Everett, Wash.
Published: Friday, February 20, 2009

State told to expect $8 billion in red ink

By Jerry Cornfield
Herald Writer

 OLYMPIA -- Lawmakers got the bad news they expected Thursday with a new report predicting the budget deficit they are battling had ballooned $2.3 billion since November to eclipse $8 billion for the first time in state history.

Even after blotting up some of the red ink with spending cuts enacted this week, legislators still must fill a $721 million shortfall in the budget ending June 30 and then address a $6.8 billion gap in the next one, according to the report.

"It's a huge, huge number," said Sen. Steve Hobbs, D-Lake Stevens, who serves on the Senate Ways and Means Committee. "I hope people understand how serious it is. I certainly hope those interest groups who come before us realize what's going on and they have to be willing to sacrifice."

The analysis released Thursday amounts to an unfinished draft of an economic forecast.

Arun Raha, executive director of the Economic and Revenue Forecast Council, prepared it at the request of legislators who said it would help in their budget-writing efforts. He warned that the figures will be different when the official revenue forecast comes out next month.

But they won't be better.

The recession gripping the nation and the state has left the economy in a virtual freefall, Raha said.

Collections of tax revenues fell and layoffs increased at rates far greater than expected at the time of the last forecast in November. Housing starts tumbled, auto sales declined and personal income dropped below expectations.

That report predicted the state would face a deficit of $5.7 billion. Now, he's saying it's going to be $2.3 billion higher.

"It has become clear to me we were not pessimistic enough," he said. "Everything we feared could go wrong, did."

Gov. Chris Gregoire relied on the November forecast when she proposed a $33.5 billion spending plan for the next two years. She erased the deficit with roughly $3.5 billion in cuts and use of federal money and transfer of money from other state accounts.

The federal stimulus package signed this week will bring the state more money than she counted on then, but it will only be about enough to offset the increase in the deficit since November.

Despite Thursday's news, Democratic leaders in the House and Senate do not plan to quickly cobble together a bill to cut spending for this budget year. They intend to wait until the March 19 forecast, then draft a spending plan for the rest of this fiscal year and another one for 2009-11.

And Hobbs stressed the new deficit figure "doesn't change our mission to write a budget that protects the most vulnerable."

Republicans said acting swiftly now could reduce the depth of cuts later.

"We need to buckle down and make decisions," said Rep. Dan Kristiansen, R-Monroe, a member of the GOP leadership team. "We cannot just keep on talking about how bad the cuts are going to be and not make them."

Democrats and Republicans differ sharply on how the Legislature should respond at this point.

Democrats aren't ruling out asking voters to raise taxes to pay for certain programs. They insist it's the last option if actions required for balancing the budget cut too deep into education, health care or social services for the poor, disabled and elderly.

"We are talking about if an all-cut budget is something we cannot accept then we will consider revenue," Senate Majority Leader Lisa Brown said Thursday. "But the revenue option will not solve this problem either."

Republicans want lawmakers to keep the state living within the means of the tax revenues it receives.

"Part of the solution is taking tax increases off the table. This is not the time to put the burden of more taxes on the hardworking families of our state," Rep. Barbara Bailey, R-Oak Harbor, a member of the House Ways and Means Committee, said in a statement.

"While limiting the size and scope of state government is never an easy process, it is vital in today's economy," she said.

Jerry Cornfield: 360-352-8623, jcornfield@heraldnet.com.
© 2009The Daily Herald Co., Everett, WA