Frequently Asked Budget Questions

How big is the state budget?

During the 2007-09 budget period, Washington state will spend about $71.5 billion to provide programs and services to citizens. This includes state, federal, capital construction and transportation funds. The 2007-09 budget period ends June 30, 2009. The 2009-11 budget begins on July 1, 2009.

How does the state use that money?

Our budget is composed of three parts:

• Operating - for day-to-day operations of the state including education, health care and public safety.

• Transportation - for maintaining, operating and building our roads, highways, rails, bridges, ferries and other modes of transportation.

• Capital - for construction and maintenance of state buildings, schools and colleges, and purchase of public lands, parks and other property.

Why are we facing a shortfall?

Our state is facing significant economic turmoil. The deepening national recession is already the longest in a quarter century and has resulted in dramatic budget shortfalls in states across the nation. Washington is not immune and our revenue – largely reliant on a sales tax – is down dramatically, resulting in the largest budget gap in state history.

We took responsible steps to address economic challenges before they began to develop. In 2007, the Governor proposed and the voters passed a constitutionally protected “rainy day fund” to help us prepare for future downturns. We immediately began putting money in this account, which is projected to be $709 million at the end of the 2009-11 biennium.

How large is the projected shortfall for 2009-11?

It is nearly $9 billion. Eliminating the budget shortfall requires a balance between maintaining critical services for our citizens and meeting constitutional and legal mandates.

What does it mean when someone says the state has a budget deficit, shortfall or gap?

A budget deficit, gap or shortfall is when projected spending exceeds projected resources in a given fiscal period.

The state is projected to have a deficit of nearly $6 billion in 2009–11 primarily because tax revenues are expected to decline as a result of the national recession. Typically this affects the part of the operating budget funded with tax dollars that are deposited into the state general fund.  The Governor’s proposed budget closes this projected shortfall.

Can the state run at a deficit?

Yes. Running the state at a deficit would require borrowing money to close the gap between expenses and revenues.  Budget experts agree it is a bad idea to borrow large sums of money to cover short-term costs. It would be like taking out a home equity  loan to pay the electric bill.  In addition, Washington’s Constitution and laws place a limit on how much debt we can accumulate over time — and most of this is paying for construction projects such has schools, colleges and prisons.

The Governor is required to propose a balanced budget with resources equal to, or greater than, spending.

What are the largest areas of spending in the budget?

The current 2007-09 operating budget using state general funds includes:

• Public schools - includes kindergarten through 12th grade school districts.

• Higher education - includes public colleges and universities as well as community and technical colleges.

• Human services - includes medical and public assistance, health care and prisons. The federal government provides almost half the money spent in this area and the state pays the rest.

• General government - includes administrative, judicial and legislative agencies.

• Natural resources - includes environmental protection, management and recreation.

• Other - includes costs of facilities and services funded through bonds, pension contributions for employees, other education agencies, transportation, and special appropriations.

What is the state required to fund?

Parts of our state’s budget, including basic education, debt service and pensions, are not considered ‘flexible’ because legal or constitutional mandates require these cost be paid.

What guided the development of the Governor’s proposed budget?

Five principles helped guide the development of the Governor’s proposed budget:

• We are one state, and it will take all of us working together to get through these tough times.

• We must continue to build a solid foundation for generations to come, and that means investing in and protecting our children.

• Government must partner with our communities to support and protect our most vulnerable.

• We must maintain the safety of our communities.

• We must lay the foundation for a good quality of life and economy for the 21st century.

What were priorities in the Governor’s budget proposal?

Consider the difficulty of our problem. Nearly sixty percent of the budget consists of items we are required to fund, such as basic education, federally mandated Medicaid, pensions and debt service. This forces us to balance the budget in the remaining 40 percent of the budget.

A crisis like this is a test of our basic values. We can’t let tough times become an excuse for sacrificing the things that matter most to our families — the safety of our communities, access to high-quality health care, and a world-class education for our children.

The steps we take today will determine our economic future. We need to position ourselves to benefit fully from our state’s economic strengths — to keep growing our exports and keep investing in green industries and new technology.

Now is the time for us to work together — Democrats and Republicans, advocates and citizens, all levels of government — to help find solutions. This is a difficult challenge for us all.

Are there new taxes proposed to balance the Governor’s proposed budget?

No. Now is not the time to be raising taxes or fees on our residents and businesses. These are hard times for everyone. 

Why has spending increased?

The operating budget increases each year for a number of reasons, including:

• Providing more services for more people. The state’s population has grown by more than 1.2 million since 1994. Our state constitution requires that we “make ample provision for the education of all children residing within its borders.” It takes nearly half of the state general fund — $12 billion — to provide basic education to children in grades K-12. The number of children attending Washington state schools has increased by 25 percent — 200,000 students — since 1990. The same trend of more services for more people also holds true in social services, health care and the correctional system.

• Rising cost of providing services. The rising costs of services, materials, goods and inflation must be paid for through the budget.

• Paying for voter-approved initiatives. When voters approve initiatives on the ballot, costs are borne by taxpayers through the budget. For instance, the teacher salary initiative (I-732) is a law that would require education spending to grow by more than $389 million unless the Legislature suspends funding for this item in the 2009–11 budget.

Where does the state get its revenue for the operating budget?

Our state has several funding sources that pay for the services provided in the state’s operating budget. General Fund revenues comes from:

• Retail Sales & Use Tax - Retail sales tax is paid at the point of purchase for certain goods and services. Use tax is a tax on the use of goods or certain services in Washington when sales tax has not been paid.

• Business & Occupation Tax - is tax businesses pay based on the value of products, gross proceeds of sale, or gross income of the business.

• Property Tax - is tax people pay when they own/possess property.

• Other sources - Other sources include smaller taxes, fees, and miscellaneous revenues.  For a description of other state taxes, visit the Washington State Department of Revenue.

Why can’t the state use the Rainy Day Fund to reduce the budget shortfall?

Created in 2007, Washington’s Rainy Day Fund is projected to have a balance of $709 million at the end of the 2009-11 biennium. Using these reserves to close the budget shortfall creates several issues:

• The fund does not have enough money to close the entire budget gap. In fact, it would eliminate only 8 percent of the deficit.

• Using all the Rainy Day Fund would leave our state with few options if declines in revenue are greater than projected.

What is the timetable for adopting the budget?

Washington state’s budget is based on a biennial, or two-year, cycle. Throughout the legislative session, citizens, special interest groups and state agencies provide input on the state budget. The 2009 legislative session is important because lawmakers will decide the budget for the next two years, taking into consideration the projected budget shortfall.