By Mike Baker

The Associated Press

OLYMPIA — Top state officials started preparing Monday for a government shutdown in July as lawmakers stalled in their bid to reach a budget compromise.

Gov. Chris Gregoire said she has started holding talks with cabinet and financial management leaders about what would happen if there’s no spending plan by the time a new budget cycle begins in July.

She’s seen little progress in budget negotiations in the Legislature and can’t recall a time that things have been so bogged down.

“I’m a little discouraged,” Gregoire said. She’s asked lawmakers for an agreement-in-principle by the end of this week.

Office of Financial Management Director Marty Brown said a shutdown has never occurred in Washington state but would likely close all but some public safety and constitutionally required operations.

Parts of the Washington State Patrol would still operate, for example, as would services for people being held in state institutions.

Brown said he expects a budget deal will come in time, but he has spoken with cabinet members about the need to start preparing contingency plans.

“We’ll be prepared either way,” Brown said.

Lawmakers are already approaching the end of a monthlong special session called largely to deal with the budget and its estimated $5.3 billion deficit.

Gregoire said she doesn’t plan on extending the session when it comes to a close next week.

Budget

The Legislature would have until the end of June to complete a budget, and Gregoire could call them back to complete that work.

Brown said lawmakers passed a budget on the final day of June in 1991.

Policy matters have become more of a stumbling block than how to fill a projected shortfall of $5 billion.

One of the key issues facing negotiators is how to handle the state’s workers’ compensation system.

The Senate wants to lower the state’s costs by allowing workers who are permanently disable to get lump-sum settlements instead of lifetime payments.

Leadership in the House has made clear that representatives won’t accept such a plan because it leaves workers with only a fraction of the benefits they would otherwise receive.

Meanwhile, the Senate has also proposed a constitutional amendment to reduce the state’s debt, a proposal that has delayed passage of the $3 billion construction budget.

House lawmakers aren’t sold on that idea.

Gregoire said both sides have been moving slowly and she’s noticed that they tend to hold sessions on different days.

“That sure makes it difficult to negotiate across the dome,” Gregoire said.