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Washington’s Gregoire Orders Cuts to Cover $520 Million Deficit

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Sept. 17 (Bloomberg) -- Washington Governor Christine Gregoire ordered a 6.3 percent reduction in state spending to cope with a projected $520 million deficit through June.

The across-the-board cut may eliminate as many as 9,000 slots at community and technical colleges, close a prison and lower funding for 3-of-4 school districts that get extra state money, Gregoire, a Democrat, said yesterday in a statement. She said the step takes effect Oct. 1.

“Even with all our belt tightening over the last two years, we must reduce spending more to bring the budget into balance,” the governor said. Gregoire announced the move while on a trade mission in China.

The state, home of Microsoft Corp., doesn’t have a personal income tax and the recession has sapped consumer spending, biting into sales taxes. States’ fiscal 2010 budgets were $74 billion lower than in 2008 and more than half raised taxes and fees in 2009, the National Governors Association has said.

Washington has reduced spending by $5.1 billion in the past three years, Gregoire said last month. Yesterday, she said the state faces a deficit of almost $4.5 billion in the two-year budget cycle that begins in July.

Moody’s Investors Service in December 2009 said it lowered its outlook on the Aa1 credit rating for $15 billion in general-obligation bonds issued by the state. Moody’s cited a $1.68 billion shortfall in tax collection since June 2009, compared with forecasts, producing an estimated $2.6 billion deficit for the current budget cycle as spending rose on social services.

A $26 billion state-aid bill signed by President Barack Obama, as well as cost-cutting measures such as shutting state agencies for 10 additional days this year, helped avert the need for immediate cuts, Gregoire said last month.

To contact the reporters on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net;

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

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