Special session near-certain after $1.4B revenue loss

Staff writerSeptember 15, 2011 

The state revenue outlook is so grim that forecaster Arun Raha didn’t crack a single joke Thursday as he laid out another $1.4 billion drop in expected state revenue through mid-2013.

Dropping his past strategy of breaking terrible news with a touch of humor, he spoke with frustration and said the economic and revenue recovery resembles a desert “mirage” that keeps moving.

Raha said job growth will continue at a slow pace – failing to recover its past peak in Washington until sometime in 2013. He cited global uncertainty caused by European debt worries and U.S. congressional gridlock as factors holding back the consumer spending that normally stokes the economy and fills state coffers.

“I’d like to assure you this nightmare will end. But I don’t see an end in sight,” Raha said in his report to the state’s Economic and Revenue Forecast Council.

Gov. Chris Gregoire all but called for a special legislative session to begin before Raha’s next forecast, due Nov. 17.

“The November forecast may bring more bad news so we can’t wait until the start of session in January to take action. Today’s forecast demands that we again take action,” Gregoire said in a statement.

Of course, timing is everything, and Gregoire and legislative leaders are expected to work closely in the coming days to map out options and see what kinds of timelines and options are available.

Talk of tax increases or closing tax breaks for industry also has increased in recent weeks, and some Republicans already have balked. Republican Rep. Ed Orcutt of Kalama voiced worry about how tax increases would affect jobs and family incomes.

Democratic budget writers on the council – Rep. Ross Hunter of Medina and Sen. Ed Murray of Seattle – said revenue has to be considered alongside what further budget cuts would mean. And some Democrats have talked of a ballot measure in the spring to raise taxes or erase tax breaks.

“I don’t think we are going to take anything off the table in discussions right now – because I think we are down to the point where people have to decide what kind of state they want to live in,” Hunter said, adding, “We’ll balance out Rep. Orcutt’s concerns about impact on jobs, because that also is important to us.”

Raha’s forecast also sets the official revenue base on which OFM and lawmakers must rely as they put the two-year budget for 2011-13 back into balance.

State budget director Marty Brown said the new revenue drop presents the state with a projected $1.28 billion deficit in June 2013. But how quickly the state’s small $163 million cushion evaporates remains a question, Brown said.

By law, Gregoire would have to enact across-the-board cuts once the state is in a deficit-spending position, unless lawmakers took action. Zarelli offered another option: giving Gregoire more leeway in making cuts during fiscal challenges such as this one.

Budget director Brown already is requiring state agency budget officers to turn in proposals for cuts of 5 percent to 10 percent to OFM by Thursday. Those recommendations will be used by OFM and lawmakers to craft proposals to close the gap.

In the meantime, budget writers planned conference calls with the governor this morning. Talks are to continue as more details about the budget options are known.

Sen. Murray and Sen. Zarelli both want a structured approach with a plan before going back into session. Rep. Hunter said he also likes the idea of taking early action to reduce spending, but Hunter said there are practicalities to overcome. All three lawmakers were roughly in agreement that the kind of one- or two-day session used a year ago would be harder to come by this time around.

Brad Shannon: 360-753-1688



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