About two weeks ago, Governor Gregoire released a list of budget reduction alternatives — both her preliminary choices for cuts ($1.65 billion) and additional alternatives ($3.84 billion).  (She will officially propose a 2012 supplemental budget later this month.)  She also includes additions to the reserve of $390 million (from delaying the June 30, 2013 apportionment payment by one day and utilizing 2011 underexpenditures).  These proposals bring the total potential reduction in the shortfall to $2.04 billion (governor’s preliminary choices) and $4.23 billion (alternatives).

The governor’s preliminary choices would cut the total general fund-state (GFS) 2011-13 budget by 5.2 percent.

Her preliminary choices fall mostly in education (33.0 percent of the cuts) and human services (49.2 percent).

Big-ticket items among her preliminary choices include:

• Reduce levy equalization by 50 percent ($150 million)
• Increase class sizes in grades 4 through 12 ($137 million)
• Reduce state support to colleges and universities by 15 percent ($166 million)
• Reduce offender supervision ($27 million)
• Implement early release of certain offenders ($18 million)
• Delay implementation of Involuntary Treatment Act (HB 3076) changes ($22.6 million)
• Reduce eligibility for long-term care services ($30 million)
• Reduce state funding for subsidized child care ($50 million)
• Eliminate the Basic Health Plan effective Jan. 1, 2012 ($48 million)
• Implement premiums for children’s health ($22 million)
• Eliminate Disability Lifeline/Alcoholism and Drug Abuse Treatment Support Act medical programs ($110 million)
• Establish drug formulary (preferred generics) for Medicaid clients ($37 million)
• Eliminate essential needs and housing funds, but provide community-based housing and case-management services to certain clients ($36 million)
• Reduce legislative and judicial agencies by 10 percent ($36 million)
• Reduce the state’s monthly per-employee Public Employees Benefits Board funding rate from $850 to $825 ($16 million)
• Reduce monthly state allocation for K-12 employee health benefits from $768 to $745 ($20 million)

Additionally, the governor suggests making $90.8 million in cuts to local government assistance.  That includes eliminating liquor profits sharing and liquor excise tax sharing effective July 1, 2012, for GFS savings of $35 million and $26 million, respectively.  Obviously, passage of I-1183 yesterday complicates matters.

My reading of the initiative, which is by no means conclusive on this point, is that passage of I-1183 means that the state cannot cut liquor profits sharing to local governments below what they are getting currently.  Profits currently go to the liquor revolving fund, as will license fees under the initiative.  Section 302 of I-1183 states that the distribution of license fees through the liquor revolving fund to localities must be made such that they receive no less than they did previously.  (Plus, there’s the additional $10 million per year for public safety programs.)

The initiative does not, however, place any floor on how much local governments receive from liquor excise taxes (which go to the general fund, not the liquor revolving fund).  Consequently, I think the legislature could still eliminate liquor excise tax sharing.  It will be interesting to see how the governor interprets the effect of the initiative on the state’s ability to change distributions, and whether these reduction options remain in her supplemental budget.