Washington Gov. Jay Inslee is warning of a budget deficit in excess of $10 billion and calling on state agencies to pare spending now to deal with it.
A Nov. 8 memo from Inslee’s budget director cited rising costs, increasing demand for public services and lower-than-expected tax collections for a projected operating budget shortfall between $10 billion and $12 billion over the next four years.
Cuts are needed to balance the spending plan Inslee will release next month for the 2025-27 biennium.
“The Governor’s operating budget will prioritize continuing essential programs and addressing caseload increases, while not expanding existing programs and services,” Pat Sullivan, director of the Office of Financial Management, wrote in the memo.
Transportation budget projections also have trended down for several forecasts creating a situation where revenues are not covering current commitments, Sullivan said.
Sullivan directed cabinet agencies to submit cost-saving options, like hiring freezes and pausing or delaying programs, by Friday, Nov. 15. And he urged presidents of higher education institutions and separately elected officials to undertake a similar exercise.
At least two agencies — Department of Social and Health Services and Department of Transportation — imposed hiring freezes, with exceptions for some essential posts.
Sullivan warned of “tough fiscal choices ahead” following release of the September revenue forecast but declined then to quantify the amount of the projected deficit.
Another forecast is coming out next week. That will give Inslee a final piece of information for the budget proposal he will release in December. It will serve as a template for lawmakers and Gov.-elect Bob Ferguson when they write spending plans in the 2025 session.
It’s going to be a challenge, said Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee and the chamber’s lead budget writer.
“They are not overstating it,” she said of the projected deficit amount. “Because of the magnitude, we’re going to need to look at a range of options.”
Asked if the “options” included spending cuts and new revenue, she said yes.
The current two-year operating budget is about $72 billion.
The deficit spans the next two budget cycles. It represents the difference between the anticipated costs of current and promised services and programs and the projected amount of revenue that will come in to pay for them. Put another way, state agencies need $10 billion to $12 billion in additional funding to maintain current programs and services.
Senate Minority Leader John Braun, R-Centralia, estimated the cost of maintaining the current level of services in the 2025-27 budget will drive base spending for the biennium to roughly $76 billion.
While the deficit “is a big number, it is not an unmanageable number,” he said. “I have absolute confidence we can deal with this without new taxes and can live within our means.”
Ferguson and his team are aware of the letter and the governor’s staff will be briefing them in the coming weeks, according to an Inslee spokesperson.
The state Department of Social and Health Services implemented a hiring freeze with exemptions for staff in essential and direct care positions. They also put a hold on new equipment purchases, as well as contracts and travel not already approved.
The state Department of Transportation also froze hiring. There are exceptions for jobs like Washington State Ferries crews and winter maintenance.
“While we have not been directed to do this, it is one logical step we can take to slow our spending while the transportation budget is contemplated during the legislative session,” said Kris Abrudan, acting senior director of external relations for the transportation department.
Education is the single largest component of the budget and Superintendent of Public Instruction Chris Reykdal requested an increase of nearly $3 billion for public schools in the next budget. A third of that is to fully fund special education.
“These types of exercises from OFM are not uncommon,” Katy Payne, OSPI chief communications officer, wrote in an email. “While there are always competing priorities and limited resources, the state has both federal and state level obligations it must meet in order to ensure all Washington students receive the high-quality public education that they are constitutionally owed.”
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