In Olympia, it's a whole new agenda

It’s week two of the Washington legislative session. What a difference a year can make. Vanished are the days when the story in Olympia was all about new Democratic programs — like paid family leave — and multi-billion dollar surpluses. Now the dominant focus is the state’s ailing economy and looming budget shortfall.

In the first week, I heard two points made repeatedly. Many Democratic lawmakers are still in denial about the scope of the state’s budget problem. And Gov. Chris Gregoire is acting and sounding like a Republican, because of her no-new-taxes pledge and proposed deep cuts to social services.

Majority Democrats in the Legislature are scrambling to figure out what cuts the Governor and state agencies have been making in recent months to keep the current $34 billion two-year budget in balance. There’ve been some ugly surprises — like the news last week that the state was about to lose nearly half of its drug treatment beds for the poor and that detox centers were at risk of closing. Those cuts were quickly reversed by the Department of Social and Health Services after lawmakers, counties, and treatment providers raised cane.

The first order of business for Democrats is to pass a series of belt-tightening measures by the end of January or early February. Think of this as an update or correction to the current budget, a way to adjust for plummeting revenues and ensure the state stays in the black. Lawmakers will likely have to pass more adjustments later in the session after the March revenue forecast comes out. Democrats also plan to move swiftly on a series of state-level economic stimulus proposals, including the Governor’s plan to fast-track some road and school construction projects.

Once the current operating budget is rebalanced, attention will shift to the next two-year budget, the one that applies to 2009-11. Washington is facing a nearly $6 billion dollar shortfall in the next biennium and some lawmakers are saying that could grow to $7.5 billion. Democrats call it a crisis, and Republicans have termed it a “challenge.”

It’s important to understand where that $6 billion figure comes from. Note that state revenues are still expected to grow about 5 percent in the coming two years,so it's not that we won't have slightly more money to spend. The problem is state expenses (some a simple function of population increases and inflation) are growing much faster than anticipated revenues — thus the budget hole.

Republicans say Democratic over-spending in the past couple of years is responsible for at least 60 percent of the problem. The remaining 40 percent, they say, is due to the faltering economy. Democrats, including the Governor, take umbrage at this and pin the entire problem on Bush and the national economy.

Issues of blame aside, the question is how to solve the challenge/crisis. Democrats are clearly counting on something of a bailout from Congress and the Obama administration. Newly elected House budget chair Kelli Linville, D-Bellingham, tells me she expects the state will get about $1.2 billion from the feds to help balance the budget. It’s my understanding this money would be separate from any stimulus dollars the state might get for road and capital improvement projects.

Cleary $1.2 billion in federal money would hardly put a dent in the shortfall. So cuts to programs and services — especially higher education and social services — will be a key part of the equation, as they usually are in downturns. The big, unanswered question is whether Democrats will also pass a package of tax hikes and put it on the ballot for voters to approve. Even though Democrats don’t want to talk about that possibility yet, it’s clear that’s where things are headed. Despite the Governor’s pledge not to raise taxes, Democratic lawmakers are definitely hinting that taxes will be a part of the final budget.

On a related note, watch this week for newly elected Superintendent of Public Instruction Randy Dorn to announce his plan to replace the Washington Assessment of Student Learning (WASL) for 2010. Two key questions: Will lawmakers go along with his proposal and can the state afford to create a new test, even one that is cheaper to administer than the WASL?