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UPDATED: Budget gap hits $2.6B; tax hikes suggested

• Published November 19, 2009

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State revenue forecaster Arun Raha said today the state's expected revenue through June 2011 has fallen by another $760 million.

That brings the state's predicted revenues for the 2009-11 period have shrunk by $5.3 billion since February 2008, and it means revenues for the period will be 3.3 percent lower than in the last budget cycle.

Gov. Chris Gregoire's budget director said it means budget cuts will be “ugly” and it makes it all but certain that Democrats will make tax and other revenue increases a serious part of the Legislature’s debate in January, and Republicans already are warning that it could backfire by harming businesses at a time jobs are desperately needed.

"The good news is the economy is finally recovering. The bad news is that revenue is not," Raha said.

Raha's outlook was based on smaller-than-predicted drops in sales-tax and business-occupation tax collections over recent months and a lag in consumer confidence that he does not expect to improve until jobless rates hit a peak of 9.8 percent sometime in the spring.

Raha said personal income in the state is improving but consumers still aren't spending, instead putting money into savings accounts and paying off debts. He said jobless rates and gas prices are the most influential factors for consumer confidence.

Gov. Chris Gregoire's budget director Victor Moore said the forecast means the budget problem is bigger than the $2 billion to $2.5 billion estimated earlier in the week. “We think the problem statement is about a $2.6 billion shortfall," Moore said. "I said last time everything was on the table. I just think I need a bigger table.’’

Moore added that he doesn‘t quite see a path to producing a balanced budget without new revenues. Gregoire's budget is due for release shortly before Christmas, and lawmakers return to session Jan. 11. Gregoire has not decided whether to submit a second budget with tax increases, and Moore said this in a statement: