State Budget Impacts

3 January 2012

Subject

The State Legislature’s budget and changes affecting nonprofit organizations.

Current Status

The State budget is projected to fall about $2 billion short this biennium.  The Legislature was called into special session late in 2011 to resolve the problem, but chose a short-term fix, and will address the issue during the regular session, January to March, 2012.

Background

The State Legislature had to cover a historically large shortfall and make deep reductions to public services in the 2011 session.  The lawmakers have ac onstitutional obligation to balance the budget, but also have an obligation to meet the needs of our communities.   For the most part, they met both of these goals in 2011.   However, it's important to note that some cuts to the state budget could have been avoided or partially mitigated by raising revenue.   Unfortunately, they were unable to garner the super-majority of votes needed for any significant new revenues, to restructure our highly regressive tax system, or to eliminate tax exemptions or "loopholes" for special interest groups.   The passage of Initiative 1053 reinstated a requirement for a two-thirds majority in the legislature to increase any tax, or to repeal any tax loophole.

Discussion

The Legislature preserved the popular state-only children’s health program, the Disability Lifeline, Basic Health, the state’s food assistance program, medical interpreter services, and ECEAP slots for three year olds.  All of these programs had been marked for elimination in the governor’s preliminary budget.

Big picture:

·          Spends approximately $32.2 billion.

·          Makes reductions of $4.6 billion.

·          Leaves a reserve of over $723 million.

·          Preserves as much of the social safety net as possible (see above)

·          Leaves reserves to guard against further downturn.

 

K-12 Education:

·          Invested $33.6 million in K-3 class size for poverty schools.

·          $5 million transportation enhancement.

·          $3 million principal and teacher evaluations.

·          Suspends I-732 and I-728, and K-4 class size enhancements.

·          Saves $41 million with cut to ALE programs.

·          Eliminated revised bus depreciation proposal.

 

Higher Ed:

·          22 percent cuts totaling $600 million

·          Accounting for tuition increases, cuts total 5.1 percent.

·          Mitigated with increased financial aid - $124 million for the state need grant.

 

Low Income Health Care:

·          Preserves the Basic Health Plan at 34,000 (42,000 currently)

·          Continues Disability Lifeline Medical with no cap

·          Changes and reduces Children’s Health by lowering income threshold to 200 percent of poverty (Those above can purchase coverage)

·          Rolls hospital rates back 7 percent (inpatient) and 8 percent (outpatient). Saves $111 million.

·          Reduces community clinic payment rates by about 10 percent (about 1/3 of recent increases) saving $42 million and continuing federal match.

 

Other Health Care:

·          Take Charge Family Planning (Eligibility expanded in SB 5912)

·          State funded family planning grants - Senate reduced by 11 percent

·          HIV prevention (No cuts)

·          Medical Interpreters - Senate position: Reduced by $2.8 million.

 

Long term and Developmental Disability care:

·          10 percent reduction in Medicaid personal care hours, based on acuity.

·          Saves $41 million from the nursing home safety net assessment.

·          Employment and day programs reformed for DDD clients.

 

Human Services:

·          Reforms the Disability Lifeline cash program, establishing a new Housing and Necessities Program.

·          State food assistance is reduced by 50 percent.

·          Refugee and naturalization services are reduced by 50 percent.

 

Public Safety:

·          Expanded juvenile treatment by $1 million.

·          Expanded housing vouchers for recently released offenders by $844,000.

The personal income in Washington is growing faster than state revenue collections, due largely to a tax structure heavily reliant on sales and use taxes and initiatives limiting the rate of increase to tax rates.

More cuts to state revenues expected:

The State of Washington must address the current shortfall in the 2012 regular legislative session.   Creating additional revenue will be difficult because of the 2/3-vote requirement, so further cuts to spending are likely.  This will have a direct impact on those nonprofit organizations that receive funding from the State to provide services.

Higher education is expected to bear the brunt of the cuts during the session.  Tax preferences, deductions and exemptions from the business and occupation and sales taxes now enjoyed by some businesses, may also be looked at.  There are nearly 200 tax preferences in place, and most are regularly reviewed.

Conclusion

Although it relied on cuts to balance the budget, rather than increasing any revenues, the Legislature did a masterful job of maintaining programs and limiting the cuts to social service programs in 2011.   Sixty percent of the state budget is legislatively protected; the shortfall represented 40% of the unprotected budget in 2011.  Cuts to the budget made up 91% of the 2011-2013 budget shortfall solution; the other 9% came from transfers of funds. 

Alliance FOR Nonprofits Washington will be following the actions of the Legislature closely, and let you know when revenue issues concerning nonprofit organizations arise.