The forecast – delivered Thursday by Arun Raha, director of the state Economic and Revenue Forecast Council – showed an increase in total revenues of $558 million above his February predictions. But that increase was far less than expected, given that state lawmakers voted in April to approve nearly $800 million in new revenues.
The forecast came as the U.S. Senate hit new obstacles to extending Medicaid to the states in December. Washington is counting on $480 million in aid, so the forecast could compound that problem.
“I think everybody is nervous about it,” Marty Brown, Gov. Chris Gregoire’s budget director, said Thursday. He was referring to both the uncertainty of the federal Medicaid and the state of the economy, reflected in the revenue forecast.
Losing $480 million of expected federal aid could put the state’s supplemental state budget for 2010-11 more than $200 million in the hole. That could require a special legislative session later in the year – or across-the-board spending cuts ordered by the Democratic governor.
The governor’s budget office also is starting work on the 2011-13 budget, and early indications are the state faces a $3 billion shortfall for that period, too.
Republican lawmakers who serve on the forecast council suggested that Gregoire and Democratic decision-makers in the Legislature should huddle on a plan, especially if the federal medical help to the states (dubbed FMAP by budget writers) fails to win approval in Congress after Wednesday’s failed procedural vote in the U.S. Senate.
“Knowing how unreliable Congress can be, we should set a deadline for ourselves,” Sen. Joseph Zarelli, R-Ridgefield, said in a statement. “If the FMAP funding question isn’t settled by August 9, when Congress is scheduled to recess for more than a month, the governor should either enact across-the-board cuts to address the deficit or call the Legislature into a special session.”
House Finance Committee chairman Ross Hunter, D-Medina, was skeptical about having a special session and said he is “reasonably confident” Congress will deliver aid.
Hunter said that if aid doesn’t arrive, he still didn’t see a point in bringing the Legislature to town if lawmakers lack an agreement to cut the budget. He suggested the governor could accomplish the cuts more quickly.
Brown agreed it would be easier for the governor, as one person making decisions, to make across-the-board cuts. But he said 60 percent of the general fund is untouchable because spending on basic education, pensions and debt payments are protected.
With what remains of the budget and a year left in the biennium, this could require across-the-board cuts of 3 percent to 4 percent to make up the funds lost in Thursday’s forecast, Brown said. Those cuts would include prison programs and services to the vulnerable.
“We’re talking about cutting people off stuff. We have to find a way to do this that is reasonable,” Brown said. “We have to think about the services we provide to folks, also. So it’s not just a green-eyeshade operation.”
Raha said job growth has slowed and will remain slow. He said the recovery is hampered by tight credit for small businesses and the vulnerability of regional banks that have more exposure risk in the troubled commercial real estate sector. But he said the outlook is better for aerospace and software industry jobs, and Washington should still lead the national jobs recovery.
“The good news is, things are getting worse slower,” he quipped.
Brad Shannon: 360-753-1688 bshannon@theolympian.com www.theolympian.com/politicsblog
