Washington's Gregoire Plans An Additional $400 Million in Spending Cuts

Governor Christine Gregoire of Washington, who yesterday proposed $4.1 billion in savings and reductions to state programs in the next two-year budget cycle, said she wants to cut an additional $400 million before that period starts.

The request will be in a supplemental budget for the current fiscal term that she will propose tomorrow, the governor said yesterday in her Seattle office. The cuts will help fight a projected $1.1 billion gap in the current spending plan, said Gregoire, 63, a second-term Democrat.

“I’ve tried to do a budget, as ugly as it is, that really, I hope, gets us through the next two years and on to recovery,” Gregoire said in the interview.

The longest recession since the 1930s caused the biggest nationwide decline in state tax receipts on record, according to the nonpartisan Center on Budget and Policy Priorities in Washington. States have filled more than $425 billion in funding gaps since fiscal 2009; the combined imbalance is likely to reach $140 billion in the next budget year, the center said.

Gregoire said she will call for accelerating the end of programs that provide health care for the poor and for single adults temporarily unemployable because of disabilities. The governor proposed eliminating those efforts yesterday as part of her 2011-2013 spending plan, which would take effect July 1 and must contend with a $4.6 billion projected deficit. Ending them sooner would help close the gap foreseen in the current budget, she said.

Another Round

Home to Costco Wholesale Corp., the largest U.S. warehouse- club chain, and Microsoft Corp., the world’s biggest software company, Washington is grappling with deficits that have persisted since the economy plunged into recession in December 2007. In September, Gregoire ordered spending slashed by 6.3 percent in response to a $520 million estimated budget gap. That projection has since doubled.

Gregoire yesterday proposed a 2011-2013 budget that calls for about $3 billion in cuts and $1.1 billion in savings. It would suspend pay raises for teachers and a program that provides smaller class sizes. Fund transfers, changes to pensions and use of reserves will also help cover the deficit, according to a copy of the plan released by her office.

Gregoire proposed drawing almost $290 million from reserves. She would end subsidized health insurance to 66,000 poor people to save $230 million. She also called for eliminating funding for parks, reducing state employee pay 3 percent and closing the McNeil Island prison by April.

No Income Tax

Washington’s revenue will decline by $1.19 billion through June 2013, according to a Nov. 18 report by the state’s Economic and Revenue Forecast Council, based in Olympia, the capital. Projected revenue will decline by $385 million in the budget cycle ending in June, and $809 million in the next two-year period, the council said.

In most other states, that revenue would include personal income taxes; Washington doesn’t have one. On Nov. 2, state voters rejected a ballot measure to tax earnings above $200,000 for individuals. They also repealed a sales levy on candy, soft drinks and bottled water, and voted to require a two-thirds majority in the Legislature to impose such proposals.

The Legislature, controlled by Democrats, met in a special session Dec. 11 to reduce the deficit for the current budget cycle by $588 million, mainly through cuts in education, corrections and health spending.

“We need to keep revenue options on the table,” state Representative Brendan Williams, an Olympia Democrat who voted against the cuts, said in a Dec. 13 interview. “Cuts alone are not going to balance out this state budget if we’re going to have a future for our kids.”

To contact the reporter on this story: Alison Vekshin in Seattle at avekshin@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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