State must be prepared to cut budget if economy slows

Agency chiefs must take seriously Gov. Gregoire's order to prepare for reduced spending.

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The Legislature adjourned in late May after cutting nearly $5 billion in spending requests to balance the $32 billion two-year state budget. But last week Gov. Chris Gregoire ordered state agency directors to prepare for more cuts -- up to 10 percent.

Some might wonder how such deep cuts could be in the state's future after the slash-a-thon that took place in the Capitol as the 2011-13 budget was being hammered together.

It's pretty simple. The budget was built on the assumption the Great Recession was behind us and the state's economy would begin to grow over the next two years, thus boosting tax revenue. The official state revenue forecast an anticipated $4 billion (about a 7 percent increase each year) more would be collected over the next two years than the past two years.

The economy, at least in mid-August, isn't looking so hot. Given that, Gregoire wisely gave the order to prepare for cuts if the September revenue forecast lags behind original projections.

Frankly, we don't see too many scenarios where revenue projects meet the overly optimistic projections on which lawmakers built the budget. Some serious cuts are going to have to be made based on some very difficult decisions.

While most of state government has seen a reduction in spending, funding for social services has increased. There are a couple of reasons for that. Some of the spending is mandated by the federal government and some out of necessity -- as the economy hit the skids more folks qualified for medical care and other subsidies.

Think about how health insurance and medical costs have soared for families. It's worse for state government. When the economy faltered the number of people in need of state services increased.

Unfortunately, college students and their families took a hit as a result. Higher education funding was reduced more than 8 percent.

Public schools -- kindergarten through high school -- received more dollar-for-dollar funding than the previous budget but when higher costs and mandates are considered the amount of money schools will have to spend on actual education might be less.

Senate Ways and Means Chairman Ed Murray, D-Seattle, said the prospect of more cuts might result in Democrats asking voters to approve some sort of tax-increase package.

But the ranking Republican on the budget committee, Sen. Joe Zarelli, R-Ridgefield, said he didn't see tax increases as the answer.

While we cringe at cuts, particularly to education, we don't see new or higher taxes as a viable option in the short term.

If the revenue forecast is down in September, the cuts have to be made immediately so the state doesn't dig itself into a deeper budget hole that will require even deeper cuts in the future.

State agency chiefs must take Gregoire's call to prepare for budget cuts seriously -- very seriously.


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