By Curt Woodward
The Associated Press
OLYMPIA — State tax collections are down again, swelling the budget deficit by about $1 billion over the next 2 ½ years as lawmakers grapple with recent voter rejection of higher taxes.
Thursday’s state revenue forecast from chief economist Arun Raha adds an additional $385 million to the hole in the current year’s state budget, which runs through June 2011.
The 2011-2013 deficit is now pegged at about $5.7 billion out of a roughly $33 billion general fund.
Gov. Chris Gregoire already has ordered spending cuts to address the current deficit, but her actions won’t be enough to fill the additional budget gap.
Gregoire has limited ability to adjust the budget without help from the Legislature, but she could call lawmakers into a special session to fix the shortfall.
The Democratic governor said she’s set a Nov. 29 deadline for legislative leaders to recommend steps to balance the current budget.
But Gregoire made clear that she can do little more with her limited budget-balancing powers.
“Quite frankly, we can’t cut any deeper without ending significant programs. Extremely difficult choices must be made and given this sharp revenue decline, they must be made now,” Gregoire said.
“The Legislature will need to act quickly — delay will only deepen the problem and limit the options.”
Majority Senate Democratic leaders concurred with Gregoire’s sense of urgency.
“When we reach agreement on a way forward, we believe the Legislature should — and will — act immediately,” Senate Majority Leader Lisa Brown, D-Spokane, and Sen. Ed Murray, D-Seattle, said in a joint statement.
Any possible special session likely would be held in early December, when lawmakers are scheduled to hold their usual organizing meetings.
Legislators also could wait until January’s regular session to rebalance the current budget, but that would shave precious weeks from the window needed to capture any savings before July.
The new revenue forecast also said Washington will collect about $810 million less than previously hoped for the next state budget, which lawmakers will write when the 2011 legislative session convenes in January.
Raha said the continuing erosion of tax income shows that damage from the Great Recession continues, even though the recession officially ended last year.
“It will be a while yet before the losses can be fully tallied or even known,” Raha told the state’s Economic and Revenue Forecast Council.
“Uncertainty will continue to prevail until a new normal — whatever that may be — settles in.
“We are in uncharted territory.”
Revenues had been flowing relatively close to target in recent months, making the immediate deficit projection a surprise to some state officials.
Republicans immediately renewed calls for a December special session to begin making spending cuts to help fix the budget hole. Democrats remain in control of the Legislature, but voters essentially tied their hands earlier this month by rejecting several tax increases and making it difficult for lawmakers to pass future tax hikes.
Raha’s report of individual economic indicators painted a discouraging picture for economic growth in the immediate future.
Credit to small business remains tight and recovery in commercial construction isn’t expected until 2012.
Single-family housing remains weak, and a recent uptick in multifamily housing is not presumed sustainable.
Auto sales are rising but are still well below pre-recession levels, Raha said.
On the positive side, Raha said, the state’s strong aerospace and software industries along with important export ties to Pacific Rim nations means Washington still could perform better than other U.S. states in the economic recovery.
