Governor says state must brace for another $1.5 billion shortfall in revenue

  • By Jerry Cornfield Herald Writer
  • Friday, September 9, 2011 12:01am
  • Local News

OLYMPIA — Gov. Chris Gregoire said Friday she’s bracing for really bad news in next week’s revenue forecast and is telling legislators a special session might be in the offing.

She said she anticipates the state’s chief economist will forecast a drop in biennium tax receipts “north of $1.5 b

illion” and spoke this week with House and Senate leaders in both parties on possible responses.

Asked about the coming forecast as she exited an unrelated meeting here, the governor said she made clear to lawmakers that she’s unwilling to make across-the-board cuts. She also told them not to pencil in a special session, “but absolutely don’t be ruling it out.”

A lot depends on the forecast that state economist Arun Raha will deliver Friday.

“I’ve heard everything from $900 million to $2 billion in less revenue, so I don’t know what it’s going to be,” said Sen. Ed Murray, D-Seattle, chairman of the Senate Ways and Means Committee.

Whatever the amount, it’s not going to be good for a budget that’s been pretty beat up in a very short period of time.

The state’s two-year, $32.2 billion budget started July 1 and runs through June 30, 2013. It had $738 million in reserves when Gregoire signed it.

But Raha’s June forecast clipped $575 million out of anticipated revenue, leaving the budget reserve at $163 million.

If his report next week is worse, as most everyone around the Capitol expects, the budget will plunge into the red.

“Fortunately, we’re early in the biennium,” Murray said. “We need to work on a plan based on what we hear next week. Whether that leads to a special session, I don’t know. We need to take our time. We need to do a real budget plan if we go into special session.”

State Sen. Joe Zarelli, R-Ridgefield, who teamed with Murray to write the Senate’s bipartisan budget plan this year, called for creating a super committee to write a “blueprint” for budget reform to bring to the Legislature when it convenes next January.

“In the past, I have been a proponent of convening the Legislature for special sessions to address known budget shortfalls,” he said in a statement this week. “A special session is not the answer this time, however.”

In August, the governor took her own preparatory step by ordering department heads to plan for cuts totaling $1.7 billion. Now she’s not sure she asked them to dig deep enough.

“I’m concerned that the 5 percent and 10 percent (cut) scenarios I asked them to prepare may not be enough,” she said. “I don’t know if 10 percent is going to get us there.”

Raha wouldn’t divulge numbers, but he’s warned it won’t be pretty.

Though tax collections in May, June and July are only a bit below expectations, he said last week, a continuing decline in consumer confidence, instability in the European markets and the debate on federal spending are pushing the nation closer to another recession.

Circumstances are “considerably worse” than in June, he told the bipartisan Economic and Revenue Forecast Council. “I do not want you to expect only a minor adjustment in September.”

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

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