Overview of Governor Locke�s 2001-03 General Fund Operating and Capital Budget Proposals
Senate Ways and Means Committee Staff
January 8, 2001
Major Features of Governor Locke�s Proposed 2001-03 Operating Budget
� $770 million or 70% of all program enhancements are for compensation. These include:
� $235 million to fund an IPD (2.2% and 2.5%)COLA for higher education, state employees and vendors.
� $138 million to pay a portion of the additional costs of maintaining health care benefits for state employees.
� $49 million in other adjustments including partial implementation of the salary survey, 6767 recruitment and retention increases and Attorney General salary increases.
� $10 million for a pool of funds for recruiting and retaining four-year college faculty.
� $10 million to raise salaries for part-time community college faculty and pay for longevity and merit increments.
� $14 million for school safety initiatives.
� $8 million for �performance school districts� which would be exempted from state rules and regulations.
� $8 million for focused assistance to struggling schools.
� $6 million for high tech programs.
� $3.5 million for alternative teacher certification programs.
� $10 million for other miscellaneous programs.
� $42 million for new enrollments at four year and community college institutions, of which $17 million increases programs in high demand like computer science.
� $17 million for additional financial aid ($9 million State Need Grant and $8 million for the Promise Scholarship program).
� $7 million to start a new state technology institute at the UW Tacoma Branch Campus.
� $23 million for other initiatives including technology programs.
� $34 million for the DSHS Children and Family Services division to reduce CPS caseworker ratios, expand child-placing agencies and increase foster care reimbursements.
� $14 million for Department of Health a new childhood vaccine.
� $12 million is provided to enhance developmental disabilities caseworker staffing ratios.
� $80 million (of which $3 million is from the general fund) is provided to support the state strategy to recover salmon.
� $7 million is provided to stabilize the Department of Natural Resources fire protection program and to add additional staff and equipment for the program.
� $3 million new funding is provided for the parks commission for ranger and visitor safety, parks management and a Lewis and Clark interpretive center.
� $22 million for debt service resulting from new capital budget projects.
� $12 million to hire 70 additional auditing staff at the Department of Revenue to increase compliance with existing tax laws.
The $1.1 billion in Enhancements Is Paid For By (1) Making $484 million in Savings and Reductions and by (2) Increasing the Spending Limit by $632 million.
� $207 million in savings are achieved by assuming a greater return on pension fund investments.
� State employees will be asked to assume a greater share of the cost of their health care benefits, saving $75 million. This proposal will increase the average employee share of health care benefits from 6% to 10% by the end of the biennium.
� The Better Schools Fund is reduced by $40 million by eliminating the professional development component.
� The state traffic education program is eliminated in the second half of the biennium saving about $6 million.
� $23 million is saved through a 2% across-the-board cut in higher education �non-instructional� programs.
� The state-funded Medically Indigent program is reduced by $34 million.
� Eliminating Medicaid dental services for most adult clients saves $20 million.
� Reducing state mental hospital populations by 32% and moving these clients to boarding homes saves a net $10 million.
� Growth in the Developmental Disabilities Volunteer Placement program is reduced by $11 million.
� Eliminating inflation adjustments throughout state government saves $31 million.
� Eliminates funding for vocational education in the Department of Corrections, saving $6 million.
The Governor adjusts the I-601-spending limit in two ways:
� A proposed amendment to I-601 to increase the spending limit for the cost of Initiative 732 (teacher COLA) and all future voter-approved spending (+$325 million).
� Extensive use of the so-called �two-way street� provisions of HB 3169 passed in the 2000 session that permits the spending limit to be increased when revenues or programs are transferred from non-general fund accounts, and moving some general fund expenditure growth to non-general fund accounts. These adjustments are included in both the 2001-03 budget and the 2001 supplemental budget (+$307 million).
� The Unrestricted Ending Balance is reduced from $480 million to $158 million. Most of what�s left in the unrestricted balance depends on the hiring of additional tax auditors at the Department of Revenue.
� The Emergency Reserve Account is reduced from $570 million to $433 million by spending some revenue before it gets to the emergency reserve and through a proposal to spend an additional $100 million of the reserve for transportation.
� The Governor�s Budget leaves $75 million in capacity under the revised 601 spending limit for future supplemental budgets.
The Governor concurs with the Treasurer's recommendation to add 3/4% to the interest rate forecast as a cushion for possible rate fluctuations. This approach limits bond proceeds to $900 million for the biennium. This amount is $87 million less than the 1999-01 capital budget.
Approximately $20 million of the Education Construction Account (ECA) is held in fund balance for 2003-05 expenditures. (The Education Construction Account comes from the excess revenue over the emergency reserve and was dedicated to education. The Legislature change the threshold for spillover above the emergency reserve from 5% biennially to 5% annually in the 2000 session but that flow of funds was changed again by Initiative 728. Now a portion of the lottery will flow to the Education Construction Account).
The Governor's budget does not assume any changes in the rules for school construction funding. This is primarily due to the fact that timber revenues and lottery funds to the ECA will not sustain the current rules in future biennia.
Since the ECA may be spent on either K-12 or Higher Education it adds to the discretionary level of the budget. The Governor proposes spending 1/3 ($97 million) of the current balance of the ECA on higher education. More than half of that amount is earmarked for the Community Colleges.
Expenditures from the combination of bonds and Ed Construction Account total $1.2 billion in discretionary capital spending, the highest since 1991.
Highlights of Major Capital Expenditures Include:
� K-12 received $200 million in bonds and ECA to supplement timber revenues and other dedicated funds to meet the current construction program rules.
� The Community Colleges received $225 million in bonds and ECA. This amount goes further than any previous budget proposal to meet repairs and renovations at the CCs.
� The 4-year colleges receive $300 million in bonds and ECA for various projects. Major building initiatives continue at UW Tacoma and WSU Vancouver. In general the Governor�s budget places more emphasis on preservation and renovation than on new projects.
� Education (K-12 and Higher Education combined) receives 65% of the discretionary funding in the capital budget.
� DSHS receives $90 million, $53 million of which is earmarked for the Special Commitment Center (sex offenders) at McNeil Island.
� Housing receives $63 million that is the same as the current biennium's appropriation.
� The proposed funding for the Washington Wildlife and Recreation Program (WWRP) is $45 million in bonds. While the Natural Resources area including WWRP gets $136 million in bond. Of that amount, $28 million is for salmon habitat restoration, $4.5 million is for the forest and fish agreement, $11 million for hatchery reforms and $4 million for Yakima Basin projects.
� The recommendation for General Government is $64 million in state bonds. $15 million for the Military Department that funds both the Bremerton and Spokane armories plus other preservation projects and finishes Yakima. The schedule for the School for the Deaf is maintained with $5 million. And the various new projects (Seattle Center, Ft Vancouver, Mirabeau Pt in Spokane, Chewelah Peak ELC) may compete in a competitive grant process funded with $6 bond.