Talking about a $2 billion deficit in Washington can seem unreal -- it's a number almost too big for the average person to imagine, but one that might have very real consequences for thousands of Tri-Citians.
And it's the number that will be the focus of lawmakers' discussion and debate as the Legislature convenes in a 30-day special session Monday to tackle that deficit before it ordinarily would meet to write a supplemental budget starting in January.
The actual shortfall between projected revenue and the biennial budget as written is about $1.4 billion, but Gov. Chris Gregoire is asking lawmakers to cut enough to leave $600 million in reserves.
A budget proposal released last Monday by Gregoire suggested cutting more than $500 million from K-12 and higher education, including reducing the K-12 school year by four days; cutting more than $690 million from health and human services, including eliminating Basic Health Plan coverage for 35,000 people; and cutting off state-funded food stamps for low-income people, among myriad other cuts.
Gregoire's proposal would reduce expenditures in the 2011-13 budget from the $31.7 billion adopted by the Legislature earlier this year to about $30 billion.
State budgets are based in part on predictions adopted by the state's Economic & Revenue Forecast Council. The council is made up of four lawmakers, with representatives from both parties, and two members appointed by the governor.
Four times a year, the council hears a presentation from the state economist attempting to predict the path state revenues may take. The economist typically presents three scenarios -- an official "most likely" scenario and unofficial optimistic and pessimistic scenarios.
Since November 2008, the forecasts have been fraught with uncertainty because of flagging consumer confidence; crises in the housing, auto and job markets; a curtailing of consumer and commercial lending by banks; and the influence of national and international events such as the federal debt ceiling debate, and most recently, the economic turmoil in Europe.
In almost every quarter since November 2008, state revenues have dropped in comparison to the previous quarter's projections. The result has been multibillion-dollar gaps between the money required to pay for all of the policies on the books and the amount of money coming in.
By law, Gregoire must offer a balanced budget within projected revenues and can't budget for new or higher taxes, but she is asking the Legislature to consider sending a 0.5 percent sales tax increase to voters in March that would raise the state's sales tax from 6.5 cents to 7 cents per dollar spent.
After county and local sales taxes are added, that would bring the sales tax in Benton County to 8.8 cents per dollar, and in Franklin County to 9.1 cents per dollar when the recently passed 0.3 percent jail tax is added.
The increased state portion of the sales tax would last for three years, and raise about $500 million in the first year. Gregoire is suggesting this to "buy back" cuts to education, corrections and services for seniors and people with developmental disabilities.
"I never thought we'd still be doing this -- still cutting the fabric of Washington three years after the start of the Great Recession," Gregoire said when she unveiled her budget. "Once again, I am presenting an all-cuts supplemental proposal to carve another huge portion from the budget -- a budget we've already cut by $10.5 billion in the past three years. Our state government is smaller, leaner and sadly, meaner to Washingtonians who depend on services that the private sector does not provide."
Democratic leaders in the Legislature expressed support for Gregoire's revenue proposal.
"I am very heartened that she included a revenue package in her proposal," said House Speaker Frank Chopp, D-Seattle. "The service reductions and program eliminations that will result from cutting $2 billion more in the current biennium will be devastating for people in communities all over the state. We owe it to our school children, to our citizens with disabilities, and, frankly, to the future of our state to have a discussion about alternatives."
Senate Majority Leader Lisa Brown, D-Spokane, said while she didn't agree with every choice Gregoire made, an all-cuts budget would devastate education, higher education and health and human services.
"I think she gave the public a clear picture of what an all-cuts budget looks like and some alternatives to avoid it," Brown told the Herald.
While it would take a two-thirds majority of the Legislature to enact a tax themselves, sending a tax measure to the ballot requires only a simple majority of lawmakers -- and a simple majority of voters to pass.
Brown said enough votes exist in the Legislature to send the sales tax proposal to the ballot.
"I know many members of my caucus would not feel comfortable just doing all cuts and not at least having a dialogue with the public about trying to avoid some of them," she said.
From there, proponents may have an uphill battle convincing voters -- who in 2010 affirmed the two-thirds majority requirement for the Legislature to raise taxes, and voted down a sales tax increase on soda and candy.
Republican leaders say there is another way to deal with the budget than a general tax increase.
"We've been pretty clear that's not where we intend to go," said Senate Minority Leader Mike Hewitt, R-Walla Walla. "We intend to continue to look for reforms and under every little rock we can find."
Brown said she supports looking for additional reforms and efficiencies in the way state government operates, but believes the sales tax option still needs to be on the table.
"If there are new ideas that aren't on the table yet, let's hear what they are," she said. "It is going to take some pretty big ideas to make the kind of money we're talking about here. Even a great idea that saves us half a million dollars -- let's take it -- but that's only a tiny fraction of the problem we have."
Hewitt acknowledged that lawmakers are unlikely to find $2 billion in efficiencies and reforms.
"That's a lot of rocks to turn," he told the Herald. "We probably can't get there. We are open to alternative revenue."
Republicans' idea of alternative revenue isn't taxes, but rather policy changes such as adopting a lawsuit reform bill allowing joint and several liability -- basically the idea that parties found negligent in a lawsuit only pay damages proportional to their own responsibility instead of equal shares. Hewitt suggested that could save the state about $100 million in money spent on lawsuits.
Republicans also will look at allowing slot machines in card rooms or restaurants -- similar to the scheme in Oregon -- to bring in another $480 million.
The state already allows some gambling outside of tribal casinos, and this would just allow another option to places where gambling already is offered, Hewitt said.
"It would be an economic driver -- creating new jobs and putting money back into the economy," he said.
While his seatmate Rep. Maureen Walsh, R-Walla Walla, recently said she is willing to consider a sales tax if Democrats will adopt some policies Republicans deem important, Hewitt said he isn't willing to go there.
"We differ," he said. "I don't disagree with her that some of these services have to be funded."
But Hewitt said the state should start by looking at programs that are on the budget books creating liabilities without actually being funded and strike those from the books if the Legislature isn't going to pay for them.
He said some of those policies were enacted when the state was flush with cash, and Republicans warned at the time they couldn't be funded forever.
Hewitt has become famous in Olympia for pulling a card out of his wallet every time he talks about the state budget showing that Republicans -- back in 2007 -- warned of a spending tsunami that threatened to put the state under water if the Legislature didn't change its ways.
Hewitt said Republicans predicted a coming budget deficit before the stock market crashed and the Great Recession hit in late 2008, and while he acknowledges the recession is to blame for some of the state's current budget problem, he also believes some of it could have been avoided.
"It's easy to do when we have a lot of revenue coming through the door -- it's easy to pass a policy that goes on forever," he said. "We kept saying we shouldn't be on this spending spree because it's going to cost us and bite us in the end. ... Is all this mess created by overspending? No. But it could be negated. I don't disagree with a lot of that policy, quite frankly. But if we don't have the cash to support it, we shouldn't do it."
Brown disputed criticisms of Democrats' spending, and said general government in Washington hasn't expanded in relationship to the private sector economy.
"General government -- which supports education, higher education and health and human services -- the biennial level is actually going to shrink in real dollars despite the population going up, the number of kids in schools going up and the people who qualify for human services going up," she said.
Earlier this month, a policy brief published by the Washington Research Council, which describes itself as a business-supported policy research organization, indicated a rapid growth in state spending leading up to the recession, followed by a slowdown. Spending peaked in 2008, and for the current biennium is 2 percent below that peak, but the report shows it slowly rising over the biennium, based on the current budget.
And the $31.7 billion 2011-13 budget is almost $1.5 billion more than the $30.2 billion supplemental 2009-11 budget adopted earlier this year to finish out the biennium, according to state data.
In October, Gregoire told the Herald that the budget increased because of population growth and higher demand for government services -- basically more children in schools and more people qualifying for services such as food stamps and Medicaid.
And while demand has risen, the number of state employees has fallen.
Ralph Thomas, spokesman for the Office of Financial Management, said the state had 64,856 people on its payroll in November 2009. That dropped to 63,327 in November 2010, and 60,667 in November 2011.
That includes all actual general government employees, but does not count positions held open or jobs in higher education because the state itself has no control over hiring or firing those people, Thomas said.
"There's no question the number of state employees has decreased," he said.