State revenue figure dips $101 million

Associated Press

OLYMPIA — Washington state revenue officials, displaying patriotic optimism and bean-counter realism, cut state revenue projections by more than $100 million Tuesday and said they’re closely watching the economic effects of last week’s terrorist attacks.

The state’s chief economist, Chang Mook Sohn, said he isn’t worried about the state slipping into a recession, even with deep losses in the stock markets, blows to the aerospace and airline industries, and uncertainty about consumer confidence in the wake of the attacks.

Sohn said the state’s finances will be tight in coming months until lower interest rates begin to jump-start the national and state economies sometime next year.

State budget director Marty Brown said he can’t rule out budget cuts this winter. He noted that state reserves, once more than $1 billion, have dwindled to $456 million.

"The budget is in balance, but it is getting tighter by the day," he said in an interview. "We’re clearly watching it. What we have to do, though, is operate from what we know, not what we fear."

He said restraint will have to be the watchword for state government spending.

The state Revenue Forecast Council took Sohn’s recommendation and lowered state revenue projections by $101 million, reflecting a dampening of the state economy, including lower-than-expected consumer sales.

The dip compares with a state budget of $22.8 billion.

A pessimistic scenario considered but dismissed by the council would have projected a deeper reduction of $893 million.

It was the second consecutive update that produced a reduction. In June, the council subtracted $144 million from the projected income.

Sohn said most of his calculations came before the terrorist attacks last week, and he will closely monitor the situation before the November updates. Those will be the numbers used by the Legislature and the Locke administration in working on budget revisions in the upcoming legislative session.

"The tragic events in New York and Washington, D.C., are sobering and likely will have an impact on the state economy," Gov. Gary Locke said. "Now, a week after the tragedies, we are working to develop a more complete picture of the economic impacts that may result."

Added Brown, "Obviously, the economic landscape has changed. Just how much remains uncertain, but we know we can handle the challenge."

Sohn said the terrorist attacks hammered the national and global economy. But he repeatedly pointed to what he sees as the state’s strong and diversified economy. Noting that the Federal Reserve Board has lowered interest rates for the eighth time this year, Sohn said "a major stimulus" like that should perk up the national and state economy sometime next year.

"I have no doubt in my mind," he said.

Several of the council members said they remain bullish. The chairman, state Senate Majority Leader Sid Snyder, D-Long Beach, said he bought a new car this week, and House Finance co-chairman Jack Cairnes, R-Renton, said he bought stock Monday as a patriotic gesture and as a smart business decision.

"I think our economy is fundamentally very sound," Cairnes said. "I think our corporations, in spite of the horrible tragedy, are fundamentally as they were before last week. The corporations and the fundamentals haven’t changed. We have a lot to feel good about."