There’s more bad budget news this morning. Arun Raha, Executive Director of the State Economic and Revenue Forecast Council, predicts state revenues will come in $1.4 billion lower than budgeted through next June putting the current budget $1.27 billion in the red.
Legislators already passed a $32 billion budget in May for the current 2011-2013 biennium based on $5 billion less revenue than they originally expected to have. The new target will have to be $30.3 billion. And that negative $1.27 billion ending fund balance (the budget had about $290 million cushion) is worse than it looks because legislators prefer to budget with some money in reserves. Simply cutting to zero isn’t the goal.
Last session, they cut $4.6 billion—including major hits to higher education, K-12 salaries, and health care—to balance the budget at $32 billion. (To reach $5 billion, they also transferred about $459 million from otherwise dedicated funds.)
Immediately after the session, the state got more bad news: state revenues were down another $328 million for the biennium, Gregoire already announced last month that all state agencies should identify 10 percent cuts for $1.7 billion, in anticipation of the latest bad budget news.
In a statement this morning, Raha said:
We are in the fragile aftermath of the Great Recession where a return to normalcy seems like a mirage in the desert—the closer we get to it, the further it moves away. Fear and uncertainty have overwhelmed consumer and business behavior. Every time our state has looked like it would break out of the malaise, it has been sucked right back in.
Political gridlock in the nation’s capital gives little hope that the full toolkit of policy options will be acted on. In an increasingly interconnected world we are not immune to Europe’s problems either. Downside risks outweigh upside risks. Washington’s job market has been weaker than expected in June. The economy added 8,300 net new jobs in June, July, and August, compared to the expected 13,600.
Gov. Chris Gregoire, saying the legislature can’t wait until January to convene, released this statement:
To respond to these difficult economic times, state government has stepped up to the challenge. We’ve reduced staff, cut salaries, eliminated entire programs, adopted some of the biggest government reforms in a century and slashed our budget. We have addressed issues relating to our business climate such as workers’ compensation and unemployment insurance. We are implementing pension reform. In the past three years we’ve cut more than $10 billion. Including today’s revenue forecast, each of the past five forecasts has reduced our budget, and in each case we’ve responded quickly and appropriately with the tools at hand and with no tax increases. The November forecast may bring more bad news so we can’t wait until the start of session in January to take action. Today’s forecast demands that we again take action.
At the first sign of more uncertainty last month, I asked state agencies to prepare for additional cutbacks of 5 and 10 percent. While we expect those recommendations next week, with today’s news it is clear that this situation will require that we implement most of those reductions. The level of cuts will impact the educational future of our children, compromise public safety and put the most vulnerable at risk. These impacts will be felt in communities across the state.
I have been meeting with legislative leadership during the past two weeks and have made it clear to those members that we must have all options on the table, and we must continue to work together in these unprecedented times. We need to do more to get our people back to work and build consumer confidence in our future.
This crisis, started by Wall Street, was not the doing of the people or government of Washington state. However, fixing it falls on our shoulders. We were just emerging from the recession when Congress failed to reach a debt deal in a timely way and the European economic crisis shook consumer confidence. While we will continue to build the way for a long-term Washington state recovery, members of Congress must quickly take action to create jobs and deal with the nation’s economic crisis.
Here is Raha’s full report.
