Governor freezes state hiring, calls for budget cuts, saying “revenue situation warrants immediate fiscal restraint.”

Responding to the economic crisis that has led to plummeting state revenues, Gov. Inslee yesterday ordered a hiring freeze and curtailed personal service contracts and equipment purchases.  Inslee’s directive states,

The COVID-19 pandemic is profoundly impacting Washington’s economy and financial outlook. The full impact is unknown, but the State’s revenue situation warrants immediate fiscal restraint. To address the significant decline in state revenues, effective May 18, 2020, for all agencies under my direction, I am directing a freeze on the following: (1) hiring not related to public safety or other non-discretionary activities, (2) signing non-essential personal services contracts, and (3) discretionary purchasing of equipment.

He details procedures and exemptions, concluding,

While this is not going to be easy, I ask each agency to use common sense, good judgment and creativity to accomplish the ultimate goal of this directive to capture immediate savings through spending reductions not related to the public safety and essential health and welfare of Washingtonians.

Emily Makings with the Washington Research Council discusses the order and writes,

Also today, the director of the Office of Financial Management (OFM) asked agencies to identify savings of 15 percent for FY 2021. Altogether, OFM is looking for savings totaling $1.874 billion from funds subject to the outlook (NGFO). (The letter notes that “[s]ome agency savings will be realized by complying with the freeze.”)

She points out that a similar hiring freeze was the first step taken in responding to the Great Recession in 2008.

In The Seattle Times, Joseph O’Sullivan reports,

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).

He cites cuts to the Department of Social and Health Services, Department of Corrections, the Health Care Authority, and institutions of higher education. Further,

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 stateswith 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.

O’Sullivan cites the letter Office of Management and Budget director David Schumacher sent agencies, which includes this estimate of the severity of the budget crisis.

“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 Associated Press reports that states across the nation are bracing for unprecedented fiscal hardship.

As the nation enters a third month of economic devastation, the coronavirus is proving ruinous to state budgets, forcing many governments to consider deep cuts to schools, universities, health care and other basic functions that would have been unthinkable just a few months ago.

Many states expect their revenue to plunge by 15% to 20% because government-ordered lockdowns have wiped out much of the economy and caused tax collections to evaporate. That puts statehouses billions of dollars in the red for the fiscal year that usually begins in July, with no end to the crisis in sight.

As we wrote yesterday, the governor and legislative leaders have joined with other state and local officials to seek $1 trillion in additional federal aid. While the House Democrats’ budget proposal includes the money, the proposal faces opposition in the Senate.