State revenue forecast sees modest increase for coffers

OLYMPIA — Washington’s bumpy budget ride appears to be smoothing out as a result of a calmer economic climate, as well as new taxes and other spending decisions approved in April’s special legislative session.

A report issued Wednesday predicts an increase of $156 million in revenue in the state budget, which runs through next June and another $197 million in the two-year spending plan that follows.

Tax collections will drop slightly in the coming months, according to the revenue forecast prepared by Washington’s interim chief economist Steve Lerch. But the decline will be offset by the sum of money steered into the general fund through actions of lawmakers and the governor, according to the report.

A portion of funds will be generated from a new tax to be imposed on roll-your-own cigarettes, starting next month. The bulk is coming from temporary transfers of liquor, lottery and hazardous-waste dollars into the general fund from local government and education programs.

Absent those decisions, Lerch forecast the state would have had $16 million less in its budget, which ends June 30, 2013, and $133 million less in the 2013-15 biennium.

“Economic indicators continue to show mixed signs, but in general remain close to our last forecast,” said Lerch, who delivered his report to the bipartisan Revenue and Forecast Council. “Our forecast reflects the lackluster recovery from the recession. We continue to see a weak economy, with low growth, high unemployment and weak confidence.”

In a prepared statement, Gov. Chris Gregoire called the forecast “welcome news” though cautioned that it shows the economy is “slowly recovering, but is not yet stabilized.”

Marty Brown, Gregoire’s budget director, said if the economy continues to bump along as it has the last three months then it should be good enough to avert the need for another special session before lawmakers’ scheduled return in January.

Brown said it’s too soon to know whether another large shortfall is in the offing. “I think we’re in the realm of OK,” he said. “It’s more stable than it has been.”

Democratic lawmakers on the forecast council didn’t sound alarmed.

“This forecast is essentially no change from when we left the (special) session,” said Rep. Ross Hunter, D-Medina, chairman of the House Ways and Means Committee.

But the Republican chairman of the panel said he’s worried because the balance sheet for the current budget shows only $22.7 million in unrestricted reserves. If the economy sags further, he said, those dollars could evaporate and require possibly tapping into a constitutionally protected reserve of $289 million to make ends meet.

“I’m very concerned about the way our budget looks,” said Rep. Ed Orcutt, R-Kalama. “We’ve kind of flatlined. We’re not any worse off than the previous revenue forecast, but we’re not in better shape either.”

The next revenue forecast will be issued Sept. 20. The latest report can be found online at www.erfc.wa.gov.

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.

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