A somber Gregoire signs budget with education cuts

A dejected Gov. Chris Gregoire gave final approval Wednesday to a new state spending plan, bemoaning in particular the sweeping cuts it makes to one of her prized issues: education.

Gregoire said the spending reductions - totaling $4.5 billion over the next two years - were necessary at a time of economic turmoil. But she was not pleased with the results of the last two-year spending plan she will sign before departing office in 2012.

"I undo how many years of my career? I'm going to undo how many of the things I've worked for?" Gregoire said. "I have a very heavy heart today."

Gregoire said she was particularly panged by the impacts on education, which bore the brunt of the reductions. The spending plan reduces salaries for teachers and classified educational staff by 1.9 percent while slashing pay for administrative staff by 3 percent. It suspends programs designed to keep class sizes low.

Higher education will also endure a large share of the cuts. To offset the spending reductions, Gregoire and lawmakers approved double-digit tuition hikes in each of the next two years.

Those increases, combined with ones in previous years, mean tuition at the University of Washington will be twice as expensive when Gregoire departs office than when she began. Rates could still go higher because Gregoire pushed a measure giving institutions the power to set their own rates.

The budget was just one of many key bills that Gregoire approved Wednesday to conclude her work for the legislative session. She also green-lighted an overhaul of the state's workers' compensation system, new limits on the state's debt and a bill that allows Washington to solicit bids for a possible private takeover of the state's liquor-distribution system.

Gregoire faced pressure in recent days to veto parts or all of various proposals.

State Auditor Brian Sonntag had asked her to veto millions of dollars in cuts to performance audits. But Gregoire reluctantly declined, saying she could not pull money away from audit positions at the Department of Revenue or a fraud unit at the Department of Social and Health Services.

"I understand and am sympathetic to his concerns," she said.

Meanwhile, groups in favor of privatizing the liquor-distribution system had actually been pushing for her to veto a bill or key parts of the bill that would consider privatization. They were concerned about a bidding process that would take place at the same time the groups are pushing a ballot initiative that would establish a private system.

Gregoire declined to veto it. She said she could not rule out getting a privatization contract done before the election, although she said it would be difficult.

"It's not political for me at all," Gregoire said. "What it is is doing the due diligence in a thoughtful manner so that we can see what the alternatives might be - but not that any one of the alternatives would be eliminated before the election."

Gregoire did veto many small sections of the budget, including a study that would have examined the feasibility of requiring direct deposit for state employees, a $100,000 plan to create a commission examining whether state agencies were duplicating services, and a variety of other provisions that relied on bills that did not pass.

The budget also includes a 3 percent reduction in pay for state employees - something enforced through unpaid leave. Some retired teachers and state employees will no longer get automatic cost-of-living pension increases.

Gregoire, who came into office in 2005, announced earlier this week that she would not seek a third term in office, saying it was time for her to move on to something else. She said Wednesday the grueling budget process was not a factor in that decision.

Attention now turns to tax revenues in the months to come. Anticipating an ongoing decline in revenues, Gregoire and lawmakers have set aside $738 million in order to bridge the gap between now and next year's legislative session. Gregoire had been pushing for reserves to be closer to $800 million.

The next forecast, one of the most closely watched indicators in Olympia, is due to be released Thursday.

"I know we're going to get a bad forecast tomorrow," Gregoire said. "I don't know what's going to happen in the September forecast."

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Associated Press writer Mike Baker can be reached at http://twitter.com/MikeBakerAP