OLYMPIA – Washington faces a $900 million budget hole through 2015, a slightly smaller one for the Legislature to fill than previously thought, thanks to a slowly recovering economy.

Governor-elect Jay Inslee, a Democrat, reiterated Wednesday he plans to do that without a tax increase, a sentiment seconded a few hours later by Republicans on the state's Economic Forecast Council when it received the latest projection of money coming into and going out of the state coffers for the next four years.

The Democrat who heads the House budget committee, however, was skeptical. . .

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(Editor's note: the original headline for this item incorrectly state the shortfall in billions.)

. . . “I think it's unlikely to be actually legally possible,” Ways and Means Chairman Rep. Ross Hunter, of Medina, said. “But we always do a no-new-revenue budget first.”

Steve Lerch, the state’s chief economist, gave the Economic and Revenue Forecast Council Wednesday a mixture of good economic news and bad at its quarterly meeting. The state still has 72,000 fewer jobs now than before the recession, and wages have been slipping since early 2011; personal income is down. But consumer confidence is headed up to levels not seen since 2008, likely in part because gasoline prices are falling. The housing market continues to improve because prices and interest rates are relatively low and rising rents are convincing more people to buy.

“It’s still a relatively weak economy, coming out of the recession,” he said.

The state can expect to collect about $32.6 billion from taxes, fees and other sources in the two-year budget cycle that starts next July 1. That’s about $2.1 billion more than it will bring in for the current budget cycle.

But when state budget staff projected all the costs of current policies, programs and salaries into 2013-15, the state would need another $900 million to stay out of the red. It could tap its reserves for part of the shortfall, but draining all of those would still leave a hole of about $400 million, and leave the state with no cash for emergencies.

That’s without adding any new programs, and without meeting a mandate from the state Supreme Court to spend more on public schools. The cost of that mandate is not yet known, but is estimated at between $1 billion and $4 billion.

Gregoire said state agencies are looking for every possible savings. “But, as I’ve been saying for months, it will not be possible to solve this problem entirely with spending cuts.”

Inslee disagreed. On Wednesday he announced his three-person team to coordinate the transition from one administration to the next, and stuck with his campaign stance that he wouldn’t raise taxes.

“We are starting a team to grow our economy to increase revenues to the state of Washington,” he said. “This is a mountain we're going to be climbing. This is the first step.”

Rep. Ed Orcutt, the Kalama Republican who chairs the forecast council, said with $2 billion more projected in the next biennium, and almost $3 billion more in 2015-17, the Legislature should be able to balance the budget and make school improvements without a tax increase. “If we get people back to work, our revenues will grow at a faster rate than they are.”

Hunter was skeptical. Getting more people working is the top goal, he said, but it’s a slow way to grow revenues. Inslee’s call for savings through better management would provide savings eventually but not quickly, he added, and if public schools and colleges are protected from cuts, the options for big savings are limited.

“I actually don’t think it’s going to be numerically possible, but we’re going to look at it,” he said of a budget proposal with no new taxes.

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