Washington Auditor Presents Grim Forecast for General Fund Revenue

ALAMEDA, Calif. — Washington state economist Arun Raha made life difficult for state budget writers last week by cutting more than $1 billion from his forecast for general fund revenue.

The forecast contains some painful truths about the state’s sputtering ­economy.

High unemployment continues to drag on Washington’s economy and the state’s modest economic recovery is decelerating, Raha said in his revised economic forecast, which provides the official baseline state officials use to write the budget.

The state’s most recent unemployment rate is 9.6%, and the private sector added only 5,100 jobs between July and October, at the same time state and local governments cut 4,000 jobs.

“The immense damage from the Great Recession continues to linger, although that recession is now officially over,” Raha said of his revised forecast. “The economy is off life-support, but still in intensive care.”

The latest forecast from Raha’s Economic and Revenue Forecast Council chops $385 million from the current biennium budget compared to its September estimate, bringing predicted revenue down to $28.1 billion. It reduces the forecast for the upcoming 2011-13 biennium by $809 million, bringing the forecast to $32.6 billion.

The current biennium ends June 30.

Washington lawmakers have spent a good portion of the past two years grappling with rising deficits and reduced ­revenues.

One of their solutions, a tax on candy, soda, and other carbonated beverages, was repealed by voters Nov. 2, which contributed to the lowered revenue forecast. The repeal, known as Initiative 1107, removes $63.5 million from the current biennium forecast and $217.6 million from the forecast for the upcoming 2011-13 biennium.

Still, most of the drop in revenues that Raha is projecting reflects weak economic growth, he said.

Gov. Chris Gregoire, a Democrat, responded to the report with a statement noting that she ordered across-the-board 6.3% cuts last month. She indicated that more across-the-board cuts are not feasible.

“Quite frankly, we can’t cut any deeper without ending significant programs,” Gregoire said. “Extremely difficult choices must be made. And, given this sharp revenue decline, they must be made now.”

She asked legislative leaders to propose solutions by Nov. 29.

New taxes are not likely to be in the picture. In addition to ending the candy-and-soda tax, the voters this month rejected an income tax measure and passed a ballot measure requiring two-thirds legislative approval for tax hikes.

They also narrowed Democrats’ majorities in both houses.

“The Legislature is in a legal position to prioritize services and make targeted reductions and reforms that will have immediate and long-term effect,” Ed Orcutt, the ranking Republican on the House Finance Committee, said in a statement.

He asked Gregoire to call a special session next month.

The governor is required to submit a budget proposal for the next biennium in December.

The regular legislative session is scheduled to begin Jan. 10.

The state’s real gross domestic product grew at a 2% annualized rate in the third quarter, Raha reported, which is nowhere near enough to create a substantial ­recovery.

“In the longer term, 2012 and 2013, real GDP growth will depend upon growth in private demand, which at this time is not giving much indication of a rapid pick up,” he wrote in the executive summary of the forecast report.

The powerful effects of the recession linger, he wrote.

“Consumer and business confidence, financial and regulatory institutions, household and corporate balance sheets, the economy and economic forecasting models — none escaped unscathed,” he wrote.

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