Sneak peak at supplemental budget

Although the new fiscal year and biennium are only 1 day old, it's not too early to start thinking about next year's supplemental budget. Based on yesterday's caseload forecast, the Governor is already hinting at what agencies can expect to be proposed.

Here are details on the caseload forecast as reported in The Olympian:

"More Washington residents will receive Medicaid and children’s health assistance in the next two years than earlier forecast, creating a $250 million shortfall in the state’s already-strained budget.

The new forecast was released Wednesday by the Caseload Forecast Council, and Gov. Chris Gregoire’s budget office released an analysis showing that $113.4 million of the expected increase is in aid to needy families that qualify for Medicaid.

An additional $69.6 million is for children’s health care, including some children whose families qualify for Medicaid and others whose citizenship has not been verified. General Assistance Unemployed costs also are up $12 million, and nursing-home costs are up by $6 million."

Coupled with last month's poor revenue forecast, the state's new budget is already projected to be in the red. In response, the Governor's budget office (OFM) sent a memo to agency directors yesterday detailing her strategy:

"On June 18, the Governor directed the following administrative actions by cabinet agencies:

• Full Time Equivalent (FTE) reductions equivalent to a 2 percent reduction in 2009-11 budgeted GFS FTEs.

• Continuation of specific GFS savings in out-of-state travel and training, personal services contracts, and equipment purchases.

• Spending restricted to only critically necessary activities.

She also has encouraged non-Cabinet agencies to impose similar measures.

The Governor’s reductions are intended to create savings that mitigate the effect of the June revenue drop. OFM will continue to watch revenue collections and caseload/enrollment projections as we approach the September and November forecast updates for GFS revenues. Ongoing expenditure and revenue pressures will very likely require further action, including revisions in a 2010 supplemental budget. The reductions in this memo represent the first steps toward supplemental budget changes for expenditures funded by the GFS."

Included in the memo are two tables showing the projected FTE and spending reductions. These figures are a good first look at what the Governor may propose in a supplemental budget.

If enacted by agencies, the Governor's proposal would reduce FTEs below budgeted numbers by approximately 642 and spending by $374 million.

While this is a good first step, additional spending corrections by the Legislature next session will be necessary to rebuild the state's rainy day account. Otherwise we may not be able to respond effectively to any future curve balls the struggling economy may throw our way.