Rossi ad in error on state deficit — there isn't one yet

Dino Rossi is airing statewide radio and TV ads suggesting Gov. Christine Gregoire has ignored the state's $3.2 billion budget shortfall.

The ads, titled "Denial," never directly say that. But the ads repeat several times a Sept. 15 statement by Gregoire that "We do not have a deficit today."

The ads assert the state has a deficit. A female narrator says about Gregoire: "Is she dishonest or is she in denial?"

The ad is inaccurate for this reason: The state is facing a projected $3.2 billion budget hole next year, but it does not have a deficit today.

The current budget, which runs to June 30, 2009, is balanced and the state has several hundred million dollars still in reserve. Part of the reserve is in a rainy-day fund that Gregoire pushed to create.

But the Senate Ways and Means Committee projects the Legislature will have to deal with a $3.2 billion shortfall when it meets in January to start putting together the next two-year budget for 2009-11.

The state is clearly facing an impending problem — and one that will require the state to slash spending or increase its revenues.

The ad is correct in implying that Gregoire has publicly downplayed the state's brewing budget woes and appeared slow to acknowledge looming problems. In early August, she ordered a government hiring freeze and targeted $90 million in spending cuts, but she still described the state economy as "resilient" and "healthy."

In the months before that, Gregoire maintained it was too early to tell whether a shortfall was coming because the economy might turn around, and her office maintained that stance when she announced the hiring freeze on Aug. 4.

Rossi responded to her announcement by saying Gregoire "has started to recognize the budget crisis she's created" — his own admission that she was not denying a problem, contrary to what his ad suggests.

At that time, the Senate Ways and Means Committee was predicting a $2.7 billion shortfall — the difference between the money the state was expecting to collect and its projected spending, assuming no changes in the next two-year budget.

On Sept. 18, a new state forecast showed the gap growing to $3.2 billion.

Gregoire then acknowledged the shortfall, said she was "preparing for it" and called for another $200 million in cuts. She blamed the state's problems on Wall Street's emerging financial crisis and federal government policies.

Her campaign says Gregoire didn't downplay bad news about state finances. The governor prepared for it by cutting $290 million, said spokesman Aaron Toso. As for her comment that Washington's economy was strong last month, Toso said, "We have a resilient economy compared to the national economy."

Rossi's spokeswoman Jill Strait admits the state does not now have a deficit. But she stresses the state "does now face a projected deficit that we should be addressing today."

If the ad said that, it would be accurate.

Strait says Gregoire continues to cite the state's current budget surplus — as she did in last week's debate — "and as long as she is doing that she is not acknowledging" the severity of the shortfall.

Bob Young: 206-464-2174 or byoung@seattletimes.com