Revenue forecaster Arun Raha said in his quarterly report Friday that actual state tax receipts are projected to increase by about $31.5 million for the period ending in June 2011. That compares with his November forecast and marks the first time in nearly two years that the state’s forecasts have exceeded previous predictions.
But because a Supreme Court ruling in the Dot Foods tax-challenge case broadened the tax exemption allowed, the state expects to lose $154 million over the period – unless lawmakers act to change the law and prevent the flow of about $95 million that isn’t already owed in refunds.
Added together, those two factors caused the state’s overall budget hole to deepen to $2.8 billion.
“The economy is performing as expected. Economic output has been positive for the last two quarters of 2009, indicating that a recovery is under way. However, employment is lagging, and the revenue recovery is still constrained by weakness in the construction sector and cautious consumers,” Raha said in a statement after releasing his forecast.
Majority Democrats say they want to use a balance of cuts and new revenue to bridge about $1.7 billion of that hole, using federal money and fund shifts to cover the rest. Senate Democrats plan to introduce their proposal as early as Wednesday, thinking their draft budgets are in line with the forecast.
“I think it was very expected and very much fits within the budget scenarios that we have developed,’’ Sen. Rodney Tom, the Medina Democrat and vice chairman of the Senate’s budget-writing committee.
“It’s kind of full steam ahead from here.’’
There is one possible glitch or delay. The House Finance Committee is set to hear a bill today that amends Initiative 960, making it possible to approve tax increases on a simple majority vote of 50 percent plus one. And Tom said his caucus won’t roll out its budget until Senate Bill 6130, which suspends I-960 for 16 months, is sent to Gov. Chris Gregoire for signing.
“When that’s in the governor’s hands and ready for signature, we’ll probably have a budget at least ready for caucus by next Wednesday or Thursday,” Tom said.
Raha said he expects state revenue to shoot up by about 8.8 percent in the 2011 fiscal year compared with the current one, and move up more modestly in the budget years ending in June 2012 and June 2013.
He also says job growth is under way in Washington, but that it will be two more years before the state has the same level of employment it had in early 2008, when the recession began here.
Raha also said job growth might reach 50,000 this year and that jobless rates should peak around 9.8 percent between April and June, while stronger job gains are seen later in the year.
But Raha said that even with the job growth that fuels revenue in this sales-tax dependent state, he thinks the total revenue available to lawmakers in the 2011-13 budget cycle will total just $32.2 billion – far below the more than $34 billion once forecast for that period.
Republican Sen. Joseph Zarelli of Ridgefield said it appears the recession is ending, but he said he remains concerned that Democrats are not looking far enough ahead into the next biennium.
And he is concerned by the implications of state spending – or of Democrats’ likely tax increases, which he thinks can slow the recovery.
“The key to bringing fiscal stability back to government, while sending a positive signal to the job creators in our state, is to move the level of state spending toward the level of revenue – not the other way around,” Zarelli said in a statement.
“If the revenue level has flattened out, as today’s forecast suggests, then we have a target to aim at on the spending side. It was a mistake to prop up the spending level last year with one-time federal money; to now rely on revenue from new taxes to maintain spending at a particular level would be a losing proposition over the long term, because it would stunt our economic recovery.”
Of the total revenue gap, about $1.7 billion is expected to be covered by spending cuts or new revenue – with federal funds and raids of other accounts used to cover the rest.
Tom declined to say how much of the budget gap will be filled by new taxes and how much by cuts, but he suggested there will be both.
In the House, Ways and Means Chairwoman Kelli Linville, D-Bellingham, said she is looking at a balance of taxes and revenue to cover the $1.7 billion – meaning she wants roughly half taxes, half cuts. Linville said a bill requiring one-quarter of the state government work force to take 11 days off without pay is “back to life” and is likely a part of the budget solution.
Gregoire has said she wants $780 million in new revenue.
Brad Shannon: 360-753-1688
bshannon@theolympian.com
www.theolympian.com/politicsblog
