STATE OF WASHINGTON

OFFICE OF FINANCIAL MANAGEMENT
Insurance Building, PO Box 43113 • Olympia, Washington 98504-3113 • (360) 902-0555

April 8, 2015

Honorable Andy Hill, Chair
Honorable Jim Hargrove, Ranking Member
Senate Ways & Means Committee
P.O. Box 40482
Olympia, WA 98504-0482
Honorable Ross Hunter, Chair
Honorable Bruce Chandler, Ranking Member
House Appropriations Committee
P.O. Box 40600
Olympia, WA 98504-0600
Dear Senators Hill and Hargrove and Representatives Hunter and Chandler:
I commend you for your efforts in passing 2015-17 operating budgets from each chamber. As negotiations
begin in earnest toward a final budget, I want to share the Governor's concerns with each budget. OFM
continues to work with legislative fiscal staff on technical and other budget issues identified by state
agencies, our staff, and others. The Governor and I look forward to continuing discussions with you on
these issues as you work to complete a final biennial budget for the citizens of Washington.
K-12 education- Both budgets make significant improvements in state funding for K-12 education.
The Governor proposed full funding of all components of House Bill2776 in the 2015-17 biennium. He
continues to believe that we should step tip this year to fully fund the Legislature's commitments on fullday kindergarten, K-3 class size reduction, and the materials, supplies and operating costs (MSOC) in the
2015-17 budget. While the House budget does not fully fund these commitments in the next biennium, it
nevertheless provides almost $500 million more in K-12 funding than the Senate budget, particularly in
the areas ofK-3 class size reduction and teacher compensation.
This is the session to make dramatic improvements in education funding, including investments that go
beyond the HB 2776 commitments already made. Specifically, the Governor remains committed to
making substantial progress on the following four funding needs in K-12:
•

Teacher salaries. Beyond the I-732 cost-of-living adjustments (COLAs), the Governor and the
House budget include an additional1.3 percent salary increase. As you know, teacher COLAs were
not funded during the recession; we need to begin making up for lost ground. This increase should
be included in the final legislative budget.

•

Student and graduation support. The Governor proposed, and continues to encourage, enhanced
funding targeted through the Learning Assistance Program to increase student support and improve
unacceptably low graduation rates. The House budget provides a different mix of enhancements to
support students and families, but the Senate budget is not adequate in targeting support to lowperforming and at-risk students (instead favoring a doubling of state funds for the Highly Capable
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Page 2 of5
program, for example). There is ample room for improvement and compromise in all of these
important programs.

•

Special education outreach and capacity. The Governor requested $800,000 for the Office of the
Superintendent of Public Instruction to establish a best practices clearinghouse for special education
instruction and to train an additional 20 leaders in special education administration at the University
of Washington-Bothell. Neither legislative budget makes this commitment.

•

New teacher mentoring. As the state provides funding to hire more teachers to reduce class sizes, it
is critical that the state fund induction and mentoring for these new teachers. The Governor places a
high priority on providing $17 million in new funding for the state's Beginning Educator Support
Team (BEST), an enhancement not included in either legislative budget.

Early learning - While both budgets strengthen state funding for access to high quality early learning,
the Governor prefers the House approach. The House funds $100 million more in early learning, about
double the increase of the Senate.

•

Preschool access. Whereas the Governor and the House increase Early Childhood Education and
Assistance Program preschool enrollment by more than 6,300 slots, the Senate adds only 4,000. The
Senate budget would leave more low-income children unserved next biennium. Under the Senate
budget, an additional 9,000 slots would need to be added by 2018 to comply with the current law
requirement to provide full access. The Governor supports a faster phase-in of preschool access.

•

Early Achievers. Both the House and Senate versions of the Early Start Act require mandatory
participation in the Early Achievers program for all Working Connections Child Care providers, but
neither budget funds Early Achievers at 100 percent of provider participation. Participation rate
assumptions not only impact funding for Early Achievers services, such as child care provider
ratings and professional development, but also impact funding levels for quality payments and tiered
reimbursement incentives for providers. We are concerned that a mandatory participation
requirement, without full funding, may reduce provider participation and family access to the
Working Connections Child Care program.

Early childhood intervention for kids with disabilities - The Senate budget does not fund early
intervention assessments and services for 1,500 children with disabilities and delays. The Governor and
House both provide $4 million for these services through the Early Support for Infants and Toddlers
(ESIT) program. We know early intervention can make a tremendous difference in the lives of these
children and their families.
Mental health services - Good work has been done in both chambers this year to help address the clear
need to improve mental health services. I draw your attention to two concerns with the Senate budget:

•

Worker safety. The House budget includes $4.3 million to hire additional staff to provide safe and
appropriate staff coverage in the wards of our state mental health hospitals. This funding helps
implement a settlement reached between DSHS and the Department of Labor and Industries (L&I),
which was based on recommendations of the Ad Hoc Safety Commission reviewing L&I safety
citations. This funding is not included in the Senate budget.

•

Psychiatrist assignment pay. The Governor approved assignment pay for psychiatrists working at
Western State and Eastern State hospitals to improve retention and recruitment of psychiatrists who
are crucial to reducing wait times for clients. To ensure the state is able to effectively serve clients
and meet court orders, $3.6 million is needed. It is not included in the Senate proposal.

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Page 3 of5

Child Protective Services staffing and Braam compliance - The Senate budget does not provide
$8 million requested by the Governor to increase the number of Child Protective Services workers to
provide earlier response to cases of child abuse and neglect, faster completion of investigations, and
follow-through services. In addition, the Senate budget provides 27 staff positions less than are needed
to meet the staffing standards in the revised settlement agreement in the Braam case. Together, these
items represent $12.2 million in needed funding for these critical services.
Health Benefit Exchange - The Senate budget diverts the current 2 percent tax on health insurers from
the operations of the Health Benefit Exchange (Exchange) to the state General Fund. As a result, the
Exchange will have to increase monthly assessments to Washingtonians accessing health care through
the state HealthPlanFinder. As we continue to implement the Affordable Care Act, we need a sustainable
funding mechanism to allow Washingtonians to access affordable health coverage through the Exchange.
Prison capacity -The Senate budget does not include $7 million included in the Governor's and House
budgets for additional prison capacity for medium-security offenders. Prison overcrowding diminishes
the Department of Corrections' ability to house offenders appropriately, based on factors such as security
threat group membership and offender special needs, and puts the safety of corrections staff at risk.
Justice Reinvestment Act- The House does not include funding for the Justice Reinvestment Act.
The act uses an evidence-based approach to reduce criminal recidivism and help reduce the need for
more expensive prison capacity by shifting some offenders from incarceration into less costly intensive
community supervision, including programming for chemical dependency and cognitive behavioral treatment. The Senate budget provides a net increase of $2.5 million for the act, which the Governor
strongly supports. In addition, the Governor places a high priority on $4 million in local government
criminal justice grant funding to ensure the success of this initiative.
Hazardous chemical incident prevention -The Senate does not fund an expansion of inspections of
facilities containing highly hazardous chemicals. This was recommended by the U.S. Chemical Safety
Board in response to investigations into the 2010 Tesoro refinery explosion. The Governor and the
House both propose $2 million in funding for L&I to conduct enhanced inspections.
Toxics reduction initiative- The Governor's budget request included $12.1 million for House Bill
14 72, the Safer Chemical Act. The act would provide a comprehensive toxics reduction initiative to
ensure that toxic threats to water quality are reduced at the source of potential contamination, rather than
relying on more expensive and less effective end-of-pipe mitigations. The lower funding levels in the
House and Senate budgets are insufficient to effectively reduce introduction of toxic substances into
state waters.
Oil by rail- The Senate budget assumes passage ofE2SSB 5057 (hazardous materials transport)
whereas the House budget assumes passage of Governor-requested ESHB 1449 (oil transportation
safety). The House proposal provides $13.8 million to fund oil transportation safety items, including
hazardous material response caches, local emergency planning assistance, preparation of geographic
response plans, advanced notification of oil transfers from rail cars, increased regulation of rail crossings,
and stronger safety measures for marine transport of oil. The Senate proposal provides $6.6 million
primarily for hazardous material response cache grants, advanced notification of oil transfers from rail
cars, and increased regulation of rail crossings. The level of funding in the Senate budget is insufficient
to protect public health and safety from the risk of oil by rail.

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Emergency drought relief- The House budget does not include $6 million in emergency drought
relief; it also does not include additional supplemental and capital funding of $3 million (for a total of
$9 million). The Governor's drought emergency declaration requested funding to support irrigation for
growers, ensure safe and adequate municipal water supplies, supply stream flows for fish, and actions at
state hatcheries.
State parks- The Governor and the House budget provide an increase of$27 million for essential parks
services such as operations, grounds and facility maintenance, security at campsites, and safety
maintenance of hiking trails in the state parks system. The Senate budget funds only $5 million of this
need. In the past four years, the parks system has relied on one-time stop-gap funding and expenditure of
available fund balances to create a patchwork of staffing to maintain state parks. The maintenance,
operation and improvement of our state parks is a high priority for the Governor.
Enterprise services - In addition to the Governor's proposal to realign the state's information
technology (IT) services into a single coordinated agency, the Senate budget would transfer state risk
management and personnel services from the Department of Enterprise Services (DES) to OFM. The IT
realignment presents great opportunity for necessary improvement. We are concerned about disrupting
the ongoing work of the IT realignment and want to minimize the impacts on remaining services
provided by DES.
Information technology pool - The Senate budget includes $25 million GF -S ($89 million total funds)
to create an IT pool in OFM for a specific list of projects. Agencies may apply to OFM for funds and
are subject to rigorous review and oversight by the OCIO. A total of21 projects are eligible for the
pool. Additional funding is necessary to successfully implement this proposal because the total General
Fund cost of these projects is about $40 million. In addition, it may be necessary to directly appropriate
funding to the Department of Revenue for its TLSR system to ensure that the project qualifies for COP
financing.
Unallocated budget reductions- The Senate budget includes an unallocated $48.6 million reduction
for Lean management strategies and efficiency savings (Section 725). As we have previously stressed,
the Legislature has the authority and obligation to make specific appropriations to agencies and
programs - such that the consequences of proposed funding levels are transparent.
Collective bargaining agreements- Under state law, the Legislature may only approve or reject the
request for funds for collective bargaining agreements as a whole. If the Legislature rejects the funding
requests - as the Senate does -. the governor and higher education institutions must negotiate new
agreements with state employee unions. By statute, new agreements would have to be submitted to the
Office of Financial Management by October 1 and found financially feasible before going back to the
Legislature for funding consideration.
The statute does not provide a framework for the Legislature to preapprove or set the fiscal parameters
for negotiations. In addition, other provisions of labor law do not permit the state to limit the subjects of
bargaining once the parties are back in negotiations. Based on the state collective bargaining framework
and other provisions of labor law, it is uncertain whether the employee compensation provisions in the
Senate budget could be implemented.
Not withstanding these concerns, the Governor fundamentally believes it is important to honor the
bargained agreements and fund the modest salary increases.

 April 8, 2015
Page 5 of5

Local government infrastructure- While both the House and Senate budgets recognize the need for
local water and sewer systems, roads and other amenities, the funding approaches between the two
chambers differ in both the short and long-term. We look forward to working with the Legislature to
reconcile the different approaches and to maintaining long-term state support of these critical local
government infrastructure projects.
Revenues- There is an obvious difference between the Governor, House and Senate budgets with
regard to revenue policy. I have written to you previously that despite modest increases in state revenue
forecasts, the Governor continues to believe that significant new revenue is needed to keep pace with the
state's obligations and growing demands for education and other vital services. As budget negotiations
ramp up this month, we would again point out that the important revenue debates are not solely about
whether or how much revenue is needed, but how such revenue is generated.
•

Carbon pollution. The Governor has proposed a charge on major carbon polluters under a marketbased pollution reduction program that would improve the health of Washingtonians and generate
significant and sustainable revenues for education, transportation and other vital services.

•

Capital gains tax. The Governor, and now the House, have proposed a new capital gains tax on the
sale of stocks, bonds and other assets to increase the share of state taxes paid by our state's
wealthiest taxpayers.

There is clearly room for debate and negotiation on the structures and details of these and other revenue
proposals. The Governor continues to believe that taxes on carbon pollution and capital gains, while
also closing outdated tax loopholes, provide the best and fairest mechanisms to generate revenues for
needed enhancements to state services.
Thank you for your consideration. We look forward to working with you through the remainder of the
legislative session.
Sincerely,

De

David Schumacher
Director
cc:

Bryon Moore, Staff Coordinator, Senate Ways & Means Committee
Charlie Gavigan, Staff Coordinator, House Appropriations Committee
Jim Crawford, Assistant Director for Budget, OFM
Joby Shimomura, Chief of Staff, Office of the Governor