Budget road still isn't clear

The latest forecast is only marginally brighter.

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Despite the looming government shutdown, not much happened in Olympia over the weekend.

The latest forecast is only marginally brighter.

Washington's budget hole is still deep — just not as deep as it was before. Updated state revenue figures released Thursday (Feb. 16) show Washington raked in slightly more money, $96 million,  than expected in the past three months.

Coupled with a revised estimate of unused state services — totaling about $330 million less expenditures than earlier expected — that means the budget shortfall for 2011-2013 is about $1 billion to $1.1 billion, instead of the previously predicted $1.5 billion. Roughly half of the $1 billion is for a reserve in case extra unexpected expenses pop up between now and June 30.

The Legislature has to take care of that shortfall in the few few weeks. 

"Our problems are not solved," said Sen. Ed Murray, D-Seattle and chairman of the Senate Ways and Means Committee, Thursday when the Washington Economic and Revenue Forecast Council released its latest forecast.

Rep. Ross Hunter, D-Medina and chairman of the House Ways and Means Committee, said: "It reduces the size of the problem by a fair amount. ... We're starting to understand the economy again. ... But we're still in a deep hole."

Rep. Ed Orcutt, R-Kalama and chairman of the Economic and Revenue Forecast Council, said the $96 million in extra revenue is not as big as it seems, noting that roughly $50 million will go to extra spending earmarked in December. "If you had a $10 bill in your pocket and someone gave you a penny, would you feel richer?" he said.

Legislative leaders have been waiting for Thursday's revenue forecast before tweaking and unveiling their budgetary fix-it proposals, hoping the forecast would give them a little extra money to play with. The minority Republicans will release their plan Friday. The House Democrats will unveil their plan early next week. The Senate Democrats will release their proposal roughly a week later.

The $96 million in extra revenue is the first time since June 2010 that the Economics and Revenue Forecast Council's predictions have been exceeded, even by a little. For the past year and a half, Washington's struggling economy usually produced less revenue to the state than predicted.

Politically, the $330 million in unused state services and the $96 million in extra revenue does not eliminate economic pressure for some type of tax hike, but greatly diminishes the impetus. 

Steve Lerch  the state's interim chief economist, said Europe's struggling economy will still have a ripple effect on Washington. That's because Washington trades extensively with Asia, and Europe trades extensively with Asia. And there's still a potential for greater effects if the euro's situation worsens. The federal government's economic woes are also contributing to uncertainty in this state. Also, the American economy is slightly better than it was prior to the recession, but has significantly fewer people in the workforce producing that economic output, which Lerch described as a good-news-bad-news situation.

Washington's economy is barely outperforming the United States' economy, and is expected to continue to do so, Lerch said.

In Washington, the aerospace industry has added 11,500 jobs since May 2010, compared to the roughly 6,000 jobs lost during the recession. Boeing now has a seven-year backlog in orders. The software industry has added 1,800 jobs since December 2009, so far not enough to make up for 2,500 software jobs lost during the recession. 

The state's private sector added 7,800 jobs in November and December 2011, compared to the state originally expecting 4,600 new jobs during that time. However, the state also lost 1,300 public jobs during those two months, compared to a predicted 300 for that period. Less money in state and local government budgets has been dragging down the economy a bit, Lerch said. 

Construction, which has a significant impact on state revenues, has remained more or less flat. Single-family house prices are still somewhat declining with Seattle house prices shrinking slightly more than those elsewhere in the  state. 

In the overall revenue picture, the state's November forecast predicted that the state will take in $30.188 billion in revenue  to 2011-2013. That has now improved to an estimated $30.284 billion. Right now, the preliminary revenue estimate for 2013-2015 is $32.294 billion. 


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About the Authors & Contributors

John Stang

John Stang

John Stang is a freelance writer who often covers state government and the environment. He can be reached on email at johnstang_8@hotmail.com and on Twitter at @johnstang_8