Gregoire announces budget cuts

OLYMPIA – Gov. Chris Gregoire, facing a faltering economy and tough campaign criticism, announced immediate budget savings of about $240 million Tuesday, including a 1 percent across-the-board cut at state agencies.

Gregoire’s plan, which could lead to government layoffs, is expected to boost the state’s surplus and help cut the next budget’s deficit nearly in half, from $3.2 billion to about $1.7 billion.

Some critical state programs, including education, social services and public safety, are exempt from the 1 percent cut to agencies under Gregoire’s control. The plan also includes general savings and money transfers.

But Washington State University was told Tuesday it will have to cut $6 million from its budget for this school year. The cut represents 2.4 percent of WSU’s state allocation of $254 million, according to a statement released by the university. It was unclear Tuesday how deep the cuts will go at Eastern Washington University.

Gregoire put much of the blame for the rocky financial outlook on the national economy, which is staggering through an ongoing credit crisis that threatens to plunge the nation into recession.

“Even though today we have a surplus and are better prepared than other states to weather this storm, we will likely face a deficit in the next two years,” she said in a statement.

Dino Rossi, her opponent in the Nov. 4 general election, quickly denounced the move as “budget cherry-picking” designed to grab headlines.

“Many of the items she refers to as cuts are really just budget items where expenditures have come in lower than expected, such as health care premiums, or by taking federal funds,” Rossi said in a statement. “It’s an election year, so again Christine Gregoire is pretending to be a fiscal conservative. But she can’t escape the fact that she increased spending by 33 percent over the last four years and wrote a budget that her own economic adviser said was unsustainable.”

Agency leaders will decide exactly how to save money under the 1 percent cut, but layoffs are on the table, said Victor Moore, director of the Office of Financial Management.

“I think to a certain extent, it’s unavoidable,” Moore said.

The Democratic governor has faced intense criticism from Rossi over the projected deficit. After months of largely dodging the question, Gregoire has lately shown signs of wanting to tackle the deficit head-on. On Tuesday, the Gregoire campaign argued that the programs that Rossi has proposed as a candidate would result in an even bigger deficit than the state is projecting.

Gregoire’s budget office is working on a no-new-taxes plan to solve the $3.2 billion deficit projected for the 2009-’11 budget period, which begins next July. The next governor and Legislature will have to solve the budget hole starting in January.

Gregoire’s preliminary plan for the shortfall calls for $605 million in savings during the next two-year budget, achieved by carrying forward the cost-cutting actions announced Tuesday and an earlier $90 million freeze on hiring and travel.

Gregoire also would tap the “rainy day” fund’s entire balance to help bridge the gap. Normally, it would take a 60 percent vote of the Legislature to access the fund, but the voting threshold is lowered in times of slack job growth.

The largest chunks of the additional savings announced Tuesday are $76 million in welfare costs, offset by federal dollars; the 1 percent agency cuts, expected to save $45.6 million; and about $25 million in transfers of unspent money, which normally would flow into a school construction account.

Among other cutbacks were three favorite projects of Democratic lawmakers: suspension of a proposed paid family leave program, halting set up work on a sales tax credit for the working poor, and the rollback of unspent money meant for property tax deferrals.

Senate Republican budget chief Joe Zarelli, R-Ridgefield, gave Gregoire credit for facing the deficit. But he said further projections of state revenue and growth in essential services could take back some of Gregoire’s proposed savings.

Senate budget Chairwoman Margarita Prentice, D-Renton, said the general direction of Gregoire’s plan sounded prudent.

“We’re all going to have to share in the pain,” Prentice said.

At WSU, President Elson S. Floyd was already responding to the weakening economy, directing staff in April to slow hiring and cut expenses. Exactly how much has been saved hasn’t been determined, according to the press release.

The press release quotes Floyd saying that he “will work to minimize the impact any additional cuts will have on our students and faculty.”