of the way through its scheduled eight-week session.

Falling tax collections and rapidly rising costs mean the state's operating budget is expected to be short by about $2.6 billion through June 2011, the end of the current two-year fiscal period.

A sizable federal bailout would in effect shrink the deficit, making the eventual combination of spending cuts and higher taxes more politically palatable.

Gregoire, a Democrat, has been hoping for roughly $1 billion from the federal government through three different pipelines.

Two of those sources, however, were tied to the health-care overhauls being debated in Congress — an effort that has stalled after Massachusetts Republican Scott Brown's election to the Senate last week.

Monday, Gregoire and other leading Washington Democrats urged Congress to move ahead on health care despite the result in Massachusetts.

In addition to the Democrats' overarching reasons for supporting the overhaul, — lower costs, broader coverage, better results — Gregoire said national leaders must remember that states are banking on more federal aid to make it through this recession-hobbled budget cycle.

"My concern is not that we won't get it," Gregoire said. "But will we get it in time for the budget? That's where my concern lies."

"This has direct bearing on our current budget," said state Sen. Karen Keiser, D-Kent.

Gregoire's proposed solution for patching the deficit would cut about $1 billion from state spending, while keeping some $780 million in services afloat with unspecified revenue.

The balance would be filled with fund transfers and other one-time fixes.

The Democrat-led Legislature is developing its own plan for bridging the deficit but will wait until February's update on tax collections and service costs before entering the homestretch of negotiations.

Gregoire has a list of tax hikes at the ready, which she likely will unveil after those reports.

But the governor also has said that each dollar of federal budget aid is a dollar of tax increases she won't have to propose.

The roughly $1 billion in expected federal aid is broken into three components.

Gregoire has said the state could get about $450 million in additional federal spending on its share of the Medicaid program, which is jointly bankrolled by the state and federal governments.

She also has been working with U.S. Sen. Maria Cantwell to get federal money for two expensive state health-care programs: The Basic Health Plan, intended as low-cost insurance for working people, and a welfare program called General Assistance, which covers medical care for disabled people who can't work.

Gregoire has said the Basic Health subsidy could be worth about $150 million, with the price tag for General Assistance less certain.

Those are the possible sources of federal money that have been tied to national health-care changes.

A third conduit could be a second round of "fiscal stabilization" money, similar to dollars included in last year's stimulus bill.

This would be primarily targeted at education spending, Gregoire said, and could be upward of $400 million.