Revenue forecast up for biennium
OLYMPIA – Compared to the last time economists tried to predict Washington’s economic future, in June, the revenue forecast is up just slightly for the rest of this biennium and through the next two-year budget cycle, a state panel was told Wednesday afternoon.
On the upside, construction is improving and employment should slowly rise, although it won’t get back to pre-recession levels until sometime in 2014. On the downside, manufacturing is off a bit and so are exports except for airplanes, state economist Steven Lerch told the Economic and Revenue Forecast Council.
Bottom line, the state can expect to collect $30.47 billion for 2011-’13, which is up about $29 million from June’s forecast; it can expect to collect $32.65 billion for 2013-’15, up about $22 million from the previous forecast. It can expect $35.5 billion in 2015-’17, the first time forecasters have looked out that far.
The biggest economic risks – a slowdown in China, continuing problems in Europe and the federal government’s willingness to flirt with a “fiscal cliff” that would require across-the-board cuts – are all outside the state, Treasurer Jim McIntyre said.
In recent years, some forecasts have been so dire that they prompted calls for special sessions of the Legislature and demands for deep cuts or new taxes. This time, legislators on the council were willing to wait until January’s regular session.
There’s still a shortfall of about $1 billion between projected expenses and revenues the next Legislature will need to close, Lerch said. That gap shrinks to about $500 million if legislators use up reserve funds.
It’s clear the economy isn’t going to grow fast enough to provide revenue needed for things like education improvements being ordered by the state Supreme Court, said state Sen. Ed Murray, D-Seattle, the chairman of the Senate Ways and Means Committee. That means legislators will either have to make cuts or find revenue.
But the Legislature can look at the next forecast, in November, and try to find some adjustments through the end of June that would add to the reserves, said the chairman of the council, Rep. Ed Orcutt, R-Kalama.
State Sen. Dino Rossi, R-Sammamish, who was recently appointed to the Legislature and the council to fill vacancies, said the biggest problem with the economy is that Washington needs to become “a business-friendly state” to attract more businesses and jobs.
“Many of the problems in the budget are self-inflicted,” said Rossi, who chaired the Ways and Means Committee during his previous tenure. Medicaid will be a big drain in a few years because Democrats “have swallowed Obamacare, hook, line and sinker.”
Murray defended the current budget, which he helped to author. All budget writers face the same problems and wrestle with the same tough choices, he said, adding, “It’s unfortunate this forum is degenerating into a campaign forum.”
“Facts are stubborn things,” replied Rossi.
“So is history,” countered Murray.