As we reported earlier, today's state revenue forecast trims $1.2 billion off expected state revenues through June 2013. It also widens the immediate budget deficit by another $385 million that Gov. Chris Gregoire would have to cover with deeper across-the-board cuts or asking lawmakers to speedily enact cuts to cover the deficit which is not about a half-billion dollars.
It also means the shortfall for the next two-year budget has swollen to $5.7 billion and Republicans are calling for a special legislative session to start after Thanksgiving. But Marty Brown, budget director for Gov. Chris Gregoire, said he just doesn't believe things are that bad in the short term.
“It defies logic. The collections are close’’ to what were predicted in September, Brown told this morning’s meeting of the Economic and Revenue Forecast Council. “I just cannot see an almost $50 million-a-month drop from today to June 30.’’
In a rare move, Brown voted against accepting the forecast through June 2011 today during the council’s quarterly meeting in Olympia. He said he voted on his own without the governor asking him to and said the lower forecast makes a difference for those who are affected by the cuts it will require to balance the budget.
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Activists worried about deep cuts to health care already are alarmed, and they held a vigil last night on the Capitol’s north entrance to warn of a disaster that lies ahead.
Longer term, Brown said he accepts forecaster Arun Raha's outlook, which predicts an $809 million drop in state revenues for the 2011-13 biennium; he voted to accept it. The council’s other members, who include the state revenue director and Democratic and Republican lawmakers, voted to adopt both pieces of the forecast.
Forecaster Raha said Brown made a valid point. But he said most of the $20 million in revenues that have come in above September’s forecast were the result of early payments on property taxes and unclaimed property receipts.
Raha said he expects both housing and job recovering to occur later than he’d previously expected, and job growth is also slow. This means the economic recovery is proceeding more slowly – producing a biennium-over-biennium revenue increase of about 5.5 percent compared to previous estimate of 6.8 percent. About $281 million of the shortfall is the result of voter passage of Initiative 1107, which repealed taxes on candy, soda and bottled water and lowered a tax break for some canned-food producers.
Republicans on the council – Sen. Joe Zarelli of Ridgefield and Rep. Ed Orcutt of Kalama – both said the Legislature needs to meet right away to enact cuts that let the state cover its budget deficit through June. Democratic Rep. Ross Hunter of Medina did not disagree that cuts need to be made soon, but he said it is difficult to do something complicated in a hurry, which this budget problem might require.
Here is Orcutt's statement on the problem.
Gov. Gregoire, who has already ordered 6.3 percent across-the-board cuts that require legislative action to fully implement, put out a statement saying it is up to the Legislature to get moving on solutions. Her statement says:
Brown later told reporters he barely has time to prepare the two-year budget by Dec. 20, let alone the new round of cuts. The new shortfall races the current deficit through June to about $900 million, about $520 million of it covered by across- the-board cuts.
The state Budget and Accounting Act allows a governor to make across-the-board cuts. But Brown said budget-writers’ hands are tied in many ways. Because the state received federal stimulus funds that require Washington to maintain college funding at a certain level, the governor was unable to save the full amount from her first round of across-the-board cuts.
Although the state Legislature could vote to eliminate the Basic Health Plan and Disability Lifeline or to reduce child-care grants to people on welfare, Gregoire cannot do that on her own. BHP, and Disability Lifeline are funded by separate budget provisos, so across-the-board cuts must be used to take a percentage of those programs rather than shut down whole programs.
That means legislative action is needed to produce some cuts. In fact, previous across-the-board cuts ordered for the Department of Corrections may require legislative action, and that agency already was unable to meet its share of the cuts that Gregoire ordered in late September.
Brown said the looming cuts are likely to hit public schools and a wide variety of programs. To illustrate the size of the problem, he said the University of Washington's one-year budget is $271 million, "so we could have shut the university down in July and not made it" balance for the budget period through June.
Raha said the outlook is "grim" but defended state revenue forecasts that have been reduced by more than $6 billion over the ongoing two-year budget cycle.
"We are essentially in uncharted territory," Raha said, describing a recession greater than any economic downturn since the Great Depression. "Forecasting is like driving a car forward by looking in the rear view mirror. If it hasn't happened before, you won't see it in the model."
Rep. Hunter said Democrats who wrote the two-year and supplement budgets that are now running short for the next eight months relied on forecasts that were the best guide available, and he noted that states like Texas were hit more suddenly by larger shortfalls of more than $20 billion.
Hunter rejected Orcutt’s contention that the budgets should have been written to anticipate lower revenues than were in the March 2011 forecast.
Hunter said Republicans have been saying the same thing for a decade and like a stopped clock happen to be right now and then. Orcutt thought that was unfair and said the real issue was writing budgets that kept in mind the uncertain economic future.Orcutt and Zarelli say the state needs to move quickly to make cuts, because those savings multiply over a longer period of time.
Update on original Nov. 18 post to clarify that Marty Brown took issue with the short-term revenue forecast and voted against it. Brown said he'll follow it nonetheless in writing a budget.