State revenue forecast jumps

OLYMPIA – Washington’s strong economy is eventually expected to cool off, but the good times are still rolling and will produce another tax windfall of nearly $484 million, state revenue officials said Thursday.

The surge drives the state’s projected reserves back over the $1 billion mark, even after the heavy spending of the Democratic Legislature and Gov. Chris Gregoire this year. Minority Republicans, heavily outgunned in the last session, had warned that Democrats were spending too much and saving too little.

The new projection, unanimously approved by the state Economic and Revenue Forecast Council, was unexpectedly strong and eases concerns of a deficit in two to four years.

“For the foreseeable future, the red ink is gone,” said Rep. Jim McIntire, D-Seattle, an economist who heads the bipartisan council of administration officials and lawmakers.

“This forecast is a good sign that our economy is still strong,” Gregoire said in a statement released by her budget office.

Still, chief economist ChangMook Sohn continued to warn that a slowdown remains on the horizon and that the torrid economy is expected to slow somewhat in the next two years. No recession is forecast and the state continues to outpace the national economy with job growth of at least 2 percent a year, he said.

Sohn said the new forecast marks the 15th quarterly expansion since the state pulled out of recession. The good news reflects stronger construction activity and growth in personal income than the council projected in March, he said.

Aerospace, software and construction all remain quite vibrant and the Puget Sound metro area’s broad strength boosts the state numbers significantly, Sohn said. The economy is generating about 60,000 new jobs each year, he said.

“Consumer and business spending in Washington remains strong,” he said.

Sohn said he expects $195.1 million in new revenue to roll in by June 30, the end of this two-year budget cycle, and a $288.5 million increase for the new biennium that begins July 1.

He said the $484 million increase is a huge number, but is only “minor fine-tuning” in the context of a $30 billion budget.

The new projected surplus now tops $1.2 billion, even after lawmakers adopted a state operating budget that spent heavily into the previous reserves.

Sen. Craig Pridemore, D-Vancouver, who wrote the Senate’s version of the operating budget, said lawmakers shouldn’t lust after the new money. He and McIntire said a big share of the windfall will go into reserves and be kept for a future downturn.

“It’s steady as she goes,” Pridemore said.