Gov. Christine Gregoire's office is considering vast cuts in state spending that Democratic leaders once would have considered unthinkable, including more than $1 billion in funding for public schools.

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OLYMPIA — Gov. Christine Gregoire’s office is considering vast cuts in state spending that Democratic leaders once would have considered unthinkable, including more than $1 billion in funding for public schools.

The governor’s office, along with agency staff, reviewed state programs and ranked them by priority. About 200 state programs and services, worth about $2.7 billion, top their list for cutting or eliminating entirely to help close a gaping hole in the state budget.

State officials project a $5 billion shortfall in the next two-year budget, though Gregoire said recently the gap could grow to $6 billion due to the deteriorating economy.

The governor will release her proposed budget next month. The Legislature must approve a balanced spending plan during the session that begins in mid-January.

On the chopping block: more than $900 million over two years that funds an initiative approved by voters to reduce class sizes; $342 million that aids school districts with small property-tax bases, and about $20 million that pays for gifted-student programs.

And those are just some of the cuts being mulled for public schools.

“There are a lot of things in this budget, because of the extraordinary size of the shortfall, [that] nobody is going to feel good about,” said Victor Moore, the governor’s budget director.

Cuts big and small

In addition to potential cuts in education, the governor is looking at rolling back more than $130 million for programs that provide health care for children and nursing-home care for the elderly.

Even relatively small items, such as $27 million to pay for performance audits of government programs, could be cut. The audits were started when voters approved Initiative 900 in 2005 in an effort improve government efficiency.

State law allows the Legislature to modify or eliminate initiatives with a simple majority vote after two years have passed.

The cuts being considered would hit hard across the state. For example, the class-size initiative, I-728, provides more than $10 million this year for the Lake Washington School District, which includes Kirkland and Redmond. The money pays the salaries for about 100 staff, mostly teachers.

Voters approved I-728 in 2000.

“Eliminating that voter-approved funding would mean an increase in class sizes, the end of some programs for struggling students, elimination of preschool programs for at-risk students and termination of critical teacher-training programs,” Chip Kimball, Lake Washington School District’s superintendent, said in a statement.

“While I understand the grave nature of the state’s budget situation,” he said, “I am urging the governor and legislators to look for other areas to cut first.”

Moore said it’s not certain if all of the proposed cuts will end up in the governor’s budget. In some cases, programs might be scaled back instead of cut entirely, such as funding for I-728.

The reality, Moore said, is that large cuts will have to be made to balance the budget. Even if everything on the list is cut, he still would have to find billions more in savings. Gregoire has pledged not to propose any tax increases to help close the budget gap.

The current two-year general fund budget totals $33.6 billion.

In addition to drafting a list of programs that could be cut or put on hold, the governor’s office and state lawmakers say they’re considering suspending pay increases for teachers and state workers. There’s also a state hiring freeze in place and the possibility of layoffs.

Higher ed told to prepare

The state’s colleges and universities also have been asked to prepare for cuts up to 20 percent, or $600 million over two years. Any higher-education cuts taken from the list being considered by the governor’s office likely would be part of the 20 percent.

Democrats, in addition to controlling the governor’s office, hold large majorities in the state House and Senate. They’ve increased state spending by $8 billion during the past four years. This next two-year budget threatens to unravel much of what they worked on since 2004.

“If we were to cut every single dime that we give to higher education — all the money to the community colleges, all the money to the universities, everything we spend on financial aid — we still have a $2 billion problem,” said state Sen. Craig Pridemore, D-Vancouver, vice-chairman of the Senate Ways and Means Committee.

“The kinds of things we’ll talk about cutting are going to shock a lot of people,” he said.

What about wages?

State Sen. Joe Zarelli, R-Ridgefield, the ranking Republican on the Senate Ways and Means Committee, said it appears the governor’s office is taking the right steps to balance the budget, and that Gregoire seems sincere about not pursuing a tax increase.

Initiative 960, approved by voters in 2007, requires a two-thirds vote in the Legislature to increase taxes. Under the initiative, taxes passed with only a simple majority have to go to the ballot.

Labor groups aren’t happy about the prospect of cuts. In fact, they want more spending.

State workers still want their pay increases, negotiated by the governor’s office and the unions this year. Teachers want higher wages, too. And health-care advocates don’t want cuts that will hurt the vulnerable.

They will jam budget committee hearings and likely rally on the Capitol campus to push their causes.

“In the middle of a historic recession, attempting to balance the budget on the backs of low-income people, working people and most vulnerable seems like the exact wrong way to go,” said Adam Glickman, a spokesman for the Service Employees International Union 775, which represents home health-care workers paid by the state through Medicaid.

“Any economist worth their degree will tell you that what you want to do during a recession is put money in the pockets of those people most likely to spend it, not take away money from those people who need to spend it and support local economies,” he said.

Glickman and others argue the state Legislature should eliminate tax breaks for wealthy businesses to deal with the budget shortfall.

Moore, a veteran of many state budgets, knows what’s coming.

“There are going to be a lot of things in this budget where people say ‘How could you reduce that program or eliminate that program?’ ” he said. “People are going to see the magnitude of the shortfall.

“We’re still getting our arms around it.”

Andrew Garber: 360-943-9882 or