FOR IMMEDIATE RELEASE Dec. 18, 1996

Lowry proposes budget plan to protect children and schools

OLYMPIA Gov. Mike Lowry today unveiled a two-year state budget plan designed to protect children's health and safety, improve public education, and make the investments necessary to preserve the quality of life in Washington State.

"Our economy is strong, and the future looks bright," Lowry said. "This budget builds on the progress we have made over the past four years and puts our state in a prime position to meet the challenges of the twenty-first century."

To meet the immediate challenge of the next two years, the governor's $19.5 billion General Fund-State (GF-S) operating budget plan for the 1997-99 Biennium proposes additional support for public education, new measures to protect endangered natural resources, and state assistance for low-income families, senior citizens, and children affected by federal cutbacks.

The governor is also proposing a bill that would allow homeowners to defer an estimated $40.9 million in property taxes by July 1999. Under that plan, homeowners with an annual income of $50,000 or less could defer any property taxes over 5 percent of their income.

In announcing his recommendations, the governor noted that the state's population is expected to increase by more than one million people during the 1990s, the fastest rate of growth since the war years of the 1940s. This surge in population growth comes at a time when cost-cutting measures already approved by Congress and the president are expected to reduce federal support for public services in Washington State by $1.7 billion through the year 2002.

The governor's budget plan provides $220.8 million to help offset anticipated federal losses of $619 million in the 1997-99 Biennium, with most of that state funding going to mitigate the effect of cutbacks on low-income families, senior citizens, and people with disabilities.

"Thanks to our state's rebounding economy and a healthy budget reserve, we have the resources necessary to address these new challenges and still meet our other responsibilities," Lowry said. "We knew this day was coming, and we prepared for it."

Major areas of the budget receiving additional funding under the governor's proposal include public schools ($693.9 million), higher education ($227.9 million), children and family services ($164.0 million), corrections ($100.9 million), long-term care for senior citizens ($95.4 million), medical assistance for the poor ($58.4 million), and financial assistance for low-income families and individuals ($123.1 million).

The governor is also proposing a comprehensive approach to watershed management, along with measures designed to protect Washington's marine waters and prevent damage from future floods. Funding includes $11 million for the successful Jobs and the Environment program in the 1997-99 Biennium as well as $70 million for the Washington Wildlife and Recreation Program.

Education

Nearly 60 percent of all additional funding proposed by the governor in the 1997-99 Biennium would go to public education, including kindergarten through grade 12 (K-12), colleges, and universities. Most of the $693.9 million increase proposed for K-12 schools would be used to accommodate 35,242 additional students, support improvements in technology, and provide a cost-of-living adjustment (COLA) for teachers and other K-12 employees.

For higher education, the governor recommends spending an additional $227.9 million in response to mounting pressures on colleges and universities by the "baby boom echo" generation and by dislocated workers seeking additional training. Most of those additional funds would be used to expand enrollments by 4,581 students and extend financial aid to 8,000 more students from families with low or moderate incomes.

Like K-12 employees and other state workers, faculty and staff at public colleges and universities would receive a COLA equal to the rate of inflation as determined by the Implicit Price Deflator (IPD) in the next two years (2.5 percent in 1997 and 2.7 percent in 1998) under the governor's proposal.

Children's Services and Federal Cutbacks

As in previous years, the governor's budget plan supports additional improvements in services for children under the state's care. His proposal for the 1997-99 Biennium provides a total of $74.5 million (including $15.8 million in federal funding) to cover the carry-forward costs of improvements approved by the 1996 Legislature, allow for further reductions in workload ratios for Child Protective Service (CPS) workers, provide substance-abuse treatment to more at-risk families, and support the foster care system.

His budget proposal also provides a total of $12.7 million a 69 percent increase to address the continuing problem of domestic violence, a major health and safety threat to women and their children.

Despite the allocation of additional federal funds in some areas, passage of the federal welfare bill (P.L. 104-193) will result in the estimated loss of $379 million in such basic areas of federal support as food stamps, child-nutrition programs, local housing assistance, substance abuse programs, and Supplemental Security Income (SSI) for legal immigrants and children with disabilities. More than half of the $619 million in federal cutbacks anticipated in the 1997-99 Biennium are the result of that single measure, according to estimates by the state Office of Financial Management (OFM).

Below are some of the major costs assumed in the governor's budget proposal resulting from federal approval of P.L. 104-193:

• $91.6 million GF-S to continue income support for elderly, blind, and disabled legal immigrants, who will lose eligibility for the federal SSI program in August. The governor's proposal also provides $3.1 million to cover 224 non-immigrant children many in foster care with medical or behavioral problems who will lose SSI eligibility in July.
• $43.6 million GF-S to establish a new state-sponsored food program for legal immigrants, approximately 38,000 of whom will lose eligibility for federal food stamps. The governor's budget also provides an additional $9 million GF-S to support local food banks along with $3.4 million GF-S for bulk food purchases to help offset federal cutbacks in food stamps and other food-assistance programs.
• $15.3 million to provide a COLA to low-income families receiving cash assistance, the first such increase since 1993. Approximately 96 percent of all recipients of the Aid to Families with Dependent Children (AFDC) program also receive food stamps, which will be reduced by an average of $26 per month for a family of three beginning next month. Most vendors who provide social services on a contract basis with the state will also receive a COLA, as will the Early Childhood Education and Assistance Program.
• $17 million GF-S to replace federal support for the Child Care Food Program, and $4.1 million GF-S to change state computers to meet requirements under the new federal welfare law.

"In some cases, the state has a legal obligation to pick up these additional costs in others, it's a moral obligation," Lowry said. "In any event, we can't afford to turn our backs on low-income families, senior citizens, and others in need if we want to call ourselves a civilized society."

Modifying the Initiative 601 Spending Limit

The $19.5 billion GF-S operating budget proposed by Gov. Lowry allows state expenditures to grow at an average annual rate of 4.6 percent above the expenditure limit for the current biennium, virtually identical to the rate of population growth and inflation. Yet, as currently calculated, spending limits established by Initiative 601 would hold annual growth to just 4.0 percent below the combined rate of inflation and population growth during the 1997-99 Biennium.

Given the mounting pressures on the state's resources, the governor is proposing two modifications to Initiative 601 so that the state budget can at least keep pace with the rate of population growth and inflation.

• Eliminate "Rebasing:" Section 2(5) of the initiative requires that annual spending limits be based on actual expenditures in previous years, rather than previous spending limits. Since the current budget holds GF-S expenditures below the allowable limit, spending limits for the 1997-99 Biennium and all years that follow would be similarly reduced under the current spending formula.

The governor will introduce legislation to eliminate this requirement known as "rebasing" which not only results in ever-tightening limits, but also penalizes state agencies for saving money since doing so virtually guarantees that they will receive less funding in the future under the current rules.

• Adjustments for Cost Transfers: Section 5(2) of the initiative allows for adjustments to the spending limit for "the costs of a federal or local government program ... transferred to or from the state." As currently interpreted, however, this provision would not allow for adjustments to the limit if the state chooses to help offset the effect of federal cutbacks outside the state budget such as the anticipated $196.4 million loss in food stamp benefits to individuals over the next two years.

The governor's proposal would clarify that the spending limit can be adjusted for the cost of any responsibility the state chooses to accept in response to federal cutbacks. With these modifications, the GF-S spending limit applicable to the governor's budget proposal is $19.545 billion, approximately $14 million higher than his proposed level of expenditures.

"Neither of these changes would alter the basic intent of the initiative, which was to tie state spending limits to population growth and inflation," Lowry said. "These modifications would return to that principle, while allowing the state to respond to the growing cost pressures we now face."

Other Measures Proposed by the Governor

Along with his proposed 1997-99 operating budget, the governor also announced three other fiscal measures that he will recommend to the 1997 Legislature.

• 1997 Supplemental Budget: To help see the state through the rest of the current biennium, the governor is proposing a $157 million GF-S supplemental budget for the current fiscal year, which ends June 30, 1997. This measure provides funding for winter storm damage and other unforeseen costs, and also uses available reserves to begin construction on four high-priority educational and arts projects: the Harborview Research and Training facility at the University of Washington; a new Health Services Facility at the Joint Center for Higher Education in Spokane; the Seattle Symphony hall; and various K-12 school projects throughout the state.
• 1997-99 Capital Budget: In addition to the four projects funded through the 1997 supplemental budget, the governor's two-year capital spending plan provides approximately $1.8 billion for new construction projects around the state. An additional $1.4 billion in reappropriations is also proposed to allow currently funded projects to proceed on schedule.
• Watershed Management Referendum: Rapid population growth is exerting increasing pressure on Washington's vital water resources, leading to growing conflicts between user groups, delays in permitting decisions, and the likelihood that more fish stocks will be listed as "threatened" or "endangered" under the federal Endangered Species Act. To protect these natural resources and prevent the economic disruption that would result from additional listings, the governor will propose a $258 million bond measure for submittal to the state's voters to help fund a comprehensive strategy for watershed management.

For more information, contact the Governor's Communications Office at 360-753-6790.