OLYMPIA, Wash. – Low tax collections are driving a new state budget deficit of about $520 million through mid-2011, leading to spending cuts of about 6.3 percent from Gov. Chris Gregoire.
Thursday's state revenue forecast showed continuing weakness in the national and state economies following the Great Recession. Arun Raha, the state's chief economist, said the economic picture is still in "uncharted territory."
"Things will eventually get better, but at a slow and uncertain pace," Raha said. "That cannot be entirely reassuring, but that is the best that I have at this time."
The state is expected to bring in about $770 million less during the current budget year, which runs through June. There was previously about $250 million in the reserves, leading to the $520 million immediate deficit.
Tax collections for the following two-year budget period are also expected to be about $670 million lower than previously expected. That makes the total drop in upcoming expected revenues about $1.4 billion.
Consumer confidence, spending and job growth are expected to remain low for the immediate future in Washington. Exports, software and aerospace offer glimmers of positive news, but the poor state job market continues to restrain consumer confidence, Raha said.
"In Washington, the job recovery this time around has been slower than in any of the previous four recessions," he told lawmakers. "If you compound that with the fact that the hole we're in is the largest in living memory, you begin to comprehend the magnitude of the problem."
Gregoire and her fellow Democrats leading the Legislature previously settled on spending cuts to most areas of government rather than another special session to help rebalance the books. Administration officials will get to work immediately determining the exact nature of those cuts, which are expected to begin Oct. 1.
Spending cuts won't touch certain areas, such as basic education, pensions and debt service. But Marty Brown, Gregoire's budget director, said social services, corrections and community colleges will clearly face significant losses. That could lead to larger community college classes, fewer services for ill people and more.
"It's not going to be pretty," Brown said.
The Legislature already balanced a massive deficit earlier this year through a combination of reduced spending, one-time fixes and tax increases. Some of those tax increases could be rolled back through an initiative on the fall ballot.