Locke has spending cuts ready

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OLYMPIA — As lawmakers mulled a controversial plan to grab part of the state's future tobacco-settlement windfall, Gov. Gary Locke said yesterday he is ready with across-the-board spending cuts that could begin next week if budget talks drag on.

State Budget Director Marty Brown said the cuts probably would be in the 4 percent range and wouldn't take effect until after the scheduled adjournment of the regular session on March 14.

House Democrats plan to unveil their new budget plan today. Senate Democrats scheduled a committee vote today on the proposal they released this week.

Leaders said they're working hard to iron out differences.

If not, the Ides of March could include a Locke order for government to roll back spending.

Locke said a 4 percent cut would cover the $350 million in additional bad economic news that arrived last month. A new revenue forecast was down about $250 million, and costs were unexpectedly higher for providing health care and public education.

Locke says he still hopes the Legislature will quickly come to terms on a budget that fully fixes a deficit of $1.5 billion or $1.6 billion, depending on how it's calculated.

Across-the-board cuts are a blunt instrument and don't allow him to exempt important programs like prisons and mental hospitals, he said. The Legislature can approve cuts that are "more surgical and more selective," he said.

Locke said the budget situation is so grave that he's ready if the Legislature bogs down.

"We're prepared and we have measures in place so we could order immediate across-the-board cuts," he said.

Brown said the governor apparently is giving lawmakers until their scheduled adjournment of the regular session to come up with a plan or get very close.

"My instinct is that we may have to do something and that it would be very short-lived," he said.

Locke and Brown stoutly rejected suggestions by the Evergreen Freedom Foundation, a conservative think tank, that state law requires the governor to order across-the-board cuts any time the general fund is projected to be in the red.

Locke said the attorney general says the state treasurer has substantial latitude to use funds outside the main state general fund until the Legislature and governor rebalance the budget to erase red ink.

Senate Democrats' budget plan ran into a buzzsaw of complaints at a public hearing yesterday. The hearing was halted for about 10 minutes by angry, chanting home-care workers who demanded a raise.

"Don't come home without it!" they chanted, referring to the pay increase of 50 cents an hour.

Sergeants-at-arms eventually cleared the room and the hearing continued. The testimony was more polite, but no less pointed.

State School Superintendent Terry Bergeson and Seattle Public Schools Superintendent Joseph Olchefske sharply criticized the proposed education cuts of over $120 million.

Bergeson said the state's budget crisis is no reason to hurt schoolchildren or abandon school improvements. She urged senators to approve more revenue, rather than approve the cuts.

Others complained about proposed cuts in public-employee salary increases, higher education, social services and other areas of the budget.

The panel also heard criticism of the proposal to sell investors the rights to part of the state's $4.5 billion tobacco settlement. By assigning rights to about 25 percent of future payments, the state would get $525 million upfront. Most of that would be used to help fill the budget hole.

The committee heard from a national expert on such use of tobacco funds. Jeffrey Hyman, vice president of UBS PaineWebber in San Francisco, said several dozen states and counties are using the plan as a way to finance construction and operating-budget needs or to set up endowment funds.

Several witnesses and Republicans on the budget panel were sharply critical.

The ranking Republican, Sen. Dino Rossi of Sammamish, said it's an unwise scheme that could hurt the state's bond rating and set up the state for big budget problems down the road.

State Treasurer Michael Murphy, a Democrat, wrote lawmakers that he is extremely opposed to the plan. It runs counter to the stated goals of the tobacco settlement to use the money for anti-smoking programs and to cover health costs, he said, and is "terrible fiscal policy."

The deal gives the state "a very minimal return on the dollar. In simple terms, our citizens wouldn't take out a mortgage on their homes because they are having trouble paying for groceries. The state of Washington should not either," Murphy said.

Chairwoman Lisa Brown, D-Spokane, tried to deflect some of the criticism.

The Legislature seems to have no heart for deeper spending cuts or to raise taxes, she told Republicans. In an interview, she said she's heard no arguments that give her second thoughts about embracing the idea.

Locke told reporters he's on board.

"The use of tobacco-settlement money is no one's first choice. But (otherwise) we either have to make deeper cuts or raise taxes, and that's not a desirable choice either," he said.