Washington Budget Crisis

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Washington Budget Crisis
Len McComb and Cassie Sauer
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State Budget Basics
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Size of the State Operating Budget
All Funds, 2001 - 2003
Outside the Pie Transportation Budget
4.6 billion Capital Budget 2.6
billion
Other 20.627 billion (federal funds, matching
funds, dedicated accounts)
State General Fund 22.451 billion
State Operating Budget Total 43.078 billion
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Human Services in the Total State BudgetAll Funds
All Other State Programs38
Human Services38
K-12 24
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Human Services in the State General FundState
General Fund Spending Only
Other24
Human Services32.5
K-12 43.5
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The DSHS BudgetAll Funds
Aging Adult Services16
EconomicServices16
Developmental Disabilities8
Medical Assistance41
Mental Health 8
ChildrensAdministration6
Other 6
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Preliminary 2003-2005 State General Fund Budget
Outlook
23.9 Billion
Gap of 1.2 Billion
2003-2005PreliminaryExpenditure
Estimate Maintenance Level
22.7 Billion
SeptemberRevenueForecast
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Increasing Expenditureswhen the economy
declines, demand for state services increases
Other (14 Million)
23,901
Corrections/JR
88
Tort Claims
100
Other Human Services
189
I-732 COLA
215
Millions
Public Schools Enrollment Growth
350
2001-03 Spending Level
Medical Assistance
493
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Voter Approved Initiatives Affect Budget
Measure Purpose 01-03 03-05 Biennium Biennium
Led to millions in tax cuts
Initiative 601 State spending limit (passed
1993)
Initiative 695 Motor vehicle excise (passed
1999) tax reduction
83 million loss
??
464 million loss
764 million loss
Initiative 728 Increased education
(passed 2000) spending
358 million loss
215 million loss
Initiative 732 Cost of living adjustments for
(passed 2000) teachers
25 million loss
95 million loss
Initiative 747 Property tax limitation (passed
2001)
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Possible Budget Busters
Gap becomes 1.8 billion
24,506
Higher education enrollments and financial aid
109
Maintain current share of health care benefits
for teachers state employees
277
Millions
605 Million
I-732 COLA for all other state employees
Current ServicesLevel
219
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Health Care in the State Budget
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People Covered by State Healthcare
Medicaid for Children 531,000
Medicaid for Adults, Aged, Blind, Disabled 286,000
Basic Health 130,000
Other State Programs (MI, GAU, ADATSA) 15,000
Medically Needy 14,000
Childrens Health Insurance Program (CHIP) 7,000
TOTAL 983,000
also, 300,000 public employees covered by the
state
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Hospitals Receive State Funding
Billions of Dollars
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Growth in State Medical Assistance
(General Fund-State and Health Services Account)
30
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Billions
01-03
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Health Services Account

• Dedicated account to pay for health care
• Not subject to I-601 spending limit
• Funding from insurance premium taxes, sin taxes,
  hospital taxes, Proshare
• Funds Medicaid expansion for children, Basic
  Health, public health, others
• In the past, its been flush so general fund
  health expenses moved in and cash moved out

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Declining Revenue to the Health Services Account

• Less Proshare money than budgeted
• Tobacco settlement securitized
• Cigarette tax static to declining
• Cigarette tax revenue dedicated to
  I-773 (I-773 increased cigarette tax
  for Basic Health expansion)
• Liquor taxes flat

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Proshare Money Less than Budgeted

• The federal government offered an agreement
• 70 million more than what the federal government
  would normally pay
• 332 million less than budgeted by
  Governor and Legislature
• In exchange for this additional ProShare funding,
  Washington agrees to stop pursuit of other
  remedies (appeals, lawsuits, etc.)

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Status of the Health Services Account

• Non I-773 portion has a projected deficit of 155
  million this biennium projected to grow another
  400 million next biennium
• I-773 portion has a projected
  ending balance this biennium
  of a positive 128 million
  must be used for
  expansion
• Potential to amend I-773 to use
  money for existing expenses

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Health Services Account Balances
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Projected Expenditures in Health Services Account
701
621
582
507
Millions
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Whats the Bottom Line?
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The 2003-05 Budget Problem is Between 1.2
Billion and 2.3 Billion
2.3 Billion
1.7 Billion
25,014
1.2 Billion
24,409
23,901
Millions
2003-05 Revenue 22.7 Billion
Current Services2003-05
General Fund and Basic HSA Deficit
Maintenance Level(GF-S HSA)Selected Program
Enhancements
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General Fund-State RevenueUsed to Grow--No Longer
Increase in Revenue to State General Fund
507
Biennium
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This Situation is Referred to as a Structural
Budget Deficit
Deficit with current revenues and spending
Millions
Permanent budget cuts or permanent tax increases
needed
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Revenue Options Being Considered(WSHA has no
position on these options)

• Income tax over 100,000
• Income tax on dividends and interest
• Education initiatives back out for
  a vote with a revenue source
• Securitize more tobacco settlement revenues
• Tax restructuring commission proposals (not yet
  released)

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Revenue Options Being Considered(WSHA has no
position on these options)

• Amend I-773 (need 2/3 vote to amend)
  use funding for
  current services
• Sales tax on selected consumer
  services (beauty/barber, manicure,
  cable TV)
• Sales tax on medical services (would result in
  BO tax cut for hospitals and doctors as
  retailers)
• Grab Premera conversion money, if it happens

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Gimmicks Have Saved Budget in Past

• Tobacco settlement
• Proshare
• Tobacco settlement
  securitization
• Moving money in and out of dedicated accounts
• Using reserves / rainy day fund
• Premera conversion?
• Will one appear?

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Possible Federal Remedies

• Increase the Federal Medicaid
  Assistance Percentage (more for
  states with high unemployment)
• Allow access to surplus Childrens Health
  Insurance Program money for current Medicaid
  children
• Ask your federal legislators to support!

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Possible Health Care Cut Proposals

• Eliminate Medically Indigent (MI)
• Eliminate General Assistance-
  Unemployable (GA-U)
• Eliminate adult dental and vision
• Cut Medicaid for kids for example, to
  175 or 130 of poverty
• Cut Basic Health by 50,000 people
• Raise premiums or copays to make people drop
• Prescription drug cuts

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One Example Gridlock to the South

• Oregon faces similar budget crisis
• Longest legislative session in history 5
  special sessions
• Possible solutions in Oregon
• Raise income tax
• Release prisoners, close prisons
• Close mental health hospitals
• Eliminate many state trooper jobs
• Big cuts in state workers
• Securitize tobacco settlement

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What You Can Do

• Meet with your legislators
• Talk to others in your community about what
  health care spending means
• Highlight good things government accomplishes
• Talk to a reporter or editorial board
• Vote/volunteer for a campaign

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Questions and CommentsContact
Informationcassies_at_wsha.orgor
206/216-2538lenm_at_localaccess.com or
360/951-1661