State deficit dramatically overstated

A careful review of Governor Locke's proposed 2003-05 budget reveals that the state deficit has been dramatically overstated. Washington's staggering $2.4 billion deficit becomes a $900 million problem at current spending levels, and it seems most of the "devastating cuts" creating an uproar around the state are actually taken from spending increases that do not yet exist. We have identified three important facts omitted from most public discussion of the budget:

1. State revenue is forecasted to INCREASE by $1.6 billion (7.4 percent) in 2003-05.

2003-05 estimated revenue: $22,689.7 million
2001-03 estimated revenue: $21,126.2 million
Increase: $1,563.5 million

2. Despite talk of massive cuts, Governor Locke's proposed 2003-05 budget INCREASES state spending by $528 million.

2003-05 estimated expenditures: $22,979.4 million
2001-03 estimated expenditures: $22,451.4 million
Increase $528.0 million

3. Nearly one third of the governor's purported $2.4 billion "cuts" in the coming budget cycle are not cuts at all. They simply delay, reduce or eliminate plans for increased spending and expanded programs. Consider the governor's "cuts":

• $389 million that would have expanded the Basic Health Plan.
• $351 million in future raises for state employees and vendors.
• $229 million in future cost-of-living raises for teachers.
• $221 million in new allocations for class size reduction.
• $140 million in general funds planned to offset higher college tuition.*
• $111 million in forecasted higher costs for health benefits.*
• $83 million reduction in pension collections due to new calculations.

*Health care and higher education costs are increasing, but both systems suffer significant waste and mismanagement problems. Hundreds of millions could be saved by implementing meaningful accountability standards.

Thus, it appears that $1.524 billion of Locke's $2.4 billion in "cuts" is not comprised of actual cuts. It is simply a decrease in hoped-for increases. Making "cuts" in these areas does not affect existing programs or existing funding levels.

Legislators could reduce the state's actual deficit to $655 million if they froze funds for class size reduction in the first year ($221 million) of the coming budget cycle, rather than just the second year. In addition, if Governor Locke would implement his new Priorities of Government budget model now instead of increasing spending by $235 million in this budget cycle with his supplemental budget, he could reduce the deficit (and the need for real cuts) to $420 million.

Prepared by Bob Williams, President and Senior Research Analyst (360) 956-3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org