Happy Thanksgiving to All!

Immediately after the Thanksgiving Weekend, on November 28, the Legislature will convene in Special Session to address the State's continuing fiscal woes.

Revenues continue to decline substantially, and the Legislature will be faced with having to cut $1.5 to $2 billion from the state’s General Fund budget. Why convene a Special Session so close to the Regular Session which will begin in January? The answer is that the sooner budget cuts are made, the smaller the percentage cut that will be necessary.

Governor Gregoire’s budget and revenue proposal

Last Monday, Governor Gregoire released her Operating Budget proposal to address the state’s revenue shortfall, which has two components. The first component is a budget proposal that reduces or eliminates a wide range of public services. The second component is a revenue proposal to go on the ballot for the voters’ decision. The revenue ballot proposal is, in effect, an opportunity for the public to “buy back” some of the cuts that are necessary to achieve a balanced budget.

The Legislature will probably have to adopt an “all cuts” budget document, even if it places a revenue proposal on the ballot. This is because a ballot measure would not be voted on by voters until at least Spring, after the Legislature would normally be adjourned.

The Governor’s proposed “all-cuts“ budget slashes an additional $1.7 billion from public services for the balance of the biennium, and leaves a reserve of $601 million in case of future revenue downturns. During the last three years, due to revenue declines, the Legislature has already cut about $10 billion and reduced the state government workforce, including higher education, by about 8 percent.

In addition to cutting state agencies and higher education institutions, the Governor’s budget includes proposals to: (a) transfer some special funds with specialized earmarked revenue sources to the General Fund; (b) reducing some revenue distributions to local governments; and (c) shifting a $340 million school apportionment payment into the next biennial budget.

Sadly, the budget proposal would eliminate most of the Disability Lifeline program and the Basic Health Plan on which so many low income people depend.

The proposal also reduces the number of days K-12 students spend in the classroom by four days, saving $99 million, and reduces School Levy Equalization (assistance to school districts in low income, low property valuation areas) by 50 percent. At the higher education level, institutions would be cut by 15 % overall. Under the Governor’s proposal, all of the education cuts could be restored by voter action on a revenue package.

The revenue proposal has three parts: (a) a ballot referendum for a temporary, half-cent sales tax increase for three years; (b) a package of fees and other revenue sources requiring a simple majority vote of the Legislature; and (c) a package of tax changes requiring a two-thirds vote of the Legislature.

Item (a) would generate about $494 million and “buy back“ the Governor’s proposed reductions mostly in K-12 and higher education. Item (b), the “majority vote package“ would generate about $59 million. Item (c), the “two-thirds vote package“, would generate about $282 million and is proposed to be used mostly to “buy back“ cuts in human services and health care.

You can see the full details of Governor Gregoire’s proposals here as well as an overview of the proposal by Senate Ways & Means Committee staff here.

The Special Legislative Session begins Monday

Monday marks the start of the special legislation session called by Gov. Chris Gregoire to address the state’s $1.4 billion budget shortfall due to lagging revenues as a result of the Great Recession.

By law, the Special Session can run no longer than 30 days, which means it must end on or before Dec. 27. The 2012 regular legislative session will begin not long after that, on Monday, January 9.

State unemployment rate continues slow improvement

One small point of good news: the state unemployment rate dropped from 9.2 percent in September to a flat 9 percent in October, according to the latest statistics from the state Employment Security Department.

This marks the lowest unemployment rate in Washington since March 2009 and follows a pattern of slow, steady improvement for more than a year.

The biggest job gains came in government, wholesale trade, education and health services, and manufacturing. Most of the 4,900 new jobs in government were in local government (2,900), federal government (1,500) and public higher education (1,000).

The worst job losses came in professional and business services (7,000), transportation, warehousing and utilities (1,100), retail trade (1,000), state government, excluding higher education (500), and financial activities (400).

You can see the full report here.

Revenue forecast glum but not significantly worse

This month’s revenue forecast from state economist Arun Raha projected a budget shortfall of $1.38 billion, or $122 million lower than predicted in recent weeks.

The forecast was boosted somewhat by a slight increase in revenues over the 2009-2011 biennium and a projected revenue increase as a result of Initiative 1183.

Raha said the revenue collected per state income is on a consistent downward trend and that real per capita General Fund revenue is projected to be below the level of 1995. He said the state gained only 500 jobs over the past two months and that cutbacks in public sector jobs continue to hold back the employment recovery.

You can read the full forecast here.

Representative David Frockt named to fill open Senate seat

The 46 Legislative District Senate seat held by the late Sen. Scott White, who died tragically of an undiagnosed heart problem last month, has been filled by David Frockt, a Member of the House of Representatives from the same district.

Senator Frockt was appointed unanimously last week by the Metropolitan King County Council, which followed the recommendations of the 46th District Democratic officers and the King County Democratic Central Committee.

The appointment of Senator Frockt, age 42, comes just in time to serve during the Special Legislative Session that begins Monday.

You can read more about the appointment here.

I look forward to hearing from you during the Special Session.

We are in unprecedented times. Please let me know your opinions on priorities for expenditure cuts and “saves” and what you think a reasonable revenue proposal should be.