"Grim numbers, dire budget prediction from Gov. Gregoire" (with video)

KING5 News, with video (02:44):

Drastic cuts to education, basic health care and the prison system. That's the bottom line in the new budget announced by Gov. Chris Gregoire Wednesday. And that will likely mean raising taxes.

Gregoire, looking grim-faced, is not a big fan of the budget she herself rolled out.

"Let me be very clear. I do not support this budget. As required by law, it is balanced. For me, it is unjust," said Gregoire.

After filling a $9 billion spending gap last year, the state now has to find an additional $2.6 billion. By law, she has to balance the budget using only existing revenue streams.

"That amount of money has to come out of a very narrow slice of the budget," said Gregoire.

Most state spending is protected. Only about $7.7. billion is available for cuts. That's made up of K-12 education, higher education, corrections, medical assistance and human services covering a wide range of programs. Of that, $2.6 billion – about one-third – needs to go.

"In short, we can only cut what makes us Washington state," said Gregoire.

In an open letter to Washingtonians, the second-term Democrat said she can't let those deep spending cuts stand.

But in this economy, everything is on the table. And while she can't quite say the word, the concept of new taxes is very much alive in Olympia.

"And fifth, proposing additional ta… uh ... state revenues," said Gregoire.

State Republicans respond that any new taxes will slow economic recovery. They want more government reform and a move towards privatizing some state services.

Representatives from the education and social and health services sectors say this budget would be catastrophic.

"The budget unveiled today will be a disaster for the state's elderly and it will eventually be a disaster for the state's budget," said Jerry Riley, chairman of Eldercare Alliance.

Keep in mind, this is far from the final word on the supplemental budget. This is the budget the governor is required to submit within current revenue projections.

Translation: it has no new taxes.

There will be new tax proposals and revenue sources identified in the budget the governor will release next month - what she calls her budget. The second budget will still have major spending cuts, she said, but it will also propose new tax sources to rescue several state programs from the chopping block.

Gregoire did not propose a specific way to finance the programs on Wednesday. But included in her proposed life raft were key programs including:

-- The Basic Health Plan, which provides subsidized health coverage to about 65,000 poorer Washingtonians.

-- General Assistance, a state welfare program for disabled people who can't work or qualify for federal disability payments.

-- Levy equalization, a system that doles out money to school districts that have a lower-than-average base of property taxes.

"These important and integral services do not come free," Gregoire said. "No one likes to pay more taxes. And no one likes to raise more taxes, no matter the state of the economy."

The decision to go to the tax well was not a surprise; Gregoire had talked repeatedly in recent weeks about her unwillingness to run with an all-cuts budget. But the move carries some political risks for the Legislature's Democratic majority, which is heading into a busy election year.

Raising taxes would require changes to Initiative 960, the voter-approved tax-limiting measure passed in 2007. That initiative effectively kept a lid on any tax plans during the last legislative session, but its two-year expiration date arrives this month.

After that, the Legislature can amend the initiative with a simple majority vote. Democrats have enough votes to take that step on their own, although threats to a rural-serving program like levy equalization could attract some Republican votes.

Gregoire has not said which tax sources she might favor for a potential revenue package, although she has sounded dubious about the idea of general increases in sales, property or business and occupation taxes during the nascent economic recovery.

Finding another tax source that can attract enough political support while also raising sufficient money to stave off cuts, however, could be a very difficult job.

Gregoire also announced Wednesday that she was taking administrative action, and would close all or part of several institutions, saving the state at least $70 million. Gregoire said that Ahtanum View, Larch, Pine Lodge prisons will be closed, as well as one wing at the state penitentiary in Walla Walla. Parts of the juvenile institutions at Naselle Youth Camp, Maple Lane School and Green Hill School will also be closed.

Also closed would be two institutions for the developmentally disabled, Frances Haddon Morgan Center in Bremerton, and Rainier School in Buckley, though savings on that won't be known until Rainier closes in 2014, said Gregoire spokesman Glenn Kuper.

"The actions combined will result in millions in savings for state government now, and even more in the future," Gregoire said.