Low Revenue Forecast Jeopardizes Further Tax Cuts

Revenue forecasters said Tuesday the state’s expected tax income has fallen $109 million below earlier estimates for the two-year budget period ending June 30, 1997.

The drop in the third-quarter forecast, although relatively slight, may doom further tax cuts following legislative approval last month of a $132 million reduction in the state’s business-and-occupation tax.

Gov. Mike Lowry stopped just short of vowing to veto any further tax cuts, and fellow Democrats in the Senate said tax relief needs to take a back seat to preserving an adequate reserve account and “investing” in higher education and public schools.

But Senate Republican Leader Dan McDonald, R-Bellevue, and House Ways and Means Chairwoman Jean Silver, R-Spokane, said tax relief remains their top priority. Both said they will insist that the new budget not spend any more than the currently authorized $17.599 billion.

Forecaster Chang Mook Sohn told a news conference that the forecast, combined with the tax cut, leaves total expected income at $17.4 billion for the period, and reduces the state’s reserve fund to $489 million.

Out of that amount must come a reserve account and any new spending or tax relief.

Sohn said the decline can be blamed on slight cooling in some sectors of the economy. In particular, job growth and holiday sales were not as strong as expected.

That slowness will likely continue through June and then gradually pick up, he said. The Boeing Co. is expected to hire 2,000 workers this year and 3,000 in 1997, Sohn noted.

Lowry, who urged caution as lawmakers complete their work on budget and taxes, announced that the state’s bill for flood relief could reach $47 million. He suggested that lawmakers approve a budget no larger than the $109 million increase he has requested, and indicated he wants little, if any, additional tax-cut legislation to pass.

If no further taxes are cut and his budget and the flood relief money are approved, that would leave $333 million as a reserve. Although he has used $500 million as a minimum surplus, he indicated that his new bottom line is $300 million.

Both House and Senate leaders also used the $300 million reserve figure Tuesday. The Senate’s supplemental budget plan for the rest of the biennium calls for $155 million in additional, onetime spending, primarily on education and higher education. The House passed budget revisions Monday night that reduce overall spending by about $40 million.