W ASHINGTON STATE'S population is currently projected to grow by more than one million people during the decade of the 1990s and reach a total of 5,930,000 by the year 2000. Increasing at the fastest rate since the war years of the 1940s, this new population boom is already putting heavy pressure on the state's public education system, its prisons, and its natural resources. Budget proposals introduced by Governor Lowry for the 1997-99 Biennium provide the means to meet this challenge and lay a solid foundation for Washington's future.

1997-99 Operating Budget

* Transportation equals one-tenth of 1 percent.
** Other includes debt service, pensions, other education, and special appropriations.
*** Transportation does not include capital transportation costs.

The Governor's proposal calls for increasing GF-S expenditures by $1.761 billion above the $17.770 billion budget plan for the 1995-97 Biennium, an annual average of 5 percent over the next two years. This is nearly identical to the combined rates of inflation and population growth anticipated in the 1997-99 Biennium, but $235.6 million higher than the applicable expenditure limit as currently defined by Initiative 601. As discussed in Part II of this document, the Governor is proposing two changes in the formula used to calculate the spending limit so that the state can at least keep pace with population growth and inflation. With these modifications, the GF-S spending limit applicable to the Governor's budget proposal is $19.545 billion, approximately $14.0 million higher than his proposed level of expenditures.

Below is a brief summary of the key elements of the Governor's operating budget proposal for the 1997-99 Biennium, which addresses major issues facing the state, provides targeted tax relief for homeowners, and leaves $303.4 million in reserve to address any unanticipated costs.

• Supporting Public Schools: State funding for kindergarten through grade 12 education (K­12) would grow by $694 million during the 1997-99 Biennium, the largest increase of any proposed by the Governor for the next two years. These funds would be used to support rising enrollments, education reform, technological improvements, levy equalization, and cost-of-living adjustments (COLAs) for teachers and other K-12 employees.

• Expanding Affordable Access to Higher Education: The first wave of the "baby boom echo" is just graduating from high school and will put tremendous pressure on the state's higher education system over the next decade. To prepare for these students, the Governor is calling for $298.9 million in additional funding (including $67.9 million in new tuition revenues) to increase enrollments, expand financial aid, and make other critical investments in the state's higher education system. The Governor is also proposing a pre-pay tuition plan that will allow families to avoid higher tuition costs.

• Responding to Federal Cutbacks: Washington is expected to lose approximately $619 million in federal funding over the next two years as a result of federal cost-cutting efforts, including reductions in food stamps, aid to legal immigrants, and other assistance for low-income families mandated by the new federal welfare law. The Governor's proposal includes $204.5 million GF-S to help mitigate the impact of these cutbacks on low-income families, senior citizens, and people with disabilities.

• Improving Children's Services: Recent tragedies involving children under the state's supervision point to the need for both closer scrutiny of - and better support for - those entrusted with this responsibility. The Governor's budget proposal provides $74.5 million ($58.7 million GF-S) to cover the carry-forward costs of improvements approved by the 1996 Legislature, reduce workload ratios for Child Protective Services workers, provide substance-abuse treatment to more at-risk families, and make other improvements.

• Meeting the Demand for Affordable Health Care: The Health Services Account was created in 1993 primarily to increase access to health care for low-income people through the Basic Health Plan and Medicaid services for children below 200 percent of the federal poverty level. Strong demand for these services has created a deficit in the account, which the Governor would address by raising taxes on tobacco products and removing a tax exemption for most non-profit hospitals.

• Preserving the Employment and Training Trust Fund: Since its creation in 1993, the Employment and Training Trust Fund has helped to provide training to 20,000 dislocated and unemployed workers at state community and technical colleges, and improve the state's capacity to help the unemployed find jobs. The Governor would remove the sunset clause that would terminate the Trust Fund in 1998, retain the offset in unemployment insurance taxes that sustains the fund, and cap participation in the program at 7,200 people per year.

• Protecting Washington's Water Resources: Rapid population growth is exerting increasing pressure on Washington's vital water resources. This has led to growing conflicts between user groups, delays in permitting decisions, and the strong likelihood that more fish stocks will be listed as "threatened" or "endangered" under the federal Endangered Species Act. To protect these natural resources and prevent the economic disruption that would result from additional endangered species listings, the Governor is proposing a plan for consideration by the Legislature, which includes a bond measure for submittal to the state's voters that would finance a comprehensive strategy for watershed management. He would also maintain the Office of Marine Safety (OMS) as an independent agency for state oil-spill prevention efforts, saving costs associated with moving OMS to the Department of Ecology.

• Expanding Tax Deferrals for Homeowners: In conjunction with his budget recommendations, the Governor is proposing a tax deferral program that would allow homeowners with an income of $50,000 or less to defer the portion of their property tax bill that exceeds 5 percent of adjusted gross income. Under this plan, a homeowner with an annual income of $40,000 could defer any property taxes over $2,000 per year. Approximately 21,000 homeowners - many of them senior citizens, dislocated workers, or single parents - are expected to participate in the program, at a cost to the General Fund of $40.9 million in the 1997-99 Biennium.

• Authorizing COLAs for Public Employees/Grant Recipients: Since 1993, salaries for K-12, higher education, and state employees have fallen behind the rate of inflation by approximately 5.8 percent. The same is true for income assistance grants and payments to vendors who provide state services under contract. The Governor's budget proposal includes $471.5 million to provide COLAs to these groups at the rate of inflation over the next two years and grant additional salary adjustments to address special compensation issues.

• Preventing Domestic Violence: In response to the large number of deaths and injuries due to domestic violence, Governor Lowry is proposing a $5.3 million initiative (including $3.9 million in federal funds) to improve services for children and other victims, increase public awareness of the problem, and provide training to judges, prosecutors, law enforcement officers, and state employees in how to spot - and provide assistance to - victims of domestic violence.

• Targeting Juvenile Offenders: The Governor's proposal, which incorporates recommendations for juvenile rehabilitation by the Sentencing Guidelines Commission, increases penalties for serious offenses, imposes stricter conditions on parole, permits greater judicial flexibility in less-serious offenses, strengthens early intervention efforts, and promotes greater parental involvement. These measures, designed to protect public safety and improve rehabilitation rates, will cost $16.2 million GF-S in the 1997-99 Biennium.

• Reducing Prison Costs: In less than a decade, Washington's prison population has doubled in response to longer sentences for certain crimes mandated by the Legislature and the voters. To help control the rising cost of corrections, the Governor is proposing measures to delay opening some new prisons, reduce inmate health-care costs, and implement less-costly sentencing options for non-violent drug offenders. These measures are expected to save $11.1 million GF-S in the 1997-99 Biennium.

1997-99 Capital Budget

• Capital Investments in Education Facilities: Education is the largest sector receiving proposed appropriations in the 1997 supplemental and the 1997-99 capital budget. Proposed funding will support public school construction grants, construction of a new collocated branch campus in Bothell, technology investments in distance learning, construction of medical and other research space, and preservation of existing facilities.

• Serving Growing Offender Populations: The amount of $155.6 million is provided to construct a major new correctional facility for adult males in Grays Harbor County. Also funded are initial investments to prepare for a new women's prison and a new facility to house juvenile offenders. These facilities are necessary to meet rising populations.

• Protecting the Environment and Washington's Quality of Life: The Governor's budget includes $70 million to set aside critical wildlife and recreational lands from future development, an investment that cannot be deferred or the opportunity will be lost forever. It also dedicates $206.2 million to continue water quality projects, and pollution and toxic control activities through the Department of Ecology.

• Building Healthy and Economically Vital Communities: Nearly $246 million is provided for a variety of community-directed programs, including loans administered through the Public Works Trust Fund, financing for moderate- and low-income housing and weatherization, Community Economic Revitalization Board loans and grants, capital assistance for community-based family services, and grants for local arts investments.

Highlights of the Governor's 1997 Supplemental Budget Plan

T HE GOVERNOR'S 1997 SUPPLEMENTAL BUDGET proposal makes several adjustments in annual expenditures necessary to complete state operations in the 1995-97 Biennium. Most of these revisions respond to changes in caseload and enrollment forecasts, emergency costs for the state's response to forest fires and winter storms, and other unanticipated expenses in individual agencies. The Governor's proposal also responds to federal cutbacks affecting state programs in the current biennium, setting the stage for initiatives recommended in the 1997-99 budget.

In addition, the Governor proposes investing $112.1 million in General Fund-State (GF-S) resources available in the current biennium to address four high-priority construction projects around the state related to education and the arts. These projects include the Harborview Research and Training facility at the University of Washington, a new Health Services Facility at the Joint Center for Higher Education in Spokane, various K-12 school construction projects at sites throughout the state, and the Seattle Symphony hall (Building for the Arts program). Funding these projects through one-time expenditures in the operating budget will ensure their construction at a time of competing demands on the state capital budget.

Components of the Governor's Proposed FY 1997 Supplemental Budget Dollars in Millions
	GF-S	All Funds	FTEs
Caseload/Enrollment Adjustments	- $ 10.2	- $68.2	-47.8
Emergency Response	8.5	7.0	0
Replacement of Federal Program Losses	32.8	17.9	35.0
Investments in Education Capital	112.1	112.1	0
All Other Adjustments	13.8	34.9	121.2
TOTAL	$ 157.0	$ 103.7	108.4

Caseload/Enrollment

Public Schools

Revised enrollment forecasts result in a savings of $5.6 million in the supplemental budget. Changes in enrollment forecasts for the 1996-97 school year represent a decline of 161 full-time equivalent (FTE) students in basic K-12 enrollment and 638 students in Special Education. These reductions are partially offset by an increase of 259 FTE students in vocational education and an increase of 383 FTE students in bilingual programs.

Department of Social and Health Services

Various caseload changes in DSHS net to a savings of $7.1 million. These changes are described below.

• The Family Foster Care caseload showed a slight decline, while Adoption Support will increase by an average of 13 percent. Estimated average cost per month per child is expected to increase in each program.

• The Juvenile Rehabilitation program is experiencing reductions in community beds as well as institutional overcrowding. Savings are partially offset by a delay in implementing the Basic Training Camp program.

• In Long Term Care Services, increases in Community Options Program Entry System (COPES), Adult Day Health, and case management are offset by reductions in Chore Services, Medicaid Personal Care, and community residential and nursing home services.

• The Medical Assistance forecast assumes caseload reductions in Categorically Needy programs, offset by increases in General Assistance and Alcohol and Drug Abuse Treatment and Support Act (ADATSA), higher per capita costs in the Medically Indigent program, increased Medicare premium payments, and increased costs for new drug treatment (protease inhibitors) for AIDS clients.

Department of Corrections

• State corrections facilities are expected to experience an increase of 569 beds (Average Daily Population) above prior estimates in Fiscal Year 1997. This will result in an additional cost of $2.6 million GF-S.

Emergency Response

• In the Department of Natural Resources, $1.5 million GF-S is made available for additional assistance for fire protection and prevention efforts on forest lands; another $4.2 million GF-S is added to the current budget for the actual and expected expenses of fire-fighting.

• A total of $1.4 million GF-S is provided for the cost of firefighters and equipment employed to help local jurisdictions after activation of the State Fire Mobilization Plan for six fires in the summer of 1996.

• The National Guard and Department of Natural Resources crews responded to widespread damage from snow and ice storms in Spokane in November 1996. These expenses amount to $51,000 GF-S.

• The Governor is recommending the addition of $1.4 million GF-S to the Governor's Emergency Fund as a potential resource for winter storm damage costs during the remainder of the biennium.

Replacement of Federal Programs

As the federal government reduces funding for the Social Services Block Grant and changes eligibility for such programs as food stamps and Supplemental Security Income, the state has experienced a corresponding increase in demand for budgeted services. These actions, together with a reduced assumption of federal Title IV-A funds for the Juvenile Rehabilitation program and additional expenses for implementing federal programs, result in a net cost to the state of $32.7 million during the 1995-97 Biennium.

Investment in School Construction and the Arts

• K-12 School Construction: The Governor proposes adding $50 million in GF-S cash to boost school construction resources in the current biennium. This funding, together with $50 million in capital bond funds provided through the Trust Land Transfer program, will supplement resources for school construction normally available from state timber sales. These projects will benefit various school districts throughout the state.

• Harborview Research and Training Building (University of Washington): A new 179,000-square-foot building will be built directly east of the Harborview Medical Center on a site owned by King County. The new facility will provide additional, modern space for research and training activities of the medical school faculty that staff the Medical Center. This project has previously received design funds through the state capital budget. The supplemental budget contains $38.5 million GF-S for this project.

• Health Services Building (Joint Center for Higher Education): An additional $21.0 million GF-S supports construction of a new 100,000-square-foot Health Services building on the Joint Center for Higher Education campus in Spokane. This facility will house teaching, laboratory, faculty office, and support space for health sciences instruction programs of Eastern Washington and Washington State universities. The building will be constructed in such a way as to allow a 20,000-square-foot addition for research activities to be added at a later date.

• Building for the Arts - Seattle Symphony Hall: The supplemental budget includes $2.6 million GF-S to complete the state's share of the cost of building the Seattle Symphony hall. This project is funded through the Department of Community, Trade, and Economic Development's Building for the Arts program.

Other Expenses

• Department of Health/AIDS Prescription Drug Program: The AIDS Prescription Drug Program has experienced significant growth due to the promise of triple-drug therapy in reducing the level of virus in AIDS/HIV patients. As a result of increased enrollment and increased drug costs, a supplemental appropriation of $1.8 million is needed.

• State Park Operations: Because of projected fee revenue shortfalls, $2.4 million in additional GF-S funding is provided to maintain existing service levels at state parks in both the current and ensuing biennium.