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Budget Terms and Definitions
1997-99 Balance Sheet - Governor's Proposed Budget
Budget Driven Revenue and Other Legislation
Adjustments to the Initiative 601 Expenditure Limit

W HEN GOVERNOR LOWRY took office in 1993, Washington State was facing a $1.7 billion budget deficit and the state's economy was in a tailspin. Today the economy is surging, the state has a healthy budget reserve, and growth in state General Fund spending has slowed to less than half the rate of the previous ten years. By reducing administrative costs, controlling staffing levels, and eliminating unnecessary programs, Governor Lowry has held spending within the limits set by Initiative 601 while ensuring that state government can meet its basic responsibilities.

Still, Washington State faces some major challenges in the years ahead. During the decade of the 1990s, Washington's population is expected to grow by more than one million people, exerting mounting pressure on the state's education system, its prisons, and its natural environment. In addition, local communities are beginning to feel the effects of federal budget reductions approved by Congress and the President. The new federal welfare bill approved last summer is projected to reduce support for poor, elderly, and disabled people nationwide by more than $54.5 billion over the next six years. Washington's share of these and other cutbacks already signed into law is estimated to be $619 million in the 1997-99 Biennium, growing to $1.7 billion by the year 2002.

Despite these growing pressures, the current spending formula prescribed by Initiative 601 will hold allowable growth in state spending below the rate of general population growth and inflation over the next two years. As a result, it is now apparent that Washington will not be able to keep up with the demand for essential services unless the current formula is modified.

As part of his budget recommendation to the 1997 Legislature, Governor Lowry is proposing two modifications in the way the spending limit is calculated under Initiative 601. These changes, in combination with the budget plan the Governor is proposing to the 1997 Legislature, will allow the state to achieve three primary goals in the coming years:

Budget Terms and Definitions

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All Funds - As referred to in this document, "all funds" means all budgeted (appropriated and non-appropriated) accounts that support state agencies in the budget, including the General Fund-State.

Appropriation - The legislative authorization to make expenditures and incur obligations from a particular fund. Appropriations typically limit expenditures to a specific amount and purpose within a fiscal year or biennial timeframe.

Capital Budget and Ten-Year Capital Plan - The long-term financing and expenditure plan for acquisition, construction, improvement, or financing of capital assets and activities. The capital budget includes investments by state government, and grants or loans to other organizations for specified projects and purposes.

Debt Limit - RCW 39.42.060 places a limit on the amount the state can pay for debt service on bonds, notes, or other borrowed money. Payments of principal and interest in any fiscal year cannot exceed 7 percent of the arithmetic mean of general state revenues for the three preceding fiscal years. The State Constitution (Article 8, Section 1(b)) contains a higher debt limit, at 9 percent of revenues.

Full-time equivalent (FTE) - As a unit of measure of state employees: Refers to the equivalent of one person working full-time for one year (approximately 2,088 hours of paid staff time). Two persons working half-time also count as one FTE. As a unit of measure of students in K-12 or Higher Education: Refers to the equivalent of one student attending class full-time for one school year (based on fixed hours of attendance, depending on grade level).

General Fund - The General Fund accounts for all financial resources and transactions not required by law to be accounted for in other funds. In contrast to "dedicated funds," which must be spent for a specific purpose, the General Fund is nonrestrictive in its use. General Fund-State (GF-S) refers to the basic account that receives revenue from the state's sales, property, business and occupation, and other specific taxes; and is spent for public schools, corrections, and other programs totaling about half the state budget. General Fund-Federal (GF-F) refers to moneys coming from the federal government into the state budget from the various federal agencies supported by the federal basic account.

Operating Budget - A biennial plan for the revenues and expenditures necessary for the regular and recurring operations of state government.

Other Funds - As referred to in this document, "other funds" means all accounts except General Fund-State that support state agencies in the budget.

Reversion - Unused appropriation authority. If an agency does not spend up to its appropriation authority for the timeframe specified, the authority not used is considered to have "reverted" back to the original fund source.

Performance Measure - A quantitative indicator that programs or services are directly contributing to the achievement of an agency's strategic plan. This includes indicators of a program's or activity's inputs, output, outcomes, productivity, timeliness, and/or quality.

Transportation Budget - The operating and capital budget for the state Department of Transportation. (Information about the Governor's proposed Transportation Budget for the 1997-99 Biennium is contained in a separate "Proposed 1997-99 Transportation Budget Highlights document.")

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1997-99 Balance Sheet
Governor's Proposed Budget
General Fund - State
(Dollars in Millions)
Beginning Balance 445.3
November Revenue Forecast 19,433.7
Proposed Property Tax Deferral (21.7)
Budget Driven Revenue and Other Legislation (22.7)
1997-99 Maintenance Level Budget, including COLA 19,231.5
Governor's Initiatives 299.7
Unreserved Balance 279.5
Initiative 601 Emergency Reserve Account 23.9
Total Reserves 303.4

Initiative 601 Expenditure Limit
As Revised for Budget and Statutory Changes 19,545.2

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Budget Driven Revenue and Other Legislation
General Fund - State
(Dollars in Millions)
Budget-Driven Revenue
Treasurer's Service Account transfer 3.6
Other Legislation
Reduced GF-S cigarette tax collections due to new tax dedicated to Health Services Account (15.0)
Increased Water Quality Account transfer (3.2)
Transfer to Flood Control Assistance Account (6.0)
Interest and Penalty Administration 0.2
Small Business Credit B&O Tax Credit (0.9)
Discount Program Memberships (0.5)
Commodities/Hay and Seed Conditioning (0.4)
Tax Deferrals/Rental Equipment (0.5)
Total Budget-Driven Revenue and Other Legislation (22.7)

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Adjustments to Initiative 601 Expenditure Limit

Changes Under Current Law

Federal Cost Transfers - Direct Impact on State Programs

Federal Medical Assistance Percentage (FMAP) (85.6)
SSI Reductions - Direct Impact on state programs 115.3
Social Services Block Grant 8.9
SPI - Food for Kids 0.3
SPI - Child Care Food Program 17.0
Title IV-A Juvenile Rehabilitation 13.4
Title IV-E -- children placed with for-profit agencies (0.7)
Americorps - Match 0.2
Effect of $157 million supplemental budget for FY 1997 on
1997-99 Biennium Spending Limit 169.9
Sub-Total 19,295.7
Statutory Changes to Initiative 601
Federal Cost Transfers - Programs Outside State Budget
Food Banks - CTED 9.0
New Food Program 43.6
OFM - Americorps - Locals 0.1
Low Income Legal Services 3.3
TEFAP - Commodities Program 3.4
Eliminate "Re-Basing" 184.6
Adjustments for Statutory Changes 249.5

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