OLYMPIA, Wash. — A cooling housing market has helped cut about $132 million from the state’s expected income, dropping the government’s total surplus to less than $1.4 billion as Gov. Chris Gregoire and lawmakers prepare to update the state budget.
ChangMook Sohn, the state’s chief economist, said the income drop was the first major setback in quarterly revenue projections in about four years. Still, Sohn called the lower income numbers “clearly a very minor fine-tuning, rather than a major change.”
Strong real estate and construction markets have pushed the state’s economic fortunes in recent years, and the state has been relatively insulated from national housing-market weaknesses that have stung mortgage lenders.
With Thursday’s lower forecast, that market softening seems to have finally applied some brakes to Washington’s economy — an event that state budget leaders have been expecting for some time.
“I think this is the beginning of a weakening trend that we have not seen, when the rest of the country has seen it in the last few years,” Sohn said.
The new projection, approved unanimously Thursday by the state Economic and Revenue Forecast Council, trims the state budget surplus from about $1.5 billion to about $1.38 billion.
Gov. Chris Gregoire’s budget office said the overall surplus includes about $954 million in general fund dollars, and about $430 million dedicated for the newly voter-approved Rainy Day Fund.
Gregoire will use Thursday’s projections to write her supplemental state budget, which will be unveiled next month. In a statement, Gregoire said the forecast “reinforces the need to continue to save money.”
State lawmakers, who return to Olympia just after the new year, will get another quarterly forecast in February before pushing their own budget proposals.
Thursday’s forecast pegged government revenue for the 2007-2009 budget at about $29.9 billion, a $130.4 million reduction from the September estimates. Sohn said $124.4 million of that cut is due to lower-than-expected collections from the real estate excise tax.
In addition, an accounting change cut the revenue total for the recently finished 2005-2007 budget cycle by $2 million.
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