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Definition of a state budget – actual cuts, or cuts in “proposed” spending?

By RACHEL LA CORTE
Business Week

Posted 11/11/2012

 

OLYMPIA, Wash.

Revenue, reform and, of course, cuts. Those are the options Washington state lawmakers will weigh this month as they try to balance a budget deficit projected to be about a billion dollars through the middle of 2013.

But what, exactly, is a budget cut? It depends on whom you ask.

For some, a cut is a removal of something that currently exists: A prison that is shuttered. A state employee who is laid off. A person who received subsidized health care from the state who now doesn’t.

But for those who deal in budgets for the state, a cut also counts as a decrease in projected spending. So that state worker who was expecting a cost-of-living increase in his or her pension and didn’t get it — that’s a cut. So is the decision not to pay for voter-approved initiatives, like one to reduce class sizes.

“There’s no one definition of a budget cut,” said Marty Brown, Gov. Chris Gregoire’s budget director. “State government and the services we provide are far too complicated.”

As lawmakers get ready to return to the Capitol for the Jan. 9 start of the 60-day legislative session, many on both side of the aisle agree that the cuts proposed by Gov. Chris Gregoire to education, social services and public safety will hurt.

“I worry more about those core services where people can’t help themselves,” said Republican Sen. Joe Zarelli, the Senate GOP’s lead on budget issues. “I haven’t felt real bad about the decisions we’ve made thus far, but as we move forward now, it gets more difficult.”

Gregoire has proposed a temporary sales tax to help offset those pending cuts. She and other Democratic leaders argue that $10.5 billion has already been cut from the state budget since 2009 and more revenue is needed. That number includes cuts to current and projected spending, and it includes things like voter-initiative mandated cost-of-living increases that have been suspended by the Legislature at times.

Republicans, who have taken on the mantra of “reform before revenue,” bristle at these definitions of cuts.

“To not get an increase is certainly not a cut, it’s a reduction in expectation,” Zarelli said. “If I were expecting to have a pay raise next year and my boss told me I’ll continue to get what I’m getting, that’s not a cut. But if I go to my boss and he says we need to reduce my pay by 20 percent that’s a cut. And that’s how we should look at it here.”

Brown disagrees. He argues that any obligation — whether it’s approved by voters or voted on by the Legislature — has to count as a cut.

“It’s obligated spending,” he said. “The law says you were going to get it.”

Both views of a cut “are legitimate,” said Scott D. Pattison, executive director of the National Association of State Budget Officers, a professional organization for all state budget officers.

“It really becomes a rhetorical political and policy discussion rather than one from a financial management standpoint,” he said.

If all of Gregoire’s proposed budget cuts — including a suggestion to shorten the school year — are approved by the Legislature, Washington is scheduled to spend about $30 billion in its current general fund budget. That’s more than the last budget cycle and about $2.5 billion less than the peak in the 2007-2009 budget, back when federal stimulus dollars helped lawmakers fill in the fiscal gaps.

So when lawmakers talk about a $10.5 billion cut, what they are referring to is cumulative cuts to current and projected spending to pay for programs that — if revenues had continued as expected — would be paid for out of a budget of about $38 billion, according to projections by the state’s Office of Financial Management.

“If you’re going to operate on the baseline that the state budget always has to increase on maintenance of service levels, then you’re not giving government any incentive to find efficiencies or find new ways to deliver services,” said Jason Mercier, director of the Center for Government of the Washington Policy Center, a conservative think tank.

Mercier said that while he questions whether some actions in the past taken by lawmakers were cuts, there’s no question that what lawmakers face now is real.

“We’ve cried wolf so many times, that when we’re in an actual deficit crisis, people are numb to it,” he said. “And that’s where we are today.”

But analysts with the Washington State Budget & Policy Center, a liberal think tank, think the $10 billion number is too low.

Kim Justice, a policy analyst with the group, said that because the baseline of a program is lowered every time there is a cut, it’s impossible to know the true impact on those who are no longer receiving services or can’t even qualify.

For example, higher premiums and requirements for the state’s basic health program mean that some can no longer afford the program, and thousands more are on a waiting list to get on it.

“In reality, it is more about the human impact,” she said. “At the end of the day, what $10 billion of cuts means vs. $7 billion, to the average person, probably doesn’t mean much. What people do know is that they’re taking home less money, they don’t have health care coverage, they’re having to pay more to meet their basic needs.”

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Rachel La Corte can be reached at http://www.twitter.com/RachelAPOly