Oregon Public Broadcasting

States across the country are in various stages of budget crisis.

Oregon's special legislative session opened Monday, with the mood relatively light -- voters just passed two tax hikes that stave off major cutting of the current budget. 

But in Washington state, there's a $2.6 billion shortfall. And now the state Treasurer is warning that “the entire treasury could be depleted” as soon as this fall.

What does this mean? The state could have to borrow to pay its bills. Austin Jenkins reports on the cash flow problem and what lawmakers are planning to do about it.

This is the sound of money flying out the door. In a basement room on the Capitol campus, a high-tech machine scans and photographs state checks - called “warrants” - that have been cashed.

Deputy Treasurer Shad Pruitt says it's a lot of checks worth a lot of money.

Shad Pruitt: “We typically get between ten and fifteen thousand warrants returned back to the state for payment. It could be anywhere in the hundreds of millions of dollars.”

Austin Jenkins: “Each day?”

Shad Pruitt: “Each day.”

Austin Jenkins: “Wow!”

Perhaps like your cash flow at home, the state is in a bit of pickle. The bills keep coming but the income has fallen off - dramatically.

Doug Extine: “My name is Doug Extine. I'm the Deputy Treasurer. We balance the checkbook for the state every day.”

Extine runs the numbers in a windowless office in the state capitol. He keeps west coast Wall Street hours – 6am to 3pm. He stares at two computer monitors. One tracks the markets.

Doug Extine: “This is Bloomberg. We can communicate with people on Wall Street.”

The other monitor displays Washington's cash position. He shows me the state's general fund is in the red to the tune of about $1.5 billion.

Doug Extine: “Cash balance today is minus $1.45B.”

Austin Jenkins: “In the general fund?”

Doug Extine: “Yes.”

Austin Jenkins: “And how is the state even able to continue to operate if its general fund is in the red?”

Doug Extine: “There are sufficient balances in the rest of the treasury.”

At least for now there are. But Washington's elected Treasurer, soft-spoken Jim McIntire, sees a problem on the horizon.

Jim McIntire: “We could envision running out of cash next fall if the governor and the legislature failed to act.”

You heard him right. The state treasury is at risk of running out of cash.

McIntire is so concerned that last month he sent a letter to the governor and top lawmakers. In stark language he writes: “Prompt, decisive action … is required to bring cash balances back to adequate levels.”

McIntire says policy-makers need to free-up about half-a-billion dollars by September. But it won't be easy.

Jim McIntire: “My sense is there's going to have to be a package of serious reductions and possibly revenue increases to get us there.”

In other words: budget cuts or tax hikes or both. And they need to kick-in quickly.

What McIntire needs is a cash-bridge to get Washington through until October. That's when the next big property tax collection is due.

Dire as the situation sounds, Governor Chris Gregoire doesn't appear to be too concerned.

Gov. Chris Gregoire: “The Treasurer felt he had a duty to write the letter to us. It's not the first time it's ever happened in the history of the state of Washington. And in those instances historically while you're waiting for that revenue to come in – typically property tax – you do a loan.”

That happened in the 1980s. Gregoire doesn't think a short-term loan will be necessary this time around. Treasurer McIntire hopes she's right.

Jim McIntire: “That would be not my preference and certainly doesn't help our credit rating if we have to do that.”

But top legislative budget writers aren't ruling it out. Rodney Tom is the number two Democrat on the Senate budget committee.

Rodney Tom: “Most businesses, even the best of businesses, they have lines of credit. That's not to say that that's a direction that we're going to be going but we're going to be looking at all options out there.”

Democratic budget writers say they don't want to imperil the state's bond rating. And they hope they don't have to resort to borrowing to pay the bills or make payroll. Wall Street will be watching.

Online:

State Treasurer's Letter (.pdf)