The Washington Office of Financial Managment (OFM) expects that the gap between state revenues and “basic spending pressures” will be approximately $3 billion next biennium.

In a report that provides state agencies, including higher education, with operating budget instructions for the next biennial budget, OFM suggests to provide funding to move current state programs forward, state funds will need to replace nearly $2 billion in federal funds that were made available to Washington during the recession. Part of these funds were used to offset cuts to higher education during the 2009-11 biennium.

In addition, funding requirements for pending funding obligations, statutory requirements to support important reforms in basic education, and restoration of voter approved commitments to reduce class size (I-728) and provide cost of living adjusts for teachers (I-732) add another $2 billion in spending pressures.

Though this adds up to a shortfall of $4 billion, OFM project that new revenues will provide $1 billion to close the gap, leaving $3 billion to be settled by the state.

So one may ask is there any good news.

In the report issued by OFM, indications show that Washington is experiencing much stronger revenue growth of 8.8% for FY 2011. Though this growth is relative to a new, much lower revenue base, it is definitely a positive note when compared to the drop in revenue in the last two years.

As Washington nears the 2011 legislative session more details will come into focus to provide a much clearer picture of the state budget.  The next big step in the process will be in mid-June when both the state caseload forecast and economic and revenue forecast are released.