The key to the Washington state House Democrats' plan to balance the state budget for the next 16 months is to hold off paying $405 million in education money until July 2013 — the next fiscal biennium. And then the Legislature would have figure out how to balance the 2013-2015 budget without that $405 million — a problem to be tackled a year from now.
House Democrats unveiled their proposal Tuesday to deal with a $1.05 billion budget shortfall for the rest of 2011-2013, which ends June 30, 2013. This proposal is designed to spend $30.66 billion in 2011-2013 and have $504 million left in reserve for unexpected expenses. Conventional Olympia wisdom says that reserve should be $1 billion to $1.5 billion, a goal that has been out of reach of the Legislature for quite a while.
When February began, the struggling economy had resulted in the state's revenue being $1.8 billion less than predicted last May when the Legislature adopted the 2011-2013 budget. After some unexpected extra revenue and some unexpected smaller expenses, it was calculated in the past few days that the shortfall is currently $1.05 billion. And roughly 40 percent of that shortfall — $405 million — has been proposed to be solved by bumping paying education bills from May and June of 2013 in fiscal 2011-2013 to July 2013 in fiscal 2013-2015.
Republicans slammed that approach. "It shifts education apportionment money and levy equalization payments into the next biennium, making it the responsibility of future legislatures to deal with, " said Rep. Gary Alexander, R- Olympia and ranking minority member of the House Ways and Means Committee, in a written statment.
Another critic is the Washington State Budget and Policy Center, a Seattle-based think tank, which said in a news release that this move will save money in this biennium but wil cost the state money in 2013-2015. The statement said the House Democats' budget proposals allows "many of the msot egregious cuts in the Gov. (Chris Gregroie's) budget to be avoided. However, this budget relies most heavily on cuts and one-time measures that do nothing to address our long-term stability."
Rep. Ross Hunter, D-Medina and chair of the House Ways and Means Committee, said the accounting maneuver will not overall disrupt state money going to school districts. Hunter said the proposed budget, having gone through multiple drafts since last October, balances a wide range of factors: the drop in revenue; a Washington Supreme Court ruling that declared the state has been illegally underfunding basic education; other lawsuits addressing earlier budget cuts; the need to keep the state health insurance safety net intact until the Feds take over more of the burden in 2014; keeping prisons and pensions intact; and dealing with a constantly shifting eoncomy.
A task force is needed to map out long-term funding of the state's K-12 education system. Hunter said, "We clearly need a strategy to fund McCleary," which is the name of the case in which the Supreme Court ruled education was illegally underfunded.
The League of Education Voters, which had filed a brief in favor of the suit, said the House is "clearly heeding the Supreme Court's ruling that basic education should be protected from further cuts." But the group criticized the Democrats' proposals for more cuts in higher education. In a blog post, the League quoted its CEO Chris Korsmo as saying, “To succeed, our state’s kids need more education, not less. We can’t keep balancing the budget at the expense of higher education.”
The House Democrats have not yet decided whether any tax increases should be tackled to put that budget proposal into play, although such a hike is not laid out in the budget numbers. Last November, Gregoire proposed a five-year, half-penny sales tax increase to be taken to voters to help pay for education. While Democrat leaders have not completely ruled out Gregoire's proposal, they have voiced little enthusiasm that it should be attempted.
Meanwhile, the House Democrat budget proposal calls for the state to send $81.6 million less to county and city governments, while also giving those governments the ability to raise their own taxes more. "Local governments have punted responsibilities up to the state . ... We can't afford to do that any more," Hunter said.
The House Democrats expect to introduce bills that would allow counties with populations greater than 250,000 to install an extra 0.1 percent sales tax, while the smaller counties could install extra sales taxes of up to 0.2 percent.
Also,local governments would be allowed to install restaurant taxes of up to 0.5 percent, if the Legislature approves such a bill. The Washington Restaurant Association opposes such a tax. And counties would be able to impose a utility tax of up to 6 percent, if such a bill passes. The Association of Washington Business opposes the entire local tax authority legislative package. King County's government supports the local tax authority package, although it is undecided on whether the cuts are justified.
Alexander criticized this local-taxation approach as well. "It makes severe reductions to local governments, but then allows local governments to raise taxes to buy back those cuts. It looks a little like they're trying to do an end run around the two-thirds vote requirement (in the Legislature) for raising taxes at the state level," Alexander said.
The Senate Democrats are expected to unveil their proposed budget early next week.
Some other major planks of the House Democrats' plan to financially survive this biennium include:
- $222.4 million in health care and human services cuts. The biggest reductions would be in programs for temporary assistance for needy families., mental health, developmental disabilities, public health, and alcohol and drug abuse.
- $65 million in higher education cuts.
- $39 million in cuts for natural resources programs.