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New budget outlook shows state $492M short by mid-2015

Post by Brad Shannon / The Olympian on Aug. 6, 2012 at 1:53 pm |
August 6, 2012 2:29 pm

Gov. Chris Gregoire’s budget office put out a preliminary budget outlook today that shows state government’s general fund accounts are going to be $492 million short by June 30, 2015. That assumes a $1.5 billion in increase in revenues in the next biennium and also assumes higher costs.

On the cost side, the big outlays include ending temporary pay cuts for state employees ($171 million) and K-12 school teachers ($166 million), cost-of-living raises for school employees under Initiative 732 ($292 million), large increases in pension contributions recommended by the state actuary ($366 million), and growth in medical assistance programs that is based on past trends ($280 million).

The shortfall would be worse – $1.04 billion – if the state did not empty its rainy-day fund, also known as the Budget Stabilization Account.

See the two-page document here. The results cast a bit of doubt on Republican gubernatorial candidate Rob McKenna’s claims last week that he can not only balance books but also put $1.7 billion more into K-12 schools and higher education by 2015 without raising taxes. Democratic Party nominee Jay Inslee has also made claims he can increase school funding without tax hikes.

Gregoire disputes that it can be done, and the outlook from the governor’s Office of Financial Management shows deficits – even without adding funds to answer the state Supreme Court’s ruling this year that said the state was not meeting its constitutional duty to amply fund basic education.

The budget outlook shows that the cost to fund a K-12 school funding reform bill passed a few years ago would total $1.05 billion – on top of the deficit already calculated.

OFM has always done outlooks, but today’s is a preliminary read on what will become a more formal outlook required by new legislation this year.

Democratic Sen. Jim Kastama’s successful legislation this year - Senate Bill 6636 - requires that budgets approved by lawmakers be balanced and also that the carry-forward costs in the next budget cycle be balanced with identifiable revenues in that next biennium. Details about Kastama’s bill are here.

OFM has been working on a formal outlook due in November almost since Kastama’s bill was passed, and state budget director Marty Brown said two weeks ago a preliminary update was in the works – well before McKenna outlined his budget plans.

Brown noted today that one big obligation has been taken off the table in the new outlook – the cost of class-size improvements under the mandate of Initiative 728. Lawmakers repealed that requirement this year.

A six-year outlook I found from 2010 assumed the state’s cost for I-728 would be $1 billion in 2013-15. But even without that, the state still runs short if current spending plans are kept intact.

OFM’s new preliminary outlook assumes revenue growth of 4.5 percent into the second biennium that begins July 1, 2015, and ends June 30, 2017. It also assumes medical inflation of 4.32 percent a year, which McKenna says he wants to reduce and that Gregoire has been reducing for some programs.

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