Earlier this month, Gov. Ferguson released a budget priorities document that called for across-the-board spending cuts. This sounded like a promising way to start to close the operating budget shortfall. However, the document did not specify the spending level from which the reductions would be made. When I wrote about Gov. Ferguson’s proposal, I assumed that his across-the-board cuts would begin with the maintenance level for 2025–27. (The maintenance level is the cost of continuing current services, adjusted for inflation and enrollment.) That assumption was wrong.

The Office of Financial Management (OFM) has now officially directed agencies to identify budget reductions:

• No reductions for public schools, community and technical colleges, the Washington State Patrol, the Department of Corrections, or the Criminal Justice Training Commission.
• 3% for higher education institutions.
• 6% for all other agencies (excluding cash benefit entitlements).

OFM specifies that the reductions would be “from the 2025–27 biennial appropriations in Governor Inslee’s budget proposal.”

This is underwhelming, to say the least. Enacted appropriations for 2023–25 total $71.945 billion. Inslee proposed appropriating $79.477 billion for 2025–27. Inslee’s proposal assumed that the maintenance level for 2025–27 is $77.245 billion.

If reductions are made as OFM specifies, I estimate that proposed appropriations for 2025–27 would be $77.411 billion—2.6% less than Inslee’s proposal but 0.2% higher than the maintenance level and 7.6% higher than current appropriations. (Notes: This does not include the new policies that Gov. Ferguson has endorsed that were not included in Inslee’s proposal. It assumes all agencies comply, even if they don’t directly report to the governor.)

As I’ve discussed, the size of the 2025–27 problem depends on assumptions about future spending. Generally, the projected 2025–27 shortfall is the difference between forecasted revenues and the maintenance level. However, some estimates include the estimated cost of collective bargaining agreements (CBAs) with state employees—though technically considered new policy, they were included in Inslee’s proposal, and they will almost certainly be funded.

Effectively, the new reductions directed by OFM would fund the CBAs. This reduces the size of the shortfall if it is defined as including their cost. However, taking Inslee’s proposal as the starting point, the reductions would not reduce the actual maintenance level, which is the main part of the problem.

OFM Director Chapman-See writes, “It is clear that addressing this budget shortfall will require further reductions and careful prioritization of state spending in collaboration with the Legislature, agencies, and state employees.” Further, “To achieve these budget reductions, agencies will focus first on programs not achieving intended objectives or delivering meaningful results for the people of Washington.”

I estimate that the reductions would result in about $2 billion in savings for 2025–27. Perhaps OFM’s idea is to take those savings options and apply them to the maintenance level. But if that’s the case, why tie the reduction targets to Inslee’s proposed appropriations level? Taking Inslee’s proposal as the starting point implies that some agencies could comply with the directive by just cutting the new policies proposed by Inslee—even though they haven’t been enacted. (For example, Inslee proposed adding $105.8 million in new, non-compensation policy changes for the Department of Agriculture. Under OFM’s directive, the department would need to find just $12 million in reductions.)

A re-prioritization of spending is certainly in order, and reductions already proposed by Inslee should be considered. But Inslee’s overall budget proposal doesn’t necessarily reflect Gov. Ferguson’s priorities. Why should it be the basis for this exercise? What overall spending target is OFM trying to achieve?

If Gov. Ferguson wants to meaningfully reduce the size of the projected shortfall, he should make the maintenance level the starting point for cuts.