State budget outlook: Getting less awful, slowly?

OLYMPIA – Good news for the state is the recession is pretty much over. Bad news is won’t seem like the recession is over until the middle of the next year.

That was the assessment Thursday Arun Raha, the state’s chief economist, gave the Senate Ways and Means Committee.

            The panel, as well as all other House and Senate committees, are gathering in Olympia this week to hear what’s happening with the bills they passed this year, and get a preview of what they’ll face next.

What they’ll face is a budget that’s more than $1.2 billion out of balance, even after eating up about $570 million the legislators thought they’d left last spring as an “ending fund balance.” That’s billion with a “b”, or as Ways and Means Chairwoman Margarita Prentice, D-Seattle, put it: “Pretty soon you’re talking real money, right?”

Senate Majority Leader Lisa Brown, D-Spokane, in a separate interview, said she’s warned her caucus to expect another tough session with the budget – tougher than last year, because there probably won’t be several billion from the federal government in stimulus money. 

Bryon Moore, the committee’s operating budget coordinator, said the state is essentially looking at about $14.4 billion for this fiscal year and next. That’s down from almost $16 billion in fiscal 2008, and about what it spent in fiscal 2006.

In his good news, bad news presentation, Raha said the state, which relies heavily on the sales tax, can expect the holiday shopping season to be “a little bit better than last year, but not much.”

There’s been a huge drop in residential construction, and non-residential construction – buildings for government, businesses and schools – may not recover for the rest of the state’s two-year budget cycle, Raha said. Local and regional banks, who lend to land developers as a major part of their business, could be hurt by the lack of new building projects.

The global economy is recovering faster than expected, which could help Washington recover quicker than most states because a significant portion of its economy is tied to exports, he said. Boeing may see fewer cancellations for new jets from foreign customers, he added, and add or keep employees.

Unemployment remains higher than predicted just last year, and jobs will probably be slow to recover, much as they were in the recessions in 2001 and 1990-91, Raha said.

Every few months, Raha and other members of the Revenue Forecast Council estimate how much the state will take in, raising or lowering the previous estimate. In September the council brought the revenue projection down an extra $238 million.

So what’s good about that? In June, they had dropped it $686 million.”In my time here, that’s the lowest number I’ve reduced the forecast,” Raha said.