OLYMPIA — Washington’s resilient economy still seems immune from national woes and is expected to pump nearly $282 million more into state coffers, revenue experts said Friday.
This windfall drives state government’s total surplus to over $1.5 billion. Still, Gov. Chris Gregoire and budget director Victor Moore called for spending restraint, given that clouds are still on the horizon.
“We’re not going to be starting a bunch of new programs, just dealing with emergencies and any new enrollment and caseloads,” Moore said.
The rosy new projection was unanimously approved by the state Economic and Revenue Forecast Council on Friday. It was the 16th consecutive quarterly update that showed expansion of the state economy and the state’s treasury.
The U.S. economy is cooling, particularly the housing sector, but Washington seems insulated from fear of recession — at least for now, said chief economist ChangMook Sohn.
That’s because the state is experiencing continued strength in four high-wage sectors: aerospace, software, business and professional services, and housing. Almost 90,000 new jobs have been created in the past year and international trade is soaring, Sohn said.
The revenue forecast for the current two-year budget cycle now tops $30 billion for the first time. This includes the $282 million the council added Friday.
In the past two months, tax collections have been $75 million above forecast levels, primarily because of the continued strength of construction and housing sales. Stronger projections for job growth and personal income also added to the council’s latest forecast.
The state’s job growth over the past 12 months was 3.1 percent — 3.8 percent in the Seattle metro area — and contrasted with 1.3 percent nationally.
Washington’s housing market, while less robust than in recent years, still is much stronger than the national situation, Sohn said. He said the state still is experiencing strong in-migration and may be able to avoid, or at least greatly delay, a big downturn in housing.
Even as the U.S. worries about recession, “probably our economy will weather through,” given the expansion of aerospace, software and other high-paying industries, Sohn said. Exports, including airplanes and farm goods, are doing extremely well, he said.
He said he’s “not pessimistic at all,” but added, “Some slowdown is inevitable.” His new forecast is for slow revenue growth, in the range of 3 percent a year, less than the historic average.
“This forecast is yet another good sign that the Washington economy is still strong,” the governor said later. “This news strengthens my conviction that we have made the right investments in education, health care and jobs.
“But we also know that national economic trends can affect us here in Washington and we must continue to be fiscally responsible.”
Moore also gave a measured view of the forecast.
“Our economy remains resilient despite slowdowns in the rest of the nation,” with job-growth particularly gratifying, he said. But he added: “There is caution. There are still clouds on the horizon.”
State Rep. Ed Orcutt, R-Carrolls, a council member, said, “You still have to move forward with some caution.” The new revenue windfall sounds big, but it’s less than 1 percent of a $30 billion two-year budget, he said.
The surplus includes $1.1 billion in unobligated revenue and about $430 million that Gregoire and the Legislature intend to place in a hard-to-tap “rainy day” fund. Voters are being asked to create that fund in November, along with constitutional rules on how it can be withdrawn by future legislatures.
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