Gov. Christine Gregoire has proposed a supplemental budget that would spend about one-third of the state’s sizeable revenue surplus on a combination of "targeted investments" and mandatory increases.

Her proposal would provide more than $187 million for K-12 education, including $38.5 million to assist high school students who are struggling with the 10th grade Washington Assessment of Student Learning (WASL) and $31 million to pay for required cost-of-living increases for teachers and other public school employees.

Gregoire provided details of her budget proposal Dec. 20, three weeks before the Legislature convenes to make adjustments to the $26 billion biennial operating budget adopted last March.

The state’s revenue picture has improved dramatically since the budget was approved, driven by a hot real estate market and an economy on the rebound. Official forecasts now project a surplus of $1.45 billion by the end of the 2005-07 Biennium.

Gregoire’s plan calls for setting aside $905 million of the surplus to deal with future spending needs, including rising costs in health care and education. A portion of the reserve would also be earmarked for a reserve account dedicated to paying down the state’s liability for state employee and teacher pensions.

The remainder of the surplus would fund a $504 million supplemental budget that’s split between new or expanded initiatives and increases driven by legal requirements.

Her plan includes $223 million for "strategic investments to that are too important to wait for the next biennial budget." These include:

• $38.5 million in new funding to help high school students who have been unsuccessful in one or more of the 10th grade WASL tests in reading, writing and mathematics. WASL passage is one of several new high school graduation requirements that take effect with this year’s sophomore class. Gregoire’s proposal would provide funding for programs such as summer school, before and after school programs, and tutoring.
• $3.4 million to help students furthest behind in math through new materials and alternative approaches to math instruction.
• $2.9 million to develop a student learning data system designed to "measure the effectiveness of education services."
• $410,000 for a "Navigation 101" program that assists students in planning for what they will do after high school, and $100,000 for pre-apprenticeship grants to support programs that guide interested students into the building and trades crafts.

Gregoire’s plan also calls for $281 million in "mandatory" increases. These include:

• $31.3 million to fund a pay increase for 84,000 public school teachers and staff. The increase is required under voter-approved Initiative 732, which mandates automatic cost-of-living increases for public school employees.
• $12 million in emergency assistance to school districts for skyrocketing utility and fuel costs.
• $40 million to pay for higher-than-projected school enrollments.

The supplemental budget would also make a $49 million dollar payment toward the state’s $4 billion unfunded pension liability. Approximately $35 million of that amount would go to the teachers’ retirement system.

Gregoire described her combination of spending and saving as "strategic, responsible and accountable."