Calling it a "necessary evil," Gov. Chris Gregoire on Tuesday signed a nearly three-inch-thick state budget bill, cutting billions of dollars in planned state spending over the next two years.

The $35 billion spending plan, hashed out by state lawmakers over several months, makes it official:
-40,000 low-income people will lose state-subsidized health coverage,
-an estimated 3,000 jobs will be eliminated at state agencies and colleges,
-teachers and state workers will get no cost-of-living increase for the next two years,
-hospitals, doctors and nursing homes will lose more than $200 million in state payments,
-millions more will be cut from mental health care and drug- and alcohol treatment programs.

"This is a responsible budget," Gregoire said, praising the lawmakers who wrote it. "It reflects courage."

"When you have no money, you have no money," said Sen. Rodney Tom, D-Medina.

Gregoire vetoed dozens of budget items, including lawmakers' proposal to strip $29 million from the state auditor's budget for efficiency-finding performance audits. State Auditor Brian Sonntag worked out a deal to turn over $15 million of that to the state treasury. The $14 million, he has said, will be enough to keep the audits going.

Many of the vetoes , Gregoire said, were to allow state agencies maximum flexibility as they try to meet the spending targets in the budget. A pet program for female prison inmates was vetoed, for example. It has shown benefits for prisoners, the governor said, but she wanted to let the Department of Corrections set its own spending priorities.

Similarly,

 she vetoed a requirement that 80 percent of the money in one fund be spent buying or raising pheasants for Eastern Washington. She said state wildlife officials should be allowed to spend some of the money on habitat development or other efforts to improve pheasant production.

The budget includes no major new tax increases, although it relies on sharp rises in tuition at state colleges and a liquor price hike. It also includes hundreds of millions of dollars in increased fees, covering everything from business licenses to court filing fees to hunting and fishing licenses.

It spends about $35 billion over the next two years, including $3 billion in federal stimulus money.

State budget writers had expected state revenues to keep growing, helping pay for increased costs in health care, salaries and planned new programs. Instead, it now looks like the state will be lucky to collect as much money in the next two years as it did in the previous two. That left lawmakers with a $9 billion shortfall between what they now expect to collect and what they had intended to spend on a "maintenance-level" budget.

Lawmakers were aghast at the cuts in Gregoire's spending plan in December, said House budget writer Rep. Kelli Linville, D-Bellingham. And then it got worse.

"Every month after that, we lost another billion dollars" in expected revenue, Linville said.

To bridge the gap, lawmakers trimmed planned spending by $4.4 billion over three years. In addition to the $3 billion from the feds, they also stripped about $800 million from the state's construction budget, as well as draining down other accounts to balance the budget.

The state is left with about $750 million in the bank. If state revenues continue to come in lower than expected, Gregoire has said she might call lawmakers back to Olympia for another round of budget-cutting.

She acknowledged that college students will pay sharply higher tuition.

"But you know what? We kept the doors open," she said.

And she said K-12 education "was the least cut" sector of the state budget. Basic education was not cut, she said, and discretionary programs were cut only about 2.6 percent.

Educators, however, are deeply unhappy.

"State education spending already is near the bottom, while our class sizes are among the most overcrowded in the country," said Mary Lindquist, president of the state teachers' union.

She said more than 3,000 teaching and support jobs will be cut, and that programs like music, art, athletics and extracurricular activities are also getting whacked. Include the lost cost-of-living increases and other changes, she said, and the cuts are more like 7.3 percent over a maintenance-level budget for schools.

Tough decisions also lie ahead, Gregoire said, as state agencies and colleges decide how to meet their spending targets.

"Cutting 40,000 people off health care will not be easy," she said.

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