Legislative Update

by Marie Sullivan, WSSDA Director of Governmental Relations

Thursday, June 16, 2011

Governor signs budget bills, revenue forecast down again

Saying she was truly dismayed by $1.8 billion in cuts to education, Gov. Chris Gregoire signed the 2011-13 operating budget June 15.

The largest reductions were in suspending I-728 and I-732 and eliminating K-4 class size enhancement for about $1.4 billion in “savings” to the state.

Another large reduction was $179 million for K-12 salaries – 3 percent for administrators and 1.9 percent for certificated and classified staff – which shifted the state budget problem to local school districts, forcing them to determine whether to pass on the reduction or make up the difference.

After the March revenue forecast, the Legislature was faced with a $5.1 billion gap for the 2011-13 biennium.

The signed $31.7 billion biennial budget includes $4.5 billion in cuts, and one-time transfers and new revenue from a tax amnesty program.

The governor vetoed many sections that she said were either unnecessary in this tight budget environment, were tied to bills that didn’t pass, and were overly proscriptive, among other issues.

She also signed into law a number of bills necessary to implement the budget, including signing in full ESHB 2065, the bill that decreases funding to alternative learning experience (ALE) programs by 15 percent.

WSSDA and proponents of ALE programs had sought a veto of Section 9 of the bill. The section directs OSPI to determine how to apply the $41 million in cuts to ALE, with a minimum of 10 percent and maximum of 20 percent. The governor declined to negatively impact the state’s ending fund balance.

The governor also signed the 2011-13 capital budget bills, approving $2.7 billion in construction projects including full funding for the School Construction Assistance Program. No vetoes were applied to capital budget provisions. The LEAP website will have the best links when posted.

A carefully worked compromise bill, SSB 5181, also was signed, which will create a blue ribbon commission to evaluate the state’s use of debt and make recommendations by the end of the year, as well as lowering the working debt limit, beginning July 1, 2015.

(WSSDA is preparing a special report on this issue, including podcast interviews with Senate bill sponsors Linda Evans Parlette, R-Wenatchee, and Derek Kilmer, D-Gig Harbor, and with House Capital Budget Chair Hans Dunshee, D-Snohomish.  We expect to send the report Friday).

June forecast blows hole in fund balance

When the operating budget was signed Wednesday, it included $738 million of ending fund balance and savings in the Rainy Day Fund.

Now, one day after, the number on the balance sheet has plummeted to $163 million.

According to the state’s chief economist, Dr. Arun Raha, a combination of factors has resulted in fewer collections than previously expected.

The impact is about $575 million less revenues for the fiscal year ending this month and what is forecast for the biennium, including a new $387 million drop in revenues for 2011-13, and $84 million less for the biennium ending this year.

Raha’s quarterly revenue forecast presentation can be found here.

In response to media inquiries, OFM Director Marty Brown said they hadn’t known the revenue forecast would be this deep. He also said they hadn’t expected an up-tick either, which is why the Legislature left as much as It did in unrestricted reserves and the budget stabilization account.

Economic Revenue Forecast Council Chair Ed Orcutt, R-Kalama, said the Legislature should have left more in the two-year spending plan, particularly at the front end of the biennium.

But Senate Ways & Means ranking member Joe Zarelli, R-Ridgefield, said he didn’t think it was time to call an emergency or a special session to address the latest forecast.

Both he and Senate Ways & Means Chair Ed Murray, D-Seattle, said there were two more revenue forecasts and six months before the Legislature convenes again.

Lawmakers, budget analysts, and Governor’s office staff will watch expenditures in the meantime, and see how the first six months of spending in the new budget goes.

“If revenues continue to drop, then we’ll have to cut again,” said Murray.

The June revenue forecast report is available on TVW.

WSSDA Legislative Reports

WSSDA legislative reports are prepared by WSSDA's Governmental Relations staff team: Marie Sullivan (360.252.3010) and Sheila Chard (360.252.3011). We welcome your questions and comments. We also encourage school directors to keep in touch with their legislators on a regular basis. If you need contact information, visit the Legislature's District Lookup Tool. WSSDA also provides a number of links to key House and Senate committees.