The state's coming budget got a big boost last week when Congress approved $26 billion in Medicaid and education funding for the states, but drastic cuts could still be in the offing.

But as Gov. Chris Gregoire told PubliCola when we interviewed her about the budget last week right after the federal money came through (when we literally put an asterisk in our headline "Special Session Not Needed*," the budget is still in a precarious spot. Today Gregiore said that the state "dodged a bullet" with FMAP funding, but across-the-board cuts could still happen if state revenue collections remain lower than expected, driving the state into the red. (With the federal money, the state will have $72 million in the bank for the remainder of the 2009-2011 biennium.)

If revenue forecasts or receipts don't improve, Gregoire says state agencies will need to brace themselves for the possibility of 4-7 percent cuts starting in October.

Whether revenue picks up or not, the state needs to draw up a supplemental budget with $500 million in cuts for the last six months of 2011.

For the following biennium, the state budget needs to be reduced by 10 percent in order to cover a projected $3 billion shortfall.

The even-keeled Jason Mercier at the conservative Washington Policy Blog posts his take on the announcement here, reporting that Gregoire has guaranteed the cuts will happen. (The Governor's communications office told us that while the cuts aren't guaranteed, they're not optimistic about September's forecast.)
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