OLYMPIA — Tax collections continue to drop in the latest state report, but economic forecasters are seeing signs that the recession may be moderating in Washington.
The newest monthly assessment of tax collections, compiled by the state’s Economic and Revenue Forecast Council, shows that general state revenues are down about $96 million, or 5.4 percent, from levels predicted in the last quarterly revenue forecast.
The council’s latest report, released this week, said preliminary tax payments in the month ending May 10 show a 15 percent year-over-year drop in retail. There also was a 38 percent drop in manufacturing-related tax revenues, and an 18 percent drop from the construction sector. Real estate excise taxes also were down, more than 17 percent below the level forecast in March.
The overall drop in tax collections cuts the total state budget reserves to about $654 million through mid-2011, including $250 million in the state Rainy Day Fund for emergencies.
When lawmakers adjourned in late April, they planned to keep some $822 million in savings to insulate against further economic downturns during the 2009-2011 budget period, which begins in July.
But the Legislature failed to pass a handful of bills that would have trimmed several million dollars from state spending, dropping the reserves to about $750 million. Lower tax collections for March and April cut even further into the reserves.
Nevertheless, chief state economist Arun Raha also reports some positive signs for the Washington economy.
Initial unemployment claims may have peaked in the state, which “suggests that we may be nearing the bottom of the current recession in our state,” Raha’s May report said.
Forecasters think the pace of job losses will slow in the months ahead, with the peak jobless rate coming in mid-2010. Raha previously has said the unemployment rate could peak at about 10 percent in Washington.
Raha also saw signs of increased activity in the real estate market, with pending single family home sales in April up about 15 percent from a year earlier. The revenue from those pending sales won’t hit the state’s books for some time, he noted, because the money won’t flow until a few months after any sales close.
A measure of the manufacturing sector also showed improvement in April, indicating a slower economic contraction, Raha reported.
National economic indicators are mixed, with positive signs in equity markets and housing balanced against tight credit and dropping business investment.
“The economy is giving mixed signals as it typically does just prior to a recovery,” the council’s May report said.