When state lawmakers assemble in Olympia later this month, they’ll likely replay a drama from their last session, when they faced a staggering multi-billion-dollar deficit and slashed programs to balance the budget.

Some on Vashon are already bracing for this year’s denouement.

Gov. Chris Gregoire’s first draft of her budget was released late last month, where she said $2.6 billion in cuts are needed to balance the 2010 budget, the second year of the state’s two-year spending plan.

This year effort’s will likely be made particularly difficult because of last year’s round of budget cuts — a $9 billion reduction in spending to close last year’s huge deficit.

On the chopping block this time around are cuts that some feel could be draconian — including the complete elimination of the state’s much-heralded Basic Health Plan, no money for the state’s Housing Trust Fund, an elimination of support for adults who can’t work because of mental or physical disabilities and far-reaching reductions in public education.

“For a lot of the people that Vashon HouseHold serves, it’s pretty much a catastrophic budget,” said Chris Szala, who heads the affordable housing organization.

The impact could be particularly devastating for school districts across the state, many of which went through wrenching debates and rounds of lay-offs last year as they attempted to come to terms with state funding reductions. Vashon had to trim $800,000 from its budget last year. Under the governor’s 2010 budget proposal, the district could face another shortfall — this time estimated at $400,000 to $600,000.

“I’d say it’s an educational funding crisis,” said Michael Soltman, superintendent of the Vashon Island School District.

“We’ve become accustomed to offering a very fine program, with variety and excellence in it. And that’s potentially compromised by the governor’s budget,” he added.

Laura Wishik, who chairs the school board, said she too is braced for another difficult year.

“We’re going to have to look at a wide variety of cuts and changes in the way we provide programs. It’s going to be pretty painful,” she said.

Gregoire, when she released her budget, said it was not the spending plan she wanted to put forward. By law, she’s required to deliver an initial budget that is balanced based on existing revenue. “It’s not a budget I can live with,” she stated in a letter released by her office last month.

Later this month, she’s expected to issue another budget that will include proposed tax increases to help address the shortfall. On the list is a sales tax on professional services — services provided by lawyers, accountants or architects, for instance.

Sen. Joe McDermott (D-West Seattle), who represents Vashon and serves on the Senate Ways & Means Committee, said he’ll be looking for new sources of revenue when the session starts, including the implementation of a state income tax, something he’s advocated for years.

“I haven’t ruled anything out,” he said.

But any significant tax reform will take several years to achieve, he said, and he doubts the Legislature will be able to raise enough revenue in the short session that begins on Jan. 11 to fully cover the looming shortfall.

Lawmakers will face a particularly difficult session, he added, because they’ll have very little wiggle room when it comes to where they can make reductions. The shortfall applies to the second year of the state’s two-year $31.4 billion budget — a large portion of which has already been spent. Additionally, there are areas where lawmakers can’t cut — debt service or basic education, for instance — because of legal restrictions.

As a result, he said, lawmakers will have to apply the shortfall — $2.6 billion or less, depending on whether lawmakers can agree to new taxes — to $7.7 million in spending.

The situation, McDermott said, will be “horrendously difficult.”

“The budget we wrote last year was extremely tough,” he said. “It was earlier this month, after some briefings I got, that I realized how much worse this coming session is going to be.”

Some Islanders, worried about what they see looming on the horizon, recently met with state Reps. Sharon Nelson (D-Maury Island) and Eileen Cody (D-West Seattle) to discuss their concerns.

Kate Hunter, Jim Hauser, Nancy Vanderpool, Roger Fulton and Szala from Vashon HouseHold gathered with the two lawmakers in a West Seattle coffee house, where they talked about what they see as an impending crisis in state government, Hunter said.

The group expressed considerable concern about the possible elimination of the state’s Basic Health Plan, which covers a lot of people on Vashon, including working people who don’t have access to health insurance through their workplace.

Hunter and Hauser’s 10-year-old grandson is covered by the pioneering insurance program.

“If our grandson gets dropped from the Basic Health program, … of course we would pay for it, but that means our life savings are at risk,” said Hauser.

The two lawmakers shared the group’s concerns about the state’s financial plight, Hunter said, and urged them to do what they can to build a grassroots constituency that would support tax reform.

“There are plenty of people on the Island who are pretty satisfied with their situation economically,” Hunter said. “They may not even know anybody who’s facing economic hard times. The state budget shortfall is only going to make things worse for the poorest of the poor.”