Tag Archives: Budget

Federal FY 2010 Budget Extended; FY 2011 A Question Mark

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Last week, the U.S. House and Senate passed a Continuing Resolution (CR) that extends the FY 2010 budget until December 18. The original Continuing Resolution expired on December 3.

Both the House and Senate ,the 12 appropriations bills they must now close the budget process through either an omnibus spending bill, which combines all 12 bills in to one, or through yet another CR.

Many speculate that the House will pass a CR that will extend throughout the entire FY2011. The scenario in the Senate is a little less clear. There appears to be some support for an omnibus bill, though it may not be able to garner enough votes for passage. If the Senate does not pass an omnibus bill they could pass a year-long CR, or another temporary CR extending only through the early part of the year. The latter would allow the new Congress to address the issue.

Republicans and House Democrats Release Proposals to Balance Budget

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Yesterday, both the House and Senate Republicans and the House Democrats issued their proposals to balance the $1.2 billion shortfall in the current fiscal year.

Both proposals come on the heels of a detailed list issued by the Governor. Senate Democrats have yet to issue a proposal to balance the current budget shortfall.

House Republicans

Rep. Gary Alexander, current Ranking Minority Leader on the House Ways & Means Committee, issued a letter outlining a general framework for balancing the current budget. 

The House Republicans agree with many of the suggestions the Governor put forth in her proposed list of reductions. In addition, the House Republicans suggested items not included on the Governor’s proposed list, including suspension of all-day kindergarten and redefining the Temporary Assistance for Needy Families program.

The letter also noted areas of disagreement between the House Republicans and the Governor. Rep. Alexander spoke to concerns regarding retroactive actions on moneys already spent and the use of delaying payments to balance the budget.

Finally, the House Republicans offered a compromise with regard to employee health care benefits, suggesting a graduated ratio based on income. The proposal would begin with 14% and end with 26%, with the median around the 20% mark beginning in January. The Governor proposed a shift from a ratio of 74 state to 26 employees.

Senate Republicans

Senate Republicans issued a much more detailed list of proposals to balance the current budget shortfall.  The list of proposals range from redirecting revenue streams to the General Fund to reductions to all state agency budgets to reductions in state and higher education employee salaries.

With regard to higher education, the Senate Republican proposal:

  • Supports the Maintenance of Effort requirement for higher education
  • Calls for examination of non-state need grant and work study financial assistance programs
  • Reduces tuition waiver authority

House Democrats

Speaker Chopp and Representative Sullivan (Majority Leader-Elect) issued a preliminary 
list of reduction ideas. The list put forth by the  House Democrats does not include some of the proposed reductions put forth by Governor Gregoire, such as elimination of the Basic Health Plan and reductions to Levy Equalization.

With regard to higher education, the House Democrat proposal suggests:

  • Reductions to state financial aid programs, with the intent to minimize impact to students
  • Supports the Maintenance of Effort requirement for higher education

National Debt Commission Releases Final Report

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Today, the bipartisan National Commission on Fiscal Responsibility and Reform released their final report, The Moment of Truth.

The report proposes ideas and solutions to bring the federal budget into primary balance in 2015 and improve the long-run fiscal outlook.

The Commission recommends that a cap on discretionary spending be put into place thorugh 2020. Higher education would be impacted by this cap. The intention of this recommendation is to hold spending to 2012 or lower than 2011 spending levels and return spending to precrisis 2008 levels in real terms in 2013. In addition, the recommendation limits spending growth to half the projected inflation rate through 2020.

Another recommendation by the Commission is to eliminate the in-school interest subsidy on federal loans. This would allow for the elimination of income-based subsidies for federal student loan borrowers and better target hardship relief for loan repayment.

A final vote on the report is expected tomorrow, Friday.

Special Session Still Possible

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Yesterday, Governor Gregoire met with Democrat and Republican leaders from the House and Senate, but did not reach an agreement regarding a special session to deal with the looming $1.2 billion budget deficit in the current fiscal year.

Governor Gregoire would like action this month to balance the 2009-11 budget, but is hesistant to call in legislators without an agreement.  Legislative leadership still needs time to talk with their caucuses about proposals for reductions.

More meetings are planned with the Governor.

Special Session Under Discussion

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A potential special session in December is one of many topics under consideration by Governor Gregoire and legislative leadership.

Gregoire is scheduled to meet with Demoratic and Republican leaders on Wednesday to discuss options for cutting the budget. She had asked leadership for ideas for cutting the budget by Monday but several asked for additional time.

A special session in December would address the state’s need to cut more than $1 billion out of this year’s budget and about $5.7 billion from the next two-year budget.  The more time that passes without a resolution to the budget the greater the impact.

Last week Governor Gregoire identified options to reduce the state’s budget. Many of the items she proposed would require legislative action by December 12.

The Governor wants an agreement on an agenda before calling a special session to avoid lengthy delibrations.

Legislative leadership has expressed concerns regarding the elimination of programs and services without first trying to reduce the costs of these programs and services. In addition, there is some preference for a full supplemental budget versus quick program cuts.

State Revenue Declines: Another $1.2 Billion Gap

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Washington’s state budget took a large hit this morning. The November Economic & Revenue Forecast, released today, shows an additional $1.2 billion decline in revenue between now and 2013.

The Forecast will require Washington to further reduce the budget for the current fiscal year by $385 million. This is in addition to the $520 million across-the-board cuts the Governor ordered earlier this fall.

State Chief Economist Arun Raha stated that the additional decline in state revenues for the current biennium is due to the repeal of the soda, candy, and bottle water tax in November and weaker future revenue growth than was assumed in September.

According to Raha, credit to small business remains tight, recovery in the commercial construction sector is not expected until 2012, and single-family housing remains weak. In addition though some signs show positive movement with regard to multifamily housing and auto sales, neither can be assumed to be sustainable or substantial.

In addition, the budget shortfall for 2011-13 increased by $800 million, increasing the total budget gap for the upcoming biennium to $5.7 billion. The increase in the 2011-13 biennium is also related to the reduction in revenue as a result of the repeal of the candy, bottled water, and soda tax combined with a weaker outlook for revenue growth.

The forecast caught many by surprise, including the Governor and policymakers since revenues had been closely tracking to the September forecast.

The Governor has stated that further across-the-board cuts are not feasible.

“I have been working with legislative leadership in both parties to collect ideas on how to address our current shortfall. This forecast has added even more urgency to those discussions, and I’ve asked them to provide their options to me by November 29. Quite frankly we can’t cut any deeper without ending significant programs. Extremely difficult choices must be made, and given this sharp revenue decline, they must be made now,” Gregoire said.

The only positive note in all of this. According to Raha, Washington’s strong aerospace and software industries combined with important exports to Pacific Rim nations may mean that Washington could perform better than other U.S. states in the economic recovery.

Latest on Congress

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This week the U.S. Congress returned to Washington, D.C. after recessing for the 2010 midterm elections.

There is tremendous debate regarding the level of action and the issues that will be acted on  during the final session of the 111th Congress.

One issue where there is no debate is the need to address the status of the FY 2011 budget. On September 30, Congress passed a continuing resolution to fund federal programs through December 3.

Therefore, before Congress departs action will need to be taken on all 12 appropriations bills by the current resolution’s deadline, pass an ominbus spending bill (which combines several appropriations bills into one), or pass an additional continuing resolution.

The 112th Congress will be officially sworn in and begin the first week in January.

Washington Legislature’s Make-Up Almost Determined

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The make-up of the 2011-13 Washington State Legislature is all but determined. As of Friday it appeared that all legislative races were resolved except for two.

In the Washington House the race fo the 25th District (Pierce County) remains undetermined. Totals released on Friday showed incumbent Democrat  Dawn Morrell trailing Republican challenger Hans Zieger by 18 votes.

The race for the 25th District clearly meets the criteria for an automatic recount, which require the gap between candidates is fewer than 2,000 votes and less than one half of one percentage point.

The final outcome in the Washington State Senate will be determined when the results of the race for the 41st Districk (King County) are known. Currently, Republican Steve Litzow holds a 309 vote lead over Democrat incumbent Randy Gordon.

The gap between the two candidates has decreased since election night. King County still has an estimated 50,000 ballots to be counted, but it is unknown how many are in the 41st District.

Finally, one race that was considered a toss-up last week was determined. Rep. Kelli Linville conceded the race for the 42nd District to Republican challenger Vincent Buys. As of Friday, only 177 votes had separated the two candidates.

If trends continue as they have over the last couple of weeks, it appears that the Senate Democrats will retain the majority in the Senate, 27-22 and the House Democrats will retain their majority with 57 or 56 seats.

Good News for State Budget

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The November Caseload Forecast shows a slight increase in Washington’s budget. 

Washington’s Economic and Revenue Forecast Council indicates collections over the past month have increased by $18.3 million. While not a game changer, this was unexpected good news.

The savings identified in the report came in the form of caseloads for nursing homes and home care, which are attributed to savings from lower-than-predicted numbers of people getting care.

The additional revenue reduces the $55 million increase in the state budget deficit because of the passage of I-1107 which repealed taxes on pop, bottled water, and candy. The revenue reduces the state’s shortfall to approximately $40 million which is likely to be addressed in a supplemental budget instead of another across-the-board cut.

Despite the good news, the overall forecast was mixed. Washington faces approximately $15 million in higher-than-budgeted costs for the state’s Disability Lifeline program. In addition, though the number of children enrolled in public schools decreased slightly the potential savings from this were erased by increases in special-education and bilingual education enrollments. Finally, enrollments are climbing much higher than anticipated in Temporary Aid to Needy Families (TANF).

In response state agencies are looking at actions to remedy these increases in the long-term.

National Commission Recommends Reductions to Higher Education to Balance National Budget

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Yesterday, the bipartisan National Commission on Fiscal Responsibility and Reform released a draft proposal to reduce the federal budget deficit.

Among the recommendations in the proposal is to eliminate the in-school interest subsidy on federal loans and discontinue administrative cost allowances paid through the Pell and campus-based programs.

The Obama Administration is withholding comment on the draft proposal until the Commission releases final recommendations.

The Commission was created by President Obama to recommend policies to address the nation’s fiscal challenges and balance the budget by 2015. The Commission, which is made up of a bipartisan set of legislators and other fiscal experts, was charged to produce a final set of recommendations no later than December 1, 2010. A final report would rquire the approval of at least 14 of the Commission’s 18 members.