State Sen. Derek Kilmer, D-Gig Harbor, addressed the economy and the 2011-13 state biennium during the weekly public affairs forum last Thursday at Cottesmore of Life Care Center.

 Although what some have dubbed the Great Recession technically ended in June 2009, Kilmer noted the weak state of the economy and its impact on Washington.

“The current recession we’re in is longer and deeper than anything we’ve seen,” he said.

The state has lost 195,000 jobs since the official start of the recession in December 2007, Kilmer said, and only 64,000 of those jobs have been regained.

The higher unemployment rate has an effect on state coffers.

Nearly half of Washington’s general fund — the principle account which supports state government — is funded by retail sales taxes, Kilmer said, and higher jobless rates have resulted in people spending less money, causing state revenues to decline significantly.

State resources in the form of the near general fund — the general fund and a few other dedicated accounts — have actually declined for two consecutive biennia, Kilmer said.

“In a recessionary period, demand for state services goes up,” he said, providing several examples of such increases since 2007:

A College enrollments are up 47,000 as people try to improve their job skills through higher education.

A Some 236,000 more people now qualify for low-income medical assistance.

A Due to population growth and departures from private-school tuition, there are 24,000 more students in the state’s public school system.

Kilmer called it a “perfect storm.”

“The state budget situation will not improve until we get people back to work,” he said. “You’re going to see cuts in every functional area of government.”

Kilmer put the $2 billion budget gap between revenues and what lawmakers want to spend, including funding the state’s Budget Stabilization Account, better known as the “rainy day” fund, into perspective with several examples:

A Cutting all higher education expenditures would save the state $1.4 billion.

A Getting rid of all corrections, minimum-security camps and work-release centers would save $1.2 billion.

A Ending all state environmental efforts would save a comparatively paltry $230 million.

“The solutions certainly aren’t simple,” Kilmer said.

Some of those not-so-simple solutions can be found in Gov. Chris Gregoire’s proposed 2011-13 budget, which includes $1.7 billion in cuts — $288 million in K-12 education, $168 million in higher education, $266 million in health care, $402 million in human services and $86 million in criminal justice/corrections.

Gregoire’s proposed budget also includes some revenue options for “buying back” some of the cuts. She has proposed a three-year half-cent sales tax increase go before voters next year, Kilmer said, as well as $282 million in other tax policy changes, including a “windfall profits tax” on oil companies, a 5 percent “luxury tax” on vehicle purchases greater than $50,000 and a 25-cent cigarette tax hike.

The legislative special session that ran from Nov. 28 through Dec. 14 was tasked with solving the state’s budget problems. Legislators, who made a down payment of sorts on the budget gap, came up with $480 million in cuts that were approved by the governor.

“What you saw in the special session was shaking the tree,” Kilmer quipped.

Lawmakers will tackle the rest of the budget when they reconvene on Jan. 9 for a 60-day regular session.

Kilmer described the budget cuts from the special session as “bipartisan” and noted the teamwork between the Democrat and Republican parties.

“We actually got to see the two parties work together to solve problems,” he said.

It will take more cooperation to get the state budget under control.

The $2 billion projected decrease in expected revenues is the main problem legislators will grapple with during the regular session, Kilmer said.

“That’s what’s driving this budget conversation right now,” he said.

Harsh budget realities could result in 60,000 adults being taken off the Basic Health Plan by the end of the 2011-13 biennium, Kilmer said, and less state support for higher education.

Despite the overall dire economic outlook and its impact on the state budget, Kilmer did have some good news to share.

He lauded some measures already undertaken by the Legislature — and voters — in getting the state’s fiscal house in order, including long-term financial stability in the form of getting debt service payments under control, reforms in higher education, more efficiencies in corrections, social service program reforms and administrative efficiencies.

There have been administrative cuts of between seven and 10 percent, he said, in state agencies.
“None of these are silver bullets to the state’s budget problem,” Kilmer said.

He also lauded voters’ November passage of SJR 8206, the Washington State Budget Stabilization Account Amendment, which transfers additional funds to the account if the state has received “extraordinary revenue growth.”

Kilmer referred to the amendment as “the rainy day fund on steroids.”

Still, lawmakers will have their hands full next year when it comes to dealing with the state budget. Kilmer said his top three priorities will be to invest in education, provide services to society’s most vulnerable and community safety.

He said the state should focus on a three-tiered economic development plan that would include encouraging entrepreneurship and making Washington more business friendly, making improvements to infrastructure and developing in-state talent.

“The state budget is not dissimilar to family budgets and what businesses deal with,” Kilmer said.

Reporter Brett Davis can be reached at 253-853-9243 or by email at brett.davis@gateline.com.