| Budget woes: Olympia's
long knives are out By DAVID AMMONS The Associated Press 10/27/01 2:04 PM OLYMPIA (AP) -- The budget knives are out. After a fat-and-sassy decade of tax cuts, generous budgets and sizable surpluses, Washington state government suddenly faces the grim reality of mounting financial woes that could easily top the billion-dollar mark. Gov. Gary Locke and lawmakers, skittish after a steady drumbeat of successful anti-tax initiatives, are looking at big spending cuts to fill the gap. Everything from health care and parks to education programs and services to the poor will be on the line. Layoffs are inevitable and a salary freeze for public employees may be coming. "We'll patch something together that is horrible and unacceptable and will cause grief to future legislatures ... and then get out of town," says Senate Majority Leader Sid Snyder, D-Long Beach. This week, the largest state agencies submit plans for 15 percent spending cuts. Led by the state's social service agency, the six departments must show ways to slash $577 million. "It'll be quite a shock to a lot of legislators," says Dennis Braddock, a former House leader who now heads the Department of Social and Health Services. "The cupboard is pretty bare," says Maureen Morris, former Locke budget deputy who now is trying to help counties devise bare-bones survival plans to follow if worst-case scenarios come true. After years of expansion, state government leaders are talking in grave tones about retrenching and shedding entire programs. Conservatives see a golden opportunity to shrink government. Liberals are quaking. Locke and the centrists who run Olympia are trying to do the least amount of damage to recipients of state services and to their own political reputations. "We need to really pare back government spending as quickly and as deliberately as possible," the governor said in a recent interview. ------ WHAT HAPPENED? How could a prosperous state with a billion-dollar surplus just a year ago plunge into the tank like this? The short answer: It's the economy, stupid. The longer answer: --Washington lawmakers have been overspending. As of the latest revenue forecast, the state budget now is spending $761 million more than the state expects to receive in taxes. As long as the economy kept perking along, the state's reserve funds were steadily replenished and the budget stayed in balance. That's no longer the case. As Republicans pointed out months ago, the $23 billion state budget that was crafted by the Democrats simply was not sustainable. --The state economy has been cooling for months, a slide that began before the Sept. 11 terrorist attacks. Economists had been predicting a near-recession this year, with a recovery in the next two years. Now they're talking about recession, hoping that it will be brief and shallow. --After Sept. 11, the slump accelerated. Boeing, the state's largest private employer, already was facing the cyclical slowdowns in the airline industry. When air travel slammed to a halt after the suicide hijackings, airlines retrenched. Boeing announced layoffs of up to 30,000 workers, many in Washington state. Counting the loss of spinoff jobs in other companies, the state budget office estimates a total job loss of 45,000, for a loss of $3.5 billion in personal income in this budget period. That translates into a tax loss of $600 million or more. --Washington's tax structure depends heavily on consumer purchases, and the war has hammered consumer confidence and discretionary spending. Tax receipts are expected to drop -- the only question is how much. The state Revenue Forecast Council trimmed the tax forecast by $101 million even before the Sept. 11 impacts were gauged. A new update is due Nov. 20. Added to this are over $300 million in unpaid bills, due to more kids in school and more convicts in prison, the impact of citizen initiatives, the House's decision not to tap pension reserves, forest fire costs, and huge legal judgments against the state. Locke and others peg the total problem at $1 billion. The Senate uses $1.1 billion as its guesstimate; House budget Co-Chairman Barry Sehlin, R-Oak Harbor, says it could hit $1.5 billion. "It's not saber rattling or scare tactics at all," Sehlin says. "It's obviously alarming." ------ THE FIX... Since the Legislature is not in session, the initial response is up to Locke. He has directed agencies to freeze most new hires and cut back on travel, equipment purchases and so on. More significantly, the budget office is preparing budget cuts to submit to the Legislature. This week, six large agencies turn in their plans for 15 percent spending cuts. Most of those cuts would come from DSHS, which provides a wide array of social programs and health benefits to the poor, elderly, children, and the disabled -- 1.3 million clients in all. "It's the Willie Sutton school of bank robbing -- that's where the money is. We have to go there," says state budget Director Marty Brown. The agency is expected to propose service cuts, such as adult dental and vision care, and to make Medicaid available to fewer people. The state has one of the country's most generous programs and cuts will be necessary both to get through the near-term financial crunch and to survive in the 2003-05 budget cycle, Braddock says. The education budget is largely protected, although some of Locke's pet programs could be on the chopping block. Locke also wants to largely shield higher education, which has been ramping up enrollment to meet soaring demand over the next decade. That means social services, the largest unprotected chunk of the budget, will take the brunt of cuts. The governor will use the November revenue update in drafting a budget to send to the Legislature, which convenes Jan. 14. The cuts take effect July 1. "It's going to be extremely tough; we all have our pet programs," Snyder says. ------ INNOVATIONS ... AND TAXES? Locke is asking his cabinet to use a little Yankee ingenuity. Sample ideas: --Cut whole programs, rather than "thinning the soup," as Brown calls it. Locke says as government downsizes, it should concentrate on doing fewer things, well. --Flatten agency organizations so there are fewer managers. --Consider "privatizing" some services -- farming them out to the private sector. --The prison budget could be slashed if drug offenders' sentences were greatly reduced in favor of community treatment. --Revenue-generating plans could include higher tuition increases, day-use fees in the parks, and a variety of fees to cover costs. Some lawmakers are talking about video poker and Powerball. So far, though, the governor isn't talking tax increases. That doesn't mean it won't be on the table, at least for discussion, before it's over. State Sen. Jim Hargrove, D-Hoquiam, is floating the idea of a temporary sales tax surcharge of three-tenths of a percent as a way to compensate for the terrorism-related damage to the economy. No bandwagon, so far. "The last thing families need is to have government increase their tax burden," says House Co-Speaker Clyde Ballard, R-East Wenatchee. "We need government to live within its means, just as families must do during these difficult times." Sen. Don Carlson, R-Vancouver, and others say it will be part of the conversation, but only as a remote possibility. "You have three choices: tax increases, programs cuts, or some combination. There are no other choices," Carlson says. Employee unions, anti-poverty advocates and others hope the tax idea gets traction. "We simply need something to get us over the hump," rather than slashing the state payroll and freezing salaries, says Greg Devereux of the Washington Federation of State Employees. Deep spending cuts are premature, he says. "It behooves us to look at temporary solutions to what we all know is a temporary problem," says poverty activist Tony Lee. "We all know the economy of the Northwest is basically very sound and will rebound. "When we go into a downturn, the need for services increases, not decreases. This is not the time to cut back, but to step up to our responsibility to the elderly, the disabled and the children of this state. "When you talk about cutting a billion, that is very, very scary." ------ David Ammons is the AP's state political writer and has covered the statehouse since 1971. He may be reached at P.O. Box 607, Olympia, WA, 98507, or at dammons(at)ap.org on the Internet. In accordance with Title 17 U.S.C. 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