State revenue forecast: $1.3 billion shortfall

Gregoire mulls calling special session of Legislature

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OLYMPIA — Washington faces a $1.3 billion budget shortfall after a revenue forecast issued Thursday determined that the economy was not showing the signs of recovery that officials had initially expected.

Lawmakers said they were discussing new ways to address the shortfall, just a few months after finalizing a plan that would reduce projected spending by $4.6 billion. Gov. Chris Gregoire was considering the possibility of asking the Legislature to come back soon to start balancing the budget, ahead of the scheduled January return of the lawmakers.

The Economic and Revenue Forecast Council, which lawmakers look to for guidance on how much to spend, had projected three months ago that the state would have money remaining at the end of the budget cycle, thanks to anticipated growth in the economy. But the latest forecast was $1.4 billion lower, leaving lawmakers with a $1.3 billion hole even if they spend all the money set aside in a rainy day fund.

“I truly wish I could assure you that this nightmare is about to end, but I see no end in sight,” said Arun Raha, the state’s chief economist.

Republicans budget writers said tax increases were not acceptable. They have the power to block any such proposals because of a voter-approved initiative that requires a two-thirds legislative majority to pass them.

“How do you get more revenue out of people who still don’t have work?” asked Republican Rep. Ed Orcutt of Kalama.

Democrats were considering a proposal that would ask voters to approve taxes in order to support education, which has faced deep cuts. Sen. Ed Murray, D-Seattle, said lawmakers need to work on getting a plan together to pass before January.

“We’re going to act,” Murray said. “We’re going to do the responsible thing.”

Democratic Rep. Ross Hunter said the state will likely need to find more than $1.3 billion in savings because there is opposition to spending the money in the rainy day fund. He said he would like to see the state leave an additional cash buffer for the current budget in order to handle additional volatility.

Raha blamed the economic weakness on factors outside of the state, including political gridlock in the nation’s capital and troubles in Europe. Because of the challenges of forecasting what will happen with the economy over an 18-month period, the state has issued both optimistic and pessimistic deviations that could leave the state with roughly $2 billion more or $2 billion less than projections.

Gregoire has already asked state agencies to prepare for cuts as high as 10 percent. She said in a statement that it’s clear the state will be required to 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,” Gregoire said. “These impacts will be felt in communities across the state.”