Governor Gary Locke’s Remarks
Pre-Budget News Conference
November 30, 2004

Good Morning.

Thank you all for coming today. It is great to be back in our larger room here in the Capitol Building!

I want to brief you this morning on where we are with the state budget.

Our target date for submitting a proposal to the Legislature is December 16. I have to tell you, developing this budget has not been easy.

Through the last two biennia, including the current one, weíve reduced maintenance-level state spending by over $4 billion. Maintenance level spending is the cost of doing whatís already in place or required by law without any new programs or initiatives. Thatís $1.5 billion in 2001-03 and $2.6 billion in the current biennium.

As we look forward to the next biennium, my budget staff is working to overcome the remaining fallout from the national recession made worse by the 9/11 attacks Ė a $1.6 billion budget deficit.

Weíre looking for a way to fix the problem without inflicting harm to critical state services. But the cuts were hard enough the last two budgets, reducing Medicaid to the poor and suspending voter-approved initiatives were not at all easy Ė and the next ones are going to hurt all the more.

Here are some of the major causes for the budget problem we face today.
The costs of providing Medicaid assistance to people in need will grow in the next budget by at least a half-billion dollars even while serving fewer people. Health care costs for public employees and teachers will increase by roughly $370 million even with teachers and state employees paying more out of pocket.
We know there will be more kids in our schools and more people in our prisons.

We need to fund the contracts that were negotiated this summer with union-represented employees. And we need to address reimbursements to private sector providers or medical care and other human services, who have not seen any increase in years, despite their rising costs.
Under current state law, we also need to increase our contributions to the state pension fund. And there are the rising costs of providing our children with more access to our colleges and universities, and protecting children and senior citizens from neglect and abuse.
As we build our budget proposal, we are continuing to use the Priorities of Government process. This process examines everything we do as a state government. Then we prioritize the services that citizens want and need the most.

We took our budget process to the public last summer, holding public meetings in Spokane and Seattle. We looked closely at everything again this fall. And then I received a report from the Priorities of Government team, which we have provided to you today.

The Priorities of Government report isnít the budget. But it helps us make budget decisions by informing us what the most important services are, and the consequences of not providing these services.

We will be telling you about our decisions in a couple of weeks. What we do know now is that our $1.6 billion problem threatens our ability to provide critical state services and puts our future at risk. This problem must be addressed.

More cuts are an option. We can take actions to increase revenue. Or we can take some combination of these steps. The state could borrow money, like some states have done.
Itís a bad idea Ė borrowing doesnít solve the problem. What do you do next year and the following years to pay for services.

If we try to solve the $1.6 billion shortfall through cuts alone, it would be difficult to restore the provisions of initiatives 732 -- teacher salaries -- and 728 -- class-size reductions. Funding to help struggling students from low-income families could be lost.
Programs for gifted students could be lost.

In our state colleges and universities, access to a college education would be limited. And the costs of a college education for those who did get accepted would go up.

It's likely that up to 40,000 low-income adults would lose health care coverage under the Basic Health Plan. The safety net for people without health insurance could disappear.
And it might mean no more low cost dental care for low income adults.

Just to give you some perspective, the entire 4-year university system has a budget of $1.6 billion! And completely eliminating the entire Department of Corrections would only save $1.4 billion! These are clearly not possibilities, but they give you a sense of the enormity of the problem the state is facing.

These are some incredibly hard choices to make. We will be considering the many options over the following weeks as we make our final decisions.

My main reason in sharing these thoughts with you today is to alert the people of the state to a problem that must be solved for the long term. The fact is we face a structural deficit in how to pay for the current level of services even with a growing and recovering economy. Because costs of certain basic federally required programs are growing faster than inflation and revenues.

The expectations that all of us have of state government to provide basic, necessary and much demanded services are significantly greater than we can afford. And they will continue to increase. Even with an improving economy we will continue to face deficits.

Since a lot of people like to say an outgoing governorís last budget proposal is dead on arrival, it might be tempting for some to simply pass this problem on to the next administration. I want everyone -- citizens and the Legislature -- to know that we are working just as hard on this budget as any in the past. We have worked hard and been successful at developing balanced budgets with no general tax increases in each of the budgets I have developed over the past eight years. We have been widely lauded for the management practices we have instituted in state government.

In two evaluations done during the last eight years, Governing Magazine and Cornell University both times named Washington among the five best-managed states in the nation. Just a few months ago, the National Policy Research Council ranked Washington state government number one for efficiency. As in our previous budgets, we will continue to employ innovative management practices and base this proposal on sensible reasoning and solid, grounded information.

In the coming weeks we will have a chance to talk more about budget issues.

Before I take your questions, I want to say a few words about the election.

This yearís race for governor is proof positive that your vote counts. Just 42 votes out of 2.9 million separate Dino Rossi and Christine Gregoire.

I am committed to a smooth transition process. We have provided relevant information about the budget and state government to the Rossi and Gregoire teams. We have offered transition office space, including phones, computers and supplies to both groups. We are doing everything we can to help the next administration take over the reins of government and govern well because this is my state. Iím proud of what one state agencies have accomplished. We want that great work to continue.

Now Iíd be happy to take any of your questions.

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