OLYMPIA — Washington state agencies will freeze most hiring, equipment purchases and personal service contracts as the coronavirus pandemic continues to takes a toll on state coffers, Gov. Jay Inslee declared Wednesday.
And as lawmakers and Inslee ponder steep budget cuts and wait to see if the federal government will provide aid, state agencies will conduct an exercise to show how they could slash their budgets by 15% for the coming fiscal year.
Preliminary projections released this month show Washington could face a $7 billion shortfall in state revenue through 2023. About $3.8 billion of that shortfall is expected to hit the current, 2019-21, $52.9 billion state operating budget that pays for schools, parks, prisons and social-service programs.
If 15% cuts are ultimately enacted by the Legislature, the state agencies handling Washington’s most vulnerable residents could be hit the hardest, according to estimates by the state Office of Financial Management (OFM).
Under that scenario, the state Department of Social and Health Services (DSHS) could suffer $506 million in cuts in the fiscal year that begins July 1, according to a letter by OFM. The single biggest reduction at DSHS would come from the agency that oversees long-term care facilities like nursing homes, which have been hit hard by COVID-19 outbreaks.
The Department of Corrections — which has struggled to provide health care and hot meals to prisoners — could see $181 million disappear. The state Department of Children, Youth, and Families — which was sending troubled foster youth out of state or putting them in hotels because of funding issues — could lose $155 million.
The Washington State Health Care Authority could lose $462 million. And Washington’s higher education system could see $310 million disappear, with community and technical colleges bearing the brunt of the cuts.
In the projected cuts, OFM estimated that K-12 school spending on nonbasic education could go down next year by $97 million. The letter lists no cuts for K-12 school spending on basic education, which the state Supreme Court in its 2012 McCleary decision ruled is the state’s responsibility.
The budget-cutting exercise comes as lawmakers are likely to return to Olympia sometime in the coming months to trim the budget in the face of the economic slowdown. Lawmakers and state officials in the meantime are also waiting to see whether the federal government steps in to help states with their budget shortfalls.
The state has gotten some assistance from the federal government, but not for the hard economic hit that Washington and other states are taking. One round of federal dollars coming to Washington must be used directly for the government’s public-health response to the coronavirus pandemic, according to Sen. Christine Rolfes, D-Bainbridge Island.
Other parts of federal coronavirus assistance — such as help with unemployment insurance — can’t be used by the state for other purposes.
A sliver of spending reductions are expected to come courtesy of Inslee’s directive issued Wednesday.
It directs the state agencies under his authority to implement a hiring freeze, with exemptions for positions that generate revenue, are needed for public health or safety, or to respond to the pandemic. The directive takes effect Monday.
It also puts a freeze on personal-services contracts, with exemptions for those needed for public safety or generating revenue, as well as approved state IT projects.
Likewise, the directive freezes state equipment purchases above $5,000 that aren’t needed for public safety.
Meanwhile, in a letter Wednesday, OFM director David Schumacher directed dozens of state agencies to have a plan by June 1 showing how they could achieve the 15% in cuts for the next fiscal year. Those reductions could from a variety of ways, he wrote, such as eliminating, delaying or reducing programs.
The goal is to find $1.9 billion in savings for the fiscal year, Schumacher wrote, to “start taking steps now to confront this fiscal crisis” because existing budget reserves would not be enough.
“Even using all of the reserves, if the unofficial forecast holds true, we estimate the state would still face a $4.1 billion shortfall over the next three years,” Schumacher wrote.
The $7 billion shortfall estimate released this month is based on assumptions that include “substantial uncertainty,” because data on state tax collections for March and April weren’t yet available.
The Washington State Economic and Revenue Forecast Council is scheduled to make an official forecast in June, when more data from during the pandemic will be available.
Washington state has a four-year balanced-budget law, meaning legislators and Inslee must balance it not only for the current budget cycle, but also for the 2021-23 budget that will be drafted early next year.
Sen. John Braun, R-Centralia, said he hopes lawmakers will return for a special legislative session soon, perhaps early summer, to start trimming the budget.
“The more spending we reduce now, the less reduction in services later,” Braun, the Senate GOP budget writer, said last week.
Schumacher has said he expects lawmakers are likely to spend some reserves and make some cuts in a special legislative session, with more reductions likely when lawmakers return to Olympia in January for their scheduled 2021 budget-writing session.