1. Washington’s Financial
Condition: Layperson’s View
1. What is the financial outlook and Governor’s proposed
solutions?
2. What federal funding will be available to help the state?
3. What are the implications for K-12 funding?
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2. National and State Economic
Downturn
• National economy has been in recession since 12/2007
• Washington lagged the downturn, and may lead
improvement…
• But state revenues collections will be impacted more
severely b/c this is a consumer lead recession
▫ Consumer sentiment is lower than in previous recessions
▫ Taxable automotive and construction activity has dropped off
sharply
▫ Other lay-off’s since October are significant: WaMu, Boeing,
Microsoft
• Washington State Economic and Revenue Forecast
Council: www.erfc.wa.gov
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3. Budget Outlook
• November forecast: $6.1 Billion projected deficit for 2009-
2011 Biennium
▫ Includes revenue downturn this fiscal year
▫ Through 6/30/2011
• New preliminary forecast on February 19th
▫ Speculation that Council will announce $8.5 - $9 Billion deficit through
6/30/2011
▫ Official forecast on March 19th
• 2011-13 Biennium
▫ November forecast: economy would improve quickly
▫ February/March forecast: guessing this will be revised
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4. Including the shortfall for this biennium, the Governor’s budget
addressed a budget problem of over $6 billion
($6,120)
Source: Senate Ways and Means Committee Staff
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5. 58% of the Budget is Protected and
Unavailable for Reduction
Near-General State Funds; 2009-11 Biennium Maintenance Level
Other Human Services
25%
Basic Education
38%
General Government
2.5%
Other Education
.5% Higher Education
10%
Medical
Natural Assistance
Resources 12% Debt
1% Other Service/Pensions/Other
K-12 8%
3%
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6. Protected Sectors Drives Large
Reductions in Others
Deficit as % of Budget
Deficit as % of Entire Available for
If Deficit Level is: NGF* Budget Reduction
$6.1 Billion 17% 39%
$8.5 Billion 23% 55%
• Fortunately, policymakers have some options that mitigate the need
for pure percentage reductions at this level
▫ Some resource changes as proposed by Governor
▫ Pension method change
▫ Federal funding
*Near General Fund-State
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7. The Governor’s budget solves slightly under 2/3rd of the budget problem
by reductions and not funding salary increases…with the remaining
solution coming from various resources changes
Source: Senate Ways and Means Committee Staff
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8. The reductions in the Governor’s proposed 2009-11 budget are spread
across state government, but some of the largest reductions occur in
human services, K-12, and higher education
* This reflects estimated net reductions accounting for any policy level increases included in the Governor’s proposed 2009-11 budget.
There was also reductions made in her proposed 2009 supplemental budget for the current biennium.
Source: Senate Ways and Means Committee Staff
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9. Schools are 41% of the Budget; Take 16% of
the Governor’s Proposed Reduction
* Reflects net near general fund policy change after accounting for reductions and increases, but excludes impacts of
compensation-related adjustments and assumed federal funding increases. Source: Senate Ways and Means Committee Staff
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10. Federal Stimulus Funding Over 2 Years
• Governor’s proposed budget assumed $1.1 Billion
• Still refining new estimate for Washington:
Anticipated 2 Year Funding Based on
Conference Negotiations
$835.6 Fiscal Stabilization (K-20 Portion)
$175.2 Title I
$231.9 IDEA (Spec Ed)
$8.6 Ed Technology
$0.0 Line-Item School Construction
$3,431.5 All Other
$4,682.8 Total for Washington
• Not all available to solve state budget deficit!!!
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11. K-12 Context
• COLA is 4.1% in 2009-10; • State cannot cut “basic
0% in 2010-11 education”
▫ New update in March
▫ $360 M cost included in • Non-basic items include
deficit projection
(biennial cost):
▫ Drives an additional $158 M
▫ K-4 enhancement ($388 M)
in local funds needed
▫ 2 LID ($75 M)
▫ Levy equalization ($456 M)
▫ I-728 ($908 M)
▫ Gifted education ($20 M)
▫ Health Benefits inflation ($96 M
if 7% inflation)
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12. Governor Proposed K-12 Budget
• No COLA for 2009-11 Biennium
▫ $360 M savings in K-12; $620 M savings in state
government total
• I-728 reduced 22%
▫ $198 M cut from $908 M program
• Levy Equalization reduced 33%
▫ $147 M cut from $456 M program
• $48 M in programmatic cuts (e.g., Reading
Corps)
• $40 M; eliminate Math/Science Professional
Development
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13. Possibilities: Caution!!!
• Budget reductions by state are very probable
▫ LEA probably not as deep as proposed by Governor
• Likely no, or low COLA funded by state
▫ Local funds value of $158 million or
$80/student/year
• Health care inflation funded
• Health care purchase-shift debate
• Pension contribution adjustment
• More federal funds
• Budget delay will make May notices difficult
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