March 17, 2011 in City, News

Washington’s budget gap grows by $778 million

By The Spokesman-Review
 

OLYMPIA — The gap between Washington state’s projected revenues and the cost of current programs grew by $778 million in the latest economic forecast, resulting in a possible deficit of about $5.5 billion if nothing were changed in the next biennial budget.

Arun Raha, the state’s chief economic forecaster, said several factors are stifling economic recovery in the state: uncertainty over oil prices, the tragedy in Japan and a slow housing market. “Clouded with a great deal of uncertainty,” is the way he put it.

Revenue is projected to drop another $80 million for the rest of this biennium, which ends on June 30. It will be about $700 million lower for the 2011-13 biennium.

The forecasting council released a preliminary forecast two weeks ago, but since that time, the earthquake and tsunami hit Japan, which is one of the state’s major trading partners, Raha said.

“The preliminary economic forecast presented two weeks ago is already outdated,” he said. Forecasts have updated their models with “early and rough estimates” of the effects of the disasters in Japan.

It’s not yet possible to factor in the possible impacts of problems at the nuclear powre plants, unknown amounts of productivitiy lost in the Japanese auto industry which accounts for about a third of auto sales in the United States or possible disruption to the sales of Washington wheat and apples, for which Japan is a major customer.

The Legislature will use this forecast to craft a General Operating Fund budget of about $31.9 billion for the two year budgeting cycle. If they can’t do that before April 24, the end of the current legislative session, they’ll need a special session.

Democrats and Republicans who serve on the Forecast Council clashed over several items involved in that two-year budget. GOP legislators, including the ranking Republican on the Senate Ways and Means Committee Joe Zarelli of Ridgefield, have called for the Legislature to reject contracts the governor’s office has negotiated with unionized state workers and seek more reductions in wages or benefits.

“We negotiated a contract with significant givebacks,” Marty Brown, Gov. Chris Gregoire’s budget director, said. “If we reopened it, I don’t know if we’d get anything better.”

And if the Legislature rejects the contract, unions receive their current pay and benefits schedule for another year, Rep. Ross Hunter, D-Medina, the House Ways and Means Committee chairman, said. That would cost the state more for the year starting July 1.

True, said Zarelli, but it could more than make up with by demanding lower pay and higher benefit costs in the next year: “The Legislature would be free to do whatever it wants in the second year of the biennium, and … write a budget based on what we can afford to do.”

Rep. Ed Orcutt, R-Kalama, said the Legislature needs to address its budget problems by increasing jobs: “I don’t see enough concern to get Washington working again.”

Sen. Ed Murray, chairman of the Senate Ways and Means Committee, shot back that the state’s economic problems are not the fault of Washington families or the Legislature but the loss of some $2 trillion taken out of the world economy by problems in the financial market.

As the forecast council was unanimously adopting the projections, some 1,000 protesters were gathering in the Capitol rotunda to demand the Legislature cut tax loopholes for businesses instead of programs for the poor. The marbled mezzanine echoed with shouts of “We’ll be back,” as they left with plans to return for more protests against budget cuts the first week of April.


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