Today the Office of Financial Management (OFM) sent agency budget directors a memo requesting that they prepare for budget reductions of up to $1.7 billion (10%) in a 2012 supplemental budget.

From the OFM memo:

“In June, the state reduced its General Fund-State (GF-S) revenue forecast for the current biennium to reflect concerns about the national economy, high gasoline prices, and supply chain disruptions from Japan.  Although the forecast continues to indicate improvement this biennium, the near-term economic outlook has weakened since June.  Given economic conditions, as well as the uncertain impact on states of pending federal budget reductions, there is a distinct possibility we will face further revenue losses in the coming year.  Therefore, the Governor is asking agencies to prepare for possible cutbacks by submitting 5 percent first-priority reductions and a second 5 percent for a total of 10 percent in GF-S reduction options as part of their 2012 supplemental budget requests.

I recognize this is a daunting task, especially considering how little time has passed since enactment of the current 2011-13 budget. Although challenging, we are not starting this analysis from scratch.  Agencies should revisit the essential services assessments that were compiled last year, as well as the budget reductions included in the Governor’s 2011-13 budget proposal but not enacted by the Legislature.  Of course, we also need to consider new or additional policy choices and structural or business process changes that allow us to further improve our efficiencies and reduce our GF-S expenditures.

When developing reduction options, it is imperative to think in terms of service outcomes, not just dollar amounts.  We continue to seek a smaller and more efficient state government that focuses on the highest priority services.

The 5 and 10 percent targets as shown on the attachment are based on each agency’s biennial appropriations from the General Fund, with exceptions for basic education, statewide pensions, and debt service.  We will be closely monitoring economic conditions and revenue collections over the next several months, and will revise this target if warranted.  Please assume a January 2012 start date for any reductions that cannot be started immediately.”

Here are the projected agency by agency saving targets at 5 and 10 percent.

As illustrated by the OFM memo, although the legislature took positive steps this year to put the state on a more sustainable budget path, additional structural reforms and spending restraint are needed.

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[Reprinted from the Washington Policy Center Blog; photo credit: flickr]