OLYMPIA, Wash. -- Gov. Chris Gregoire told state agencies and workers Monday to prepare for additional budget cuts as high as 10 percent, warning that Washington's economic outlook has weakened.
In a letter to state employees, Gregoire budget director Marty Brown called the task "daunting." His office has asked agencies to prepare packages that would reduce projected spending by 5 percent or 10 percent -- the latter of which would save the state more than $1.6 billion.
"We don't think the economy is getting any better, and we need to get prepared," Brown said in an interview.
Gregoire told state employees in a memo that leaders need to be extra cautious because of economic uncertainty triggered by credit rating downgrades, federal debt concerns, the economy in Europe and the tsunami in Japan. She said the state has to be prepared if more bad news happens.
"For every two steps forward in the recovery, it seems we are taking one step back," Gregoire wrote.
Brown said it is too soon to say whether lawmakers will have to return to Olympia for a special session to deal with the budget before their official session begins again in January. A new revenue forecast is due out next month, and Brown said he is not optimistic about what it will show.
Relying on projections, lawmakers had set aside an estimated $738 million to handle any slowdowns in revenue for the two-year budget cycle that began in July. An updated revenue forecast in June quickly wiped out much of that buffer, leaving $163 million.
Brown wants the potential spending cuts submitted just days after the new revenue forecast is released.
Lawmakers cut some $4.5 billion in projected spending during this year's session, relying heavily on reductions in education funding. Democrats were unable to close the shortfall with any tax increases because of a voter-approved initiative last year requires a two-thirds majority to pass them.
Gregoire encouraged state workers to share their ideas on to make government more efficient.
"As we focus on a smaller and more efficient state government, we must tighten our focus on our very highest priorities," Gregoire said.