Looking back at state budgeting in the Great Recession, part 5: Detailing the policy cuts

By: Emily Makings
10:44 am
May 5, 2020

From the 2008 spending high point to 2012 (the last budget with net policy cuts), state spending dropped by 7.1 percent ($2.406 billion). This includes changes to both new policy and maintenance level (the cost of continuing current services) spending. The first chart shows how much state spending was cut (or increased) in various budget areas. Considering both policy and maintenance level changes, higher education and natural resources were more deeply cut compared to their 2008 spending levels than human services.

During the recession, maintenance levels continued to increase, necessitating larger policy cuts. Ultimately, policy level spending cuts totaled $13.194 billion.

Setting aside maintenance level changes, the largest policy cuts went to the Department of Social and Health Services (DSHS) and the Health Care Authority (HCA), public schools, and higher education. That’s where the money was. In the 2008 supplemental budget, K–12 made up 40.5 percent of appropriations, DSHS and HCA together made up 31.5 percent, and higher education made up 10.9 percent. (DSHS and HCA are grouped together because Medicaid was transferred from DSHS to HCA in 2011, which skews the figures if they are kept separate.)

However, policy level cuts in response to the Great Recession were not made proportionately. For example, cuts to public schools made up just 34.9 percent of total policy cuts, while cuts to DSHS and HCA made up 43.5 percent of total policy cuts.

Why did the policy level in some budget areas get cut so deeply and yet have a much smaller impact on overall spending, while policy level cuts in other budget areas led to substantial overall cuts? Consider K–12 and higher education. Policy level cuts to public schools were substantial ($4.609 billion), yet overall state spending on K–12 increased over the period by $25.3 million. Policy level cuts to higher education were $1.452 billion and overall state spending on higher education decreased by $919.1 million. The difference is that K–12 is an entitlement—all children must be served, so the maintenance level has a big impact on overall spending. This is not the case with higher education.

The next chart shows the level of policy cuts in each of the 11 budget bills enacted over the time period. The largest cuts occurred when making original 2009–11 and 2011–13 appropriations.

Following are some of the notable policy reductions by budget, in terms of the near general fund–state. The Legislature made a lot of cuts; these are only the major ones.

To summarize them: Federal stimulus funds, new fees, higher tuition, and higher local levy limits allowed for reduced state spending over the period. Several rounds of across-the-board cuts were made and efficiencies were found in many budget areas. Employee compensation was reduced. State-funded human service programs were cut (but so were Medicaid programs). Major non-basic education programs were eliminated. The most substantial budget gimmick was a one-day school apportionment shift in 2011.

Although these strategies were used in combination in most of the budget bills over the period, the availability of federal stimulus funds was concentrated in fiscal years 2009, 2010, and 2011. This delayed some service cuts. Stopping planned spending early on (e.g. freezing hiring, delaying program implementations) also helped to delay actual cuts to services.

ESHB 1694 (enacted 2/18/09): The $628.6 million in policy cuts included the hiring, travel, equipment, and goods and services freeze and across-the-board cuts directed by Gov. Gregoire in Summer and Fall 2008. Also:

  • Federal funds were used in lieu of state funds for the Temporary Assistance for Needy Families program, saving $154.5 million (DSHS).
  • The federal stimulus bill provided a higher Federal Medical Assistance Percentage (FMAP), so the federal government covered more of the state’s Medicaid costs, saving $124.2 million (DSHS).
  • Pharmacy initiatives were undertaken to lower drug costs, saving $15.0 million (DSHS).
  • Across-the-board cuts to state funding for higher education institutions, saving $71.0 million.

2009 Supplemental (enacted 3/5/2009): $581.6 million in policy cuts.

  • With the higher FMAP for Medicaid, the state saved $193.5 million (DSHS).
  • The higher FMAP also meant reduced state costs for long-term care, saving $57.4 million (DSHS).
  • Federal stimulus funds were also used in lieu of state funds for the Student Achievement Program (which had been funded via I-728 in 2000), saving $362.0 million (K-12).

2009–11 (enacted 5/13/09): $5.611 billion in policy cuts. The agency spending freeze and other agency savings continued in this biennium.

  • The higher FMAP reduced state Medicaid costs by $746.4 million, long-term care costs by $274.8 million, and developmental disabilities costs by $163.9 million (DSHS).
  • Reduced Medicaid hospital expenditures, saving $64.3 million (DSHS).
  • Basic Health Plan enrollment cut, saving $222.4 million (HCA).
  • State funding for vaccines discontinued, saving $55.3 million (Department of Health).
  • Federal stimulus funds used in lieu of state funding for the Department of Corrections, saving $182.4 million.
  • Family Leave Insurance program delayed until 2012.
  • Changes to actuarial assumptions for pensions saved $272.2 million (K–12).
  • Levy equalization funding was cut by $236.6 million, of which federal stimulus funds offset $176.3 million (K–12).
  • The student achievement program (I-728) was suspended for the biennium, saving $800.3 million, but $200.3 million was offset with federal stimulus funds (K–12).
  • I-732 (teacher cost-of-living adjustments) was suspended for the biennium, saving $352.6 million in K–12 and $35.0 million in higher education.
  • For higher education institutions, cuts to institutional and academic instruction saved $118.5 million, cuts to non-instructional services saved $127.5 million, cuts to student services and instruction saved $310.4 million. Using stimulus funds in lieu of state funds saved $81.4 million. (These cuts were offset by tuition increases of 7–14 percent.)

ESHB 2921 (enacted 2/15/10): $45.4 million in policy cuts. Restrictions on agency hiring, travel, services, and equipment continued.

2010 Supplemental (enacted 5/4/10): $918.4 million in policy cuts. In March 2010, the Legislature increased the levy lid (the maximum amount of school district revenues that may be levied) from 24 to 28 percent for 2011 through 2017.

  • McNeil Island Corrections Center was converted to minimum security, saving $49.2 million (Department of Corrections).
  • The budget assumed an extension of the higher stimulus FMAP, saving $472.6 million in DSHS.
  • The higher stimulus FMAP for Medicare part D saved the state $86.9 million (DSHS).
  • The hospital safety net assessment was created to leverage higher federal matches, saving $66.8 million (DSHS).
  • The Security Lifeline Act capped Disability Lifeline benefits at 24 months in a 60-month period, saving $28.2 million (DSHS).
  • The SY 2010–11 student achievement program distribution was eliminated, saving $78.5 million (K–12).
  • Funding for class size reductions in grades K–4 was reduced, saving $30.0 million (K–12).
  • Across-the-board reductions in higher education saved $73.1 million.
  • State agencies were closed for 10 days, saving $39 million.

HB 3225 (enacted 12/11/10): $490.4 million in policy cuts.

  • An Education Jobs Federal Grant was used, saving $208.1 million (K–12).
  • K–4 class size reductions were eliminated for SY 2010–11, saving $39.4 million (K–12).
  • A 4.2 percent service reduction to higher education institutions saved $51.1 million.

ESHB 1086 (enacted 2/18/11): $235.8 million in policy cuts.

  • A 10 percent cut was made to Medicaid in-home personal care hours, saving $19.3 million (DSHS).
  • Funding for class size reductions in grades K–4 was reduced, saving $25.4 million (K–12).
  • Special education safety net costs were deferred into 2011–13, saving $24.8 million (K–12).
  • GFS support for the state need grant was reduced (but higher education institutions were required to hold students harmless), saving $25.4 million.

2011 Supplemental (enacted 5/16/11): $108.0 million in net policy cuts.

  • The June 2011 apportionment payment to school districts was delayed from the last business day of June to the first business day of July, saving $115.0 million in 2009–11 but shifting those costs to 2011–13 (K–12).

2011–13 (enacted 5/17/11): $4.053 billion in policy cuts.  

  • McNeil Island Corrections Center was closed, saving $23.2 million.
  • Implementation of the family leave insurance program was delayed until 2015, saving $33.2 million (ESD).
  • New admissions to the Basic Health Plan were frozen for the biennium, saving $128.5 million (HCA).
  • Tobacco settlement funds were used in lieu of GFS for the basic health plan, saving $44.0 million (HCA).
  • Disability Lifeline grant was reduced, saving $100.3 million (DSHS).
  • The state food assistance program was cut, saving $30.3 million (DSHS).
  • The 10 percent cut to Medicaid in-home personal care hours saved $88.3 million (DSHS).
  • Medicaid emergency room visits capped at three a year, saving $33.0 million (DSHS).
  • Medicaid hospital inpatient and outpatient rates were reduced, saving $110.5 million (DSHS).
  • Medicaid adult dental funding was cut, saving $28.6 million (DSHS).
  • The Discover Pass was created and proceeds were used in lieu of the GFS, saving $67.1 million (State Parks and Recreation).
  • The K–4 class size reduction enhancement was eliminated, saving $169.6 million (K–12).
  • The Student Achievement Program (I-728) was suspended for the biennium, saving $860.7 million (K–12).
  • I-732 teacher cost-of-living adjustments (COLA) were suspended for the biennium, saving $295.4 million.
  • Higher education institutions were cut by 4 percent, saving $535.5 million. (Offset by tuition increases of 12–16 percent.)
  • State, K–12, and higher education salaries were cut, saving $356 million (various).
  • Future automatic COLAs for Public Employees’ Retirement System Plan 1 and the Teachers’ Retirement System Plan 1 members were eliminated, saving $344 million (various).

SHB 2058 (enacted 12/14/2011): $226.4 million in policy cuts.

  • Implementation of changes to the Involuntary Treatment Act was delayed, saving $22.6 million (DSHS).
  • Federal funds were used in lieu of the GFS for Temporary Assistance for Needy Families (TANF), saving $38.4 million (DSHS).
  • Some medium security units at the Washington State Penitentiary were converted to minimum security, saving $11.7 million.
  • Pupil transportation depreciation payments were shifted from October to the following August, saving $49.0 million.

2012 Supplemental (enacted 3/23/12): $295.4 million in policy cuts.

  • Funding for TANF and Working Connections Child Care was reduced to reflect caseload under-expenditures and other changes, saving $126.6 million (DSHS).
  • Administrative and efficiency reductions saved $73 million (various).
  • The state contribution to employee health care was reduced from $850 to $800 per member per month, saving $33 million (various).

Previous posts in this series:

Categories: Budget.