During a press conference this afternoon, Governor Gregoire announced the steps she will take to address a potential shortfall in the current state budget and direct agencies to prepare for an additional shortfall in 2011-13.

Despite the receipt of federal funds for Medicaid and teachers, agency and department savings, and reductions in state spending, dollars for the state budget remain difficult.

Over the last two months revenue collections have declined by $125 million below forecasted levels. Though the state has a $72 million ending fund balance for the 2009-11 biennium, after taking into consideration revenue declines, the potential for additional budget shortfalls that would eliminate the remaining dollars in the ending fund balance remain possible if future revenue reports continue to show a decline.

Beyond the current biennium, the state is also estimated to face a $3 billion deficit over the next two year budget (2011-13).

Given this context, the Governor announced three actions she will direct state agencies to undertake to prepare for the upcoming two-year budget and potential revenue shortfalls in the short-term.

• Prepare reductions of 4-7% for the possibility of across-the-board cuts starting October 1 if the September forecast or revenue receipts are lower than expected.
• Prepare budget reductins for a supplemental budget for the last six months of the current biennium equal to $500 million statewide to be passed in January.
• Draft 2011-13 budgets to prepare for the expected $3 billion shortfall which will require a 10% reduction in the expected general fund budget.