State budget office posts agency options for reaching a 15% savings.

In mid-May, Gov. Inslee ordered a hiring freeze and his budget director, David Schumacher called on agency directors to identify savings in their FY 2021 appropriations.  Schumacher’s memo states,

I am directing agencies to identify operating budget savings options from their fiscal year 2021 appropriations. OFM’s immediate combined savings options target is $1.9 billion. (See the attachment for specific agency targets.) All agencies are not listed because they have little opportunity for Near General Fund savings. However, all agencies should identify savings they can make on their own or which require legislation and must be included in a second supplemental budget.

In addition, all agencies should be planning to propose reductions as part of their 2021–23 budget submittals.

The $1.9 billion is about 15% of FY 2021 appropriations, making 15% the agency target. Some areas of the budget are more or less protected from reductions. The state has been posting the agency responses to the OFM request, noting

The spreadsheets reflect preliminary savings options identified by each agency. They are not formal proposals and do not necessarily reflect the priorities of Gov. Inslee or the agency. Because a program or service reduction is listed does not mean the reduction will actually happen, or happen at the level shown.

Crosscut reporter Melissa Santos writes of the exercise,

Many of the areas targeted for possible reductions are the same ones that took a beating during the last recession. Those include higher education and many social services.

Other areas of the budget — such as K-12 education and some Medicaid spending — are largely off limits, either due to constitutional protections or federal rules. 

Even if lawmakers use all of the state’s reserves, they will still face a three-year shortfall of about $4 billion, according to Inslee’s budget office.

Santos also interviews legislative leaders about the possibility of tax increases.

New taxes aren’t off the table — but they also won’t solve all the state’s problems, leaders say.

Jinkins gave the example of a capital gains tax, which she has championed in the past. That type of tax would apply to profits from selling assets such as stocks and bonds.

“A capital gains tax wouldn’t help in the short term, because it would take 18 months to implement it and to start collecting,” the House speaker said.

In recent years, the Legislature has also had difficulty finding the votes to pass such a tax, even with Democratic majorities.

Still, Billig, the Senate majority leader, said he would like to consider new tax revenue so that the upcoming cuts won’t have to be as deep. 

Some Republican legislators want to reopen collective bargaining. Not giving the negotiated raises would save about $62 million. Santos reports,

But budget director Schumacher said the process is more complicated. He said state lawyers have determined that the Legislature would have to actually approve budget reductions to reopen the contract negotiations. What’s more, Inslee and other Democrats are unlikely to see eye to eye with Republicans about the need to nix the raises.

Schumacher said he has reservations about targeting state employee salaries to save what amounts to a relatively small amount of money, compared with the overall budget.

Achieving the reductions will not be easy. For example, n presenting the University of Washington’s savings list, UW president Ana Mari Cauce writes, 

Let me be clear:

  •  A 15 percent reduction to the University’s FY21 state appropriations would have devastating effects on our ability to provide an excellent education to our students given that state appropriations are a large portion of our Core Operating Budget, which supports instruction, research and public service.

  • The state’s appropriations to the University as a proportion of state funding and tuition revenue have not recovered since the height of the Great Recession, so there is much less room now to cut state funding without severely increasing the cost to our students and their families or causing permanent damage to the quality of our state’s flagship university.

  • The University does not have the tuition price or enrollment flexibility to increase revenue that it did during the Great Recession.

The director of the Department of Revenue similarly makes the agency’s case.

I am concerned about the effect a 15 percent cut would have on revenue collections. The attached spreadsheet provides information on what Revenue is proposing as part of the budget reduction exercise with high-level details of the impacts. You will see that a cut this large equates to a loss of approximately over 258 Revenue FTEs with a potential of an estimated annual $178 million reduction in revenue collection.

And so on. It’s early in the process, but this initial exercise helps clarify the options.