Steeper dive in state revenue projected; workers furloughed

The state faces a reduction in projected revenue of about $8.8 billion over the next three years.

By Rachel La Corte / Associated Press

OLYMPIA — Washington is facing a reduction in projected state revenue of about $8.8 billion over the next three years due to the economic impacts of the COVID-19 pandemic, new numbers released Wednesday show.

The latest update by the Economic and Revenue Forecast Council is higher than the $7 billion predicted during an unofficial forecast that was prepared at the end of April.

Lawmakers — who are expected to be called into a special session by Gov. Jay Inslee sometime this summer — must first contend with the impact on the current on the approximately $53 billion two-year budget that ends mid-2021. That initial projected drop of state revenue — nearly $4.5 billion — means that after reserves and the state’s so-called “rainy day” fund are used, lawmakers will be left with a $1.4 billion shortfall that they’ll have to address through either cuts or new revenue.

The projection for the next two-year budget that lawmakers are tasked with writing at the start of the next regular legislative session in January is more than $4.3 billion in projected reduction in revenues from July 2021 through mid-2023. The next revenue forecast will be on Sept. 23.

Democratic House Speaker Laurie Jinkins said that House and Senate leaders want to come back to deal with the immediate shortfall soon, but she said they want to make sure they have a framework of a plan before they return to the Capitol.

Jinkins said that budget teams are already meeting and that lawmakers will be looking at both revenue and reductions as part of the solution.

“We have to take a balanced approach,” she said.

Last month, Inslee issued a directive freezing most hiring and signing of personal services contracts and purchasing of equipment, and the state’s budget office sent a letter to state agencies telling them to find ways to cut 15 percent from their current budgets. Agencies started submitting their budget proposals with suggested cuts this month.

On Wednesday, Inslee ordered cabinet agencies to cancel a scheduled 3% raise for agency directors and exempt employees who earn more than $53,000 a year, affecting nearly 5,600 employees. Union-represented and non-represented classified employees will still get the scheduled raise on July 1.

Republican Sen. John Braun said that the move was a “step in the right direction, but it’s not enough.” Braun and other Republicans have pushed for lawmakers to convene a special session soon in order to stop new spending that is set to take effect July 1, including the state worker raises that are still set to take effect.

Braun said that given the current situation, the union contracts should be be renegotiated.

“The economic facts are pretty clear to everyone that we can’t afford to do this,” he said. “And frankly, I would say it’s unfair when you put it in comparison to what private employees are dealing with right now.”

Inslee also announced that starting no later than June 28, more than 40,000 state employees will be required to take one furlough day per week through July 25, and then will be required to take one furlough day per month through at least the fall.

Inslee’s office said that the canceled pay raises and furloughs are expected to save about $55 million over the next year. Inslee urged other agencies not under his authority — including the Legislature, higher education and statewide elected officials — to adopt similar measures, which his office said would save an additional $91 million.

The Legislature has already taken action, with the Senate Facilities and Operations Committee on Tuesday adopting several reductions, including a 12-month suspension of a 2.5% increase for all employees. The House has also frozen salaries effective July 1, according to Bernard Dean, the chief clerk of the House.

Washington’s stay-at-home order was in place from March 23 until the evening of May 31, and the state’s 39 counties are currently in the process of moving through a four-stage phase in for lifting of restrictions. The state’s unemployment rate jumped to from 5.1 percent in March to 15.4 percent in April after businesses closed or reduced operations.

As of this week, 11 counties are in Phase 3, which expands group gatherings to 50 or less, including sports activities, and allows restaurants to increase capacity to 75 percent. Gyms and movie theaters can reopen at half capacity during this phase. Twenty-two counties are currently in Phase 2, which allows restaurants and taverns to reopen at half capacity with limited table sizes, hair and nail salons and barber shops to resume business, and retail stores to reopen for in-store purchases at 30% capacity. It also allows additional outdoor recreation and gatherings with no more than five people outside of a person’s household.

Three counties — Benton, Franklin and Yakima — remain in Phase 1, which only allows essential businesses to be open and limits restaurant service to takeout and delivery and allows limited outdoor recreation.

King County, the state’s largest and home to Seattle, was recently approved to move to a modified Phase 1 and will now allow all outdoor recreation permitted in Phase 2, expand opening indoor fitness studios for one-on-one activities, allow restaurants to begin opening indoor seating at 25% of normal capacity and allow hair stylists and other personal services at 25% capacity. Two other counties — Chelan and Douglas — are also in a modified Phase 1 of reopening.

More than 26,500 people in Washington state have tested positive for the virus and at least 1,231 have died. The virus causes mild to moderate symptoms in most patients, and the vast majority recover. But it is highly contagious and can cause severe illness and death in some patients, particularly the elderly and those with underlying health conditions.

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