OLYMPIA – Although battered by the pandemic, Washington’s budget outlook isn’t as bad as originally expected when the virus first hit, the state economist said Wednesday.
Restrictions taking effect this week are too new to factor into a projection of what will happen to the economy in the coming months, said Stephen Lerch, executive director of the Economic and Revenue Forecast Council. New restrictions include the closure through at least Dec. 14 of bars and restaurants to inside dining along with gyms, theaters and museums, and a slight reduction in the capacity limits for stores.
“The concern is, if cases continue to spike, there could be additional impacts on the economy,” Lerch said. “People will pull back.”
Members of the council, which received Lerch’s report, were sharply divided on whether the Legislature should hold a special session to come up with financial aid for small businesses before the regular session starts in January.
“There’s going to be suffering between now and January,” Rep. Ed Orcutt, a Republican from Kalama who is the council’s chairman, warned. He called for a special session “sooner rather than later.”
But David Schumacher, director of the Office of Financial Management, said the state just started a $50 million relief program for businesses using federal money from the federal Coronavirus Aid, Recovery and Economic Security Act, and has about $200 million that hasn’t been allocated.
“Until that CARES Act money is gone, I don’t think we have a problem,” he said.
Rep. Timm Ormsby, the Spokane Democrat who is chairman of the House Appropriations Committee, said until Congress decides on another relief package, anything the state would do is “speculative.”
While he said he was happy to look at proposals, Ormsby argued that any economic modeling of consumer confidence developed before the pandemic “goes out the window” when there’s a safety issue like the pandemic.
Sen. Christine Rolfes, the Bainbridge Island Democrat who leads the Senate Ways and Means Committee, said the state options are far less than the federal government.
“The state government doesn’t print money. The federal government prints money,” she said. She criticized some “political leaders throughout this country” who she said act like masks, social distancing and even the virus are “fake.”
But Sen. John Braun, of Centralia, the top Republican on Ways and Means, shot back that the GOP had proposed 13 separate bills on relief for the virus in May and got almost no response from Democrats. The federal government already passed some $6 trillion in relief.
“Why aren’t we thankful for the help we’ve gotten, and get off our hands and do something about this situation instead of relying on hope,” Braun said. “To claim we don’t care about others, we don’t wear masks, we’re denying the virus is just plain false.”
The voters of the legislators’ districts need to be represented in the decisions, Braun added: “I don’t doubt the governor’s good will, but he’s not getting the feedback that he needs,.”
While sharply divided over the question of the need for a special session, the council was unanimous in accepting Lerch’s forecast, which said certain sectors of the economy, including home sales and property values, are doing better than expected. The state can expect to take in about $634 million more than projected just two months ago, Lerch said.
But even with that potential boost in revenue, the state might still get about $1.9 billion less than the amount the Legislature was told to expect when it updated the state budget last spring. The outlook for the 2021-23 budget, which the Legislature must pass next year, is about $1.6 billion lower.
The biggest risks to the economy and the state budget involve the virus, he said.
For example, Boeing’s problems with the new 737 Max could be fixed soon, which normally would lead to airlines ordering more jetliners. But the sales would depend on whether the airlines believe more people are willing to fly.
Some of the businesses that were closed in March have reopened but restaurants, bars and “brick-and-mortar” stores were hard hit by the shut down and some may not survive new restrictions.
Growth for the third quarter was stronger than expected, and personal income was higher, but that was partly due to the federal stimulus payments, which won’t be available in the final three months of the year. In the September forecast, economists were expecting some additional federal aid that would help stimulate the economy; now they aren’t.
The demand for building permits is stronger than expected, as were real estate excise tax collections. That may be because mortgage rates remain low and with more people working at home, there’s more demand to upgrade.
Economists originally expected the pandemic to depress prices, so the fact the reverse happened was “a little surprising,” Lerch said.