$3.8 billion slashed in state Senate proposal

OLYMPIA — Senate Democrats used words such as “devastating,” “difficult” and “painful” to describe the $31 billion operating budget proposal unveiled in Olympia on Monday.

The proposal slashes $3.85 billion from programs, mostly in health care, human services, K-12 education and higher education, and uses about $3 billion in federal stimulus to add to $28 billion in revenues forecasted for the 2009-11 biennium.

The budget also would lay off about 7,000 state workers and freeze pay and up health care costs for those remaining on the payroll, close several state facilities including McNeil Island prison, and eliminate tax breaks for banks selling foreclosed properties and consumers buying hybrid vehicles.

The projected $9 billion shortfall was based on estimates that it would cost the state $37 billion to maintain current and mandatory programs and services for the next two years.

Senate Majority Leader Lisa Brown, D-Spokane, said making drastic cuts had been “personally painful” for lawmakers, each of whom had come to the Legislature because there was some issue that inspired their passion.

“But this is not about us,” she said. “This is about the state.”

Talk on Monday quickly turned to whether the Legislature might put a tax package on the ballot this fall so voters can decide what government services they want to “buy back,” as Democrats have put it.

Brown said Democrats have not yet discussed a revenue package, but the budget proposal did include several measures intended to tighten up tax breaks and raise revenues by about $138 million.

Those ideas may run afoul of Initiative 960, which requires a two-thirds majority of the Legislature to pass any bills that result in higher taxes. The initiative also requires that any increased taxes passed by the Legislature be put on the ballot for a non-binding advisory vote.

Democrats hold a 31-18 majority in the 49-member Senate, but Brown said she was hopeful enough Republicans would see the merits of eliminating tax breaks that the measures would earn the needed two-thirds majority.

But Brown also said the Senate is prepared to live with the budget it presented Monday and that the cuts made were not an attempt to scare voters into approving tax increases, as some Republicans have claimed.

But she also speculated that voters may get over an initial aversion to taxes when they see what services are lost.

“This is a real budget,” she said. “This is not a set-up for something else that is happening. I believe many people when they see it will see these are very difficult cuts.”

Sen. Joseph Zarelli, R-Ridgefield, minority leader on the Senate Ways & Means Committee, criticized the budget as a temporary fix that just postpones the state’s fiscal reality.

“Instead of making policy adjustments that will generate substantial ongoing savings, this proposal is about punting and doing temporary backfill that would put off the problem for another two years,” he said. “The Senate Democrats could have made policy changes months ago that would have established a new baseline for state spending and reduced the size of the budget gap by billions of dollars. By failing to act earlier they have almost guaranteed we will be back in this position again in 2011.”

While the emphasis Monday was on cuts, the Senate budget proposes $183 million in new spending. That includes $51 million to pay for bonds, $45 million to maintain the state’s current financial aid policy and $18 million to finish an information technology project intended to streamline Medical Assistance payments, among other items.

It also keeps all state parks open through a $5 fee vehicle owners can opt to pay when getting or renewing a registration.

Several parks, including Sacajawea State Park in Pasco, had been listed for possible temporary closures.

And it keeps intact a proposal to define information technology, security, health and safety support services at Hanford as part of clean-up for purposes of getting a preferential business and occupation tax rate.

The House will release its budget today and a final budget is expected to be adopted in April.

Some of the biggest cuts include:

Health care

About 45,000 people would lose access to the state’s Basic Health Plan as $251.1 million, or 42 percent, is cut from the program and enrollments in the plan are frozen over the next two years.

At the same time, Medicaid reimbursement rates for hospitals are reduced by 5 percent, saving the state an estimated $107.2 million.

Terry Litke, chief financial officer for Kennewick General Hospital, said that kind of cut would amount to about 30 percent of the hospital’s annual $5 million budget as it continued to provide services for patients while getting less money from the state.

He also expected the hospital to be hit by higher numbers of people visiting the emergency room as they dropped off of the Basic Health Plan, meaning KGH will have to pick up the tab for their care.

“Any of those people who came to our facility who were covered by Basic Health before, now we won’t get paid anything so it is a direct reduction in revenues to us,” Litke said.

Human services

The General Assistance Unemployable program and Adult Day Health, both proposed for elimination by Gov. Chris Gregoire in December, are kept, but GAU is cut by $59.3 million, or 50 percent, and Adult Day Health is limited to clients living in their own homes, saving the state $19.5 million.

State-funded community mental health services are cut by $23.2 million, or 9 percent, but local officials said Benton and Franklin counties are in a good position to absorb those cuts because of recent changes to how mental health money is allocated in the region.

Carrie Huie-Pascua, director of the bicounty Human Services Department, said the counties have actually seen a 5.8 percent bump in mental health funding as the 11-county region in which they participate shifted to a new funding formula based on population.

Under the old formula, Benton and Franklin counties essentially were subsidizing care in smaller counties, such as Columbia County, but are now getting a fairer share of the pie, she said.

Because of that, Huie-Pascua does not expect to have to reduce rates for mental health providers or services for patients using the county-funded services.

K-12 education

The K-12 system sees a net loss of $877 million after $420 million in federal stimulus money is used to backfill cuts. Some major cuts include $753 million, or 90 percent, cut from funding for a voter-approved initiative to reduce classroom sizes, and $285 million, or 75 percent, cut from levy equalization money, which is intended to help property-poor school districts.

Courtney Stenson, spokeswoman for the Pasco School District, said those cuts will be especially hard for the smaller school districts in Eastern Washington that don’t have the kinds of property tax revenues to support schools that more wealthy counties in Western Washington have.

“We believe that any reduction in levy equalization funding is inherently inequitable because it impacts poorer districts like Pasco and doesn’t impact property adequate districts,” she said.

Higher education

Higher education loses $513 million, which Senate leaders said likely would translate into 10,500 fewer students attending college.

Washington State President Elson Floyd issued a statement saying the university will try to minimize damage to programs as it cuts its budget.

“Budget cuts of the magnitude of those in the Senate’s budget would have a dramatic impact on WSU,” he said. “Layoffs and reductions in enrollment and important public service programs would be unavoidable.”

Columbia Basin College President Rich Cummins said he’s waiting for a final budget from the Legislature before he makes any decisions about what gets cut, but he expects the number to be in the range of 13 percent of the college’s $23 million in state funding.