Politics & Government

Tax collections continue to slide

Washington lawmakers might have to cut state spending by as much as $1 billion when they come back in January to re-write the state budget, because of a further decline in tax collections and a greater demand for services.

Victor Moore, budget director for Gov. Chris Gregoire, said Thursday the revised budget the governor submits to the Legislature in mid-December probably will cut between $500 million and $1 billion from the roughly $30 billion two-year operating budget for 2009-11 that took effect July 1. Passing that budget required this year’s Legislature to make $4 billion in cuts.

Moore made his remarks after the state Economic and Revenue Forecast Council met in Olympia and learned state tax collections will be $238 million less than what was expected only three months ago.

That means all $739 million the governor and Legislature had expected to be left in its main checking and “Rainy Day” savings account would be wiped out by mid-2011 and the state would be nearly $200 million in the hole.

The projected deficit is expected to grow even deeper in November. That’s when the state finds out how many more people have signed up for Medicaid, how many kids are enrolled in public school and how many criminals are in prison. Greater demand in those areas could widen the gap between tax collections and the need for spending.

Nonetheless, members of the forecast council said they saw no reason for lawmakers to come back in a special session before January to rewrite the state budget.

“We should get through the end of the year and into next year,” said Sen. Craig Pridemore, D-Vancouver, chairman of the forecast council.

“Special sessions are for emergencies,” council member Rep. Ross Hunter, D-Medina, said. “This is not an emergency.”

Arun Raha, the state’s chief economist, was the bearer of the bad news.

“I continue to worry about the downside risks of this recovery,” Raha said. “Consumer spending is bumping along the bottom. If spending does not pick up, we risk a double-dip bottom.”

Raha said he thinks Washington and the nation have hit the bottom of this current recession, and the recovery will begin soon.

“We are mildly – and I stress, mildly – more optimistic than we were in June,” he said. “But the recovery is still fragile and fraught with risk.”

He said he expects the state to collect less money in the 2009-11 budget cycle than it collected in the two-year budget cycle that ended June 30 – $29.6 billion, compared with $29.8 billion. That’s money that goes into the state’s general fund, its main checking account.

The state’s overall budget is about $70 billion, including all the federal money, as well as the transportation and capital budgets.

Rep. Gary Alexander of Olympia, top Republican on the House budget committee, urged caution.

“I don’t want us to get too hopeful,” he said.

State Sen. Joe Zarelli, top Republican on the Senate budget committee, said the time for lawmakers to start rewriting their own budget is when they come back to the state capital Oct. 1-3 for previously scheduled committee meetings.

“We shouldn’t count on more bailout money from the federal government, and I don’t sense the voters of Washington are in favor of the majority party’s proposals to raise taxes,” Zarelli said in a statement. “So, the Legislature simply has to step up. Next March, when it’s time to adopt a supplemental budget, will be too late.”

Raha said relatively little of the federal economic stimulus money has been spent. That won’t really kick in until summer and fall of 2010, he said. That’s what will help the state economy keep its head above water, he said.

“Government has raised its spending to make up for the private consumer, the money that consumers are not spending,” he said. “But if (consumer) confidence doesn’t improve and people (don’t) start spending, we are at risk of a double dip.”


Joseph Turner: 360-786-1826