Slow recovery forecast for state

OLYMPIA – The good news for the state is that the recession is pretty much over. The bad news: It won’t seem like the recession is over until the middle of next year.

That was the assessment Thursday that Arun Raha, the state’s chief economist, gave the Senate Ways and Means Committee.

The panel, as well as all other House and Senate committees, are gathering in Olympia this week to hear what’s happening with the legislation they passed this year and get a preview of what they’ll face next.

What they’ll face is a budget that’s more than $1.2 billion out of balance, even after eating up about $570 million legislators thought they’d left last spring as an “ending fund balance.” That’s billion, with a b, or as Ways and Means Chairwoman Margarita Prentice, D-Seattle, put it: “Pretty soon you’re talking real money, right?”

Senate Majority Leader Lisa Brown, D-Spokane, said in an interview she’s warned her caucus to expect another tough session with the budget – tougher than last year, because there probably won’t be several billion dollars in federal stimulus money.

Bryon Moore, the committee’s operating budget coordinator, said the state is essentially looking at a budget of about $14.4 billion for this fiscal year and next. That’s down from almost $16 billion in fiscal 2008, and about what it spent in fiscal 2006.

In his good news-bad news presentation, Raha said the state, which relies heavily on the sales tax, can expect the holiday shopping season to be “a little bit better than last year, but not much.”

There’s been a huge drop in residential construction, and nonresidential construction – buildings for government, businesses and schools – may not recover for the rest of the state’s two-year budget cycle, Raha said. Local and regional banks, which lend to land developers as a major part of their business, could be hurt by the lack of new building projects.

The global economy is recovering faster than expected, which could help Washington recover more quickly than most states because a significant portion of its economy is tied to exports, he said.

Boeing may see fewer cancellations for new jets from foreign customers, he added, and add or keep employees.

Unemployment remains higher than predicted last year, and jobs will probably be slow to recover, much as they were in the recessions in 2001 and 1990-’91, Raha said.

Every few months, Raha and other members of the Revenue Forecast Council estimate how much the state will take in, raising or lowering the previous estimate. In September the council brought the revenue projection down an extra $238 million.

So what’s good about that? In June, they had dropped it $686 million.

“In my time here, that’s the lowest number I’ve reduced the forecast,” Raha said.