Forecast shows $395M uptick in state revenue

But officials warn next 2-year budget faces challenges

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OLYMPIA — Slow economic growth is expected to continue in Washington state, but officials on Tuesday warned that the state still faces a “significant budget challenge” while writing a new two-year budget next year.

An updated forecast by the Economic and Revenue Forecast Council shows lawmakers may have $395 million more available to them through the middle of 2017 — $157 million more than predicted in February for the remainder of the two-year budget that ends mid-2015 and $238 million more for the next budget that ends mid-2017. It’s a small amount for a state in which the two-year budget cycle is expected to collect about $33 billion for the general fund through 2015 and about $36 billion through 2017.

However, officials are still anticipating a budget crunch at the start of the next legislative session that starts in January. Last week, the Office of Financial Management directed state agencies to identify potential cuts of 15 percent of current costs.

“While the revenue increase is welcome news, we still face a significant budget challenge in our next budget,” David Schumacher, director of the Office of Financial Management, said in a written statement.

The next revenue forecast is scheduled for mid-September.

One of the challenges facing lawmakers is a court-ordered requirement to put additional money into the state’s basic education system.

The state Supreme Court last week ordered the state to court on Sept. 3 to explain why lawmakers haven’t followed its orders to fix the way Washington pays for public education.

The court had ruled in 2012 that lawmakers were not meeting their constitutional responsibility to fully pay for basic education, saying they rely too much on local tax-levy dollars to balance the education budget. They were given until the 2017-18 school year to fix the problem.

As much as $2.5 billion, by legislative estimates, will need to be added to the education budget in coming years to meet the obligations lawmakers have already identified for improving basic education and paying for it.

At a meeting to discuss the forecast, Schumacher said that the court requirement “continues to put billion-dollar obligations on top of each budget.”

“We’re being squeezed both by very slow revenue growth and increasing expenditure pressure,” he said.

Democratic state Rep. Ross Hunter, a member of the Revenue Forecast Council and the top budget writer in the House, said that lawmakers can’t predict what the high court might do after the Sept. 3 hearing that has been scheduled. But Hunter said that even without the added financial factor of education funding, the upcoming 105-day legislative session will be a challenge.

“We will have to make very hard choices next year,” he said.