State Revenues Less Than Predicted Asian Financial Crisis, Wary Consumers, Reduced Construction Named As Culprits
Lawmakers are awaiting new economic predictions from Washington’s chief economist, who says the state collected $50 million less than expected in October and November.
Economist Chang Mook Sohn says possible culprits are the Asian financial crises, a change in consumer spending patterns and a dip in new construction.
Sohn said Asia’s financial woes ultimately will take a toll in Washington state, which exports $29 billion worth of goods to Asia per year, with airplanes accounting for half the total.
Sohn said he may revise the state’s revenue forecast next month, which could have significant implications on state spending plans.
“I think things have really gotten worse,” he said. “There have been clearly unfavorable developments, and I think we will see more worsening before we see a better picture.”
The shortfall is only a tiny percentage of Washington’s $19.1 billion budget, and this isn’t the first time revenue has been below projections. But legislators are anxiously awaiting Sohn’s new economic predictions to determine whether any pending legislation or spending proposals will require rethinking.
“It all depends on what the new projections are,” said Senate Minority Leader Sid Snyder, D-Long Beach, chairman of the state Revenue Forecast Council. “It’s too early to panic. But there is a dark cloud.”
Lawmakers had hoped for the luxury this session of debating what to do with a state budget surplus currently projected to reach $865 million by the end of 1999.
A $2.4 billion Republican transportation plan that relies on current revenue projections and on money collected above a voter-approved spending limit is among the programs that could be affected.
“We’ll deal with it when we get there,” said Sen. Jim West, R-Spokane, chairman of the Ways and Means Committee and author of the GOP plan. “Asia is significant, but our economy is still strong.”
The package would use surplus money and bond sales over 25 years to pay for critical road improvements. It also would amend the spending limit to permit the transfer of general fund money into the transportation budget.
Democratic Gov. Gary Locke’s $2.4 billion transportation proposal would increase the gasoline tax.
If revenue projections fall significantly, “we’d all have to revise our (transportation) packages,” said Dick Thompson, director of the state Office of Financial Management. “If it is a trend and revenue collections are down for several more months, we will all be affected.”
As early as last fall, lawmakers began closely watching the escalating money crises in Thailand, Korea, Hong Kong, Indonesia and the Philippines.
“We said that we clearly recognized the potential danger of the Asian money crisis in November,” Sohn said. “And we explicitly said the level of uncertainty has heightened. Since then, it has worsened. We have seen the danger is a lot greater than we had perceived earlier.”
xxxx PROJECTION October and November revenue was projected at $1.831 billion, but collections came in 2.8 percent lower, at $1.781 billion.