Tax Fortunes Buck Asia, Boeing Woes But Locke’s ‘99 Revenue Target Still Would Be $350 Million Short
Despite the Asian financial crisis and looming layoffs at Boeing, state revenue forecasters today predicted tax collections for this budget period will be up slightly and will rise by 7.5 percent in the next two-year budget cycle.
But state revenue forecaster Chang Mook Sohn’s prediction nevertheless threw a chill into Democratic Gov. Gary Locke’s revenue assumptions for the next two-year budget cycle beginning July 1, 1999.
Dick Thompson, the governor’s budget chief, said his staff had been working on the assumption that the next biennium would bring in about $350 million more than the $20.9 billion predicted by Sohn.
Locke and the Legislature have been waiting for Sohn’s quarterly forecast before getting serious about tweaking the current $19.1 billion state budget. Sohn’s prediction that the current forecast of $19.43 billion will be up by $13.2 million for the biennium will speed up that task.
But Locke and the Republican Legislature also have been waiting for an early forecast on the coming two-year cycle as they argue over how best to finance billions of dollars in needed highway construction, the impacts of which will be felt for years to come.
Locke is expected to use Sohn’s projection to argue that the best way to finance highway needs is through an increase in the gasoline tax, not through a Republican plan to issue bonds, the cost of which could drain money needed for education and other purposes.
Sohn contends that a crisis in Asian financial markets caused partly by heavy debt, combined with Boeing plans to reduce its Washington payroll by 12,000, will slow state economic growth and revenue in the next budget cycle.
Sohn’s forecast also predicted a budget surplus of $874.1 million for the current cycle. The surplus continues to grow as a result of a strong economy combined with voter-approved limits on how much lawmakers can spend each year.
xxxx HIGHLIGHTS Here are highlights of Washington’s economic and revenue forecast, and the fallout: Overall economy: Aerospace employment downturn expected, beginning in second half of 1998, but state should continue to out pace national economy in overall job growth and personal income. Inflation and interest rates are falling. The economy is expected to cool somewhat in the 1999-2001 budget cycle. New projection: About $13 million added to revenue projections for this biennium, but the 1999-2001 forecast is about $350 million below levels previously assumed by the governor and the Legislature. Total income: $19.96 billion forecast for the budget cycle that ends June 30, 1999, and $20.9 billion for the 1999-2001 cycle. Spending: Budget currently stands at $19.1 billion and is not expected to increase this legislative session. Reserve: $871 million projected. Tax cuts and legislation could reduce this amount. Next: Senate Republicans unveil their budget late today, preserving a surplus of about $550 million. Associated Press