As a slow national economic recovery increases the possibility of an additional $1.4 billion state budget shortfall next January, the Legislature faces a number of daunting tasks.

First is balancing a budget to meet declining revenues. Second is implementing strategies to restore the vitality of industries that created the prosperity of the last decade. Not the least of these is the once-booming housing market.

Every key component of our state’s economy is inextricably linked to the homebuilding and real-estate market. It should be no surprise that when the national housing market collapsed a year ago, our regional economy imploded, too. Congress placed the industry on life support with the approval of an $8,000 tax credit for first-time homebuyers. The prescription has begun to work, but the patient isn’t stable. This tax credit is scheduled to expire on Nov. 30, and Congress will soon consider extending the tax credit until the housing market has achieved a full and robust recovery.

The purchase of just one additional home creates a ripple of economic activity within the housing industry. Economists estimate that the tax credit resulted in more than 7,000 home sales in Washington state during 2009. Washington State University estimated that 65 percent of those who sell their homes to first-time buyers turn around and buy another house from someone else who’s been waiting to sell. In fact, that cycle occurs about four times, according to the Center for Real Estate Research at WSU. Using that math you can figure that the 7,000 sales to first-time homebuyers in Washington state generated by the tax credit caused another 5,000 people to buy homes.

Home sales also are a critical job creator – every 1,000 home sales by first-time buyers creates more than 700 jobs. Many of these jobs are in the real estate and construction sector, but the impact of home sales also extends to retail and service jobs as homebuyers go to hardware, furniture or appliance stores to fix up and furnish the homes. That’s good news in Spokane County where currently more than 20,000 people are unemployed.

Home sales also give a shot in the arm to state and local government budgets that pay for everything from schools and public safety to parks and health care. The city of Spokane is looking at a $7 million budget gap for 2010, due in large part to the decline in sales tax and real estate excise tax. Economists estimate that each sale to a first-time homebuyer produces more than $15,000 in tax revenue for state and local governments. Washington’s elected officials facing heart-wrenching budget cuts in January should be at the front of the line asking Congress to extend the tax credit beyond Nov. 30.

Economists agree that the housing market is on the mend; sales are up and the oversupply of homes is receding. But a full and robust recovery has not yet arrived, and without continued stimulus we may suffer a relapse to the record-poor condition the housing market was in one year ago. Among the many federal economic stimulus strategies, my own conversations with Spokane-area Realtors and homebuilders indicate the tax credit for homebuyers is working beyond initial expectations. Our ability to persuade Congress to extend the incentives will go a long way toward moving Washington’s economy to a complete and speedy recovery.