Arun Raha, the state’s top economist, said there hasn’t been a huge change in the economy since the September forecast: He said the state can now expect to collect about $122 million less than what he last forecasted.

“One very important word of caution is relevant here: Despite the relatively small change … the biggest threat to the U.S. and Washington economies remains the European debt crisis,” he said. He said U.S. bank exposure to European debt is “worrying.”

He said the secondary risk is gridlock in Washington, D.C. that has lead to fiscal policy gridlock.

Raha said consumer spending growth is improving, but we still have a long way to go. “Real consumer spending grew 2.4 percent in the third quarter, but its sustainability is questioned,” he said, since the savings rate and income have both dropped.

Gross Domestic Product is now at pre-recession levels in the U.S., but with 6.8 million fewer jobs. (more…)

Tags: Revenue forecast

“These are not normal times,” said Arun Raha, the state’s top economist, in opening up his presentation on the Economic and Revenue Forecast (which you can watch live on TVW). “Fear and uncertainty have overwhelmed” consumer behavior, he said. Political gridlock in the other Washington has lead to uncertainty. And Europe’s economic troubles are affecting our own economy.

He said the probability of a double-dip recession has increased, though it’s too early to say if it will. Because of all these economic factors, Raha said he expects the state to take in $1.4 billion less in the two-year budget cycle than he estimated just last quarter.

“There are still over 6 million fewer jobs nationally than there were at the start of this recession,” he said, illustrating the term “jobless recovery.”

Raha said even though most of those in the audience weren’t surprised by the forecast, it’s still “truly troubling.” He said the best he can hope for is that we don’t slip into another recession.

In the Q&A portion, lawmakers said there may be a need for a brief special session to handle the lack of revenue.

Tags: Budget, economy, Revenue forecast

A new and possibly budget-busting state revenue forecast and plans to carve out new state congressional and legislative district boundaries highlight TVW’s coverage for this week.  Both those events, and others, will be shown live on TVW and live on the web at tvw.org — check TVW’s air schedule here.

We’ll also have live coverage of two legislative hearings, Senate Ways & Means on Monday, and a joint House hearing on Tuesday, both looking at K-12 school issues.  The State Supreme Court’s fall docket kicks off Thursday, TVW will carry three of the four cases live.

We’ll be at Seattle CityClub Tuesday covering a conversation with new UW President Michael Young, and at The Olympian Editorial Board Wednesday recording pro-con interviews on I-1163, the in-home care initiative.  On Saturday we’ll be in Port Angeles for the ceremony that begins the removal of the Elwha River Dams, and at the Seattle U Law School for a conference on civics education and the law.  All these events will be recorded and televised this week and/or next.

Tags: Elwha Dams, Initiative 1163, Legislature, redistricting, Revenue forecast, supreme court, The Olympian

This week’s Q&A is with Sen. Mike Carrell, who I spoke with mostly about SJR 8205, which will remove a provision in the state’s Constitution that has never been enforced — and has been ruled unconstitutional. We also talked about next week’s big Economic and Revenue Forecast, where the state’s top economist is expected to have more bad news for lawmakers. Read all the way through the interview to see what Sen. Carrell has to say about it.

Q: First, what would the SJR do, in your own words?
Carrell: What it will do is eliminate from the state constitution a redundant part which is Article 6, Section 1(A). Article 6, Section 1 says what the qualifications are for a person to vote: You must live in the state, be 18 years of age, you can’t be a criminal — things of that nature. But Article 6, Section 1(A) says if you’ve been a resident of some state outside of Washington and you haven’t been here at least 60 days, then you can only vote for the president and vice president. The U.S. Supreme Court declared that it was unconstitutional to not allow somebody to vote that was of the age and had the other qualifications. But this has remained in our state constitution. I’ve tried for a number of years to convince people of both parties to clean up the constitution by removing this clause, and I finally did convince virtually everyone, so it’s going to a vote of the people.
It’s more a matter of doing some house cleaning to clean up something that was never implemented. It was passed by the people in 1977 and since that time, it has never been in actual effect. We have ignored it, so it is time to get rid of it.
(more…)

Tags: Budget, initiatives, Q&A, Revenue forecast, SJR 8205, supercommittee, voting

Here is the complete video of Thursday’s meeting of the Washington State Economic and Revenue Council, where Arun Raha, the state’s chief economist, explained how lawmakers will have $700 million less to work with in the next budget cycle.

Tags: Revenue forecast

The latest on the state’s economy: The 2011-2013 budget will be about $700 million less than what was forecast in November. For this year, it’s $80 million less.

The meeting is live on TVW now.

“The economic outlook remains clouded with a great degree of uncertainty,” said Arun Raha, the state’s chief economist. He said first, political unrest spread throughout the Middle East, driving up oil prices, then the earthquake in Japan. “The preliminary economic forecast, presented less than two weeks ago, is already outdated.”

“Collections have come in $85 million below target” since November, he said, referring to taxes collected.

Showing a chart with revenue collections each year, he said: “We will not be back to the prior revenue peak reached in fiscal ’08 until fiscal ’13.”

He said the state has seen six quarters of GDP growth. He said growht in GDP is threatened by rising gas prices — and consumers who aren’t spending as much. He said gas prices have spiked in recent weeks. “If gas prices stay high, I fear we may lose the recent gains in consumer spending.”

He says credit conditions for small businesses continue to improve, but aren’t back to normal. “At this point in the 1981-82 recession, we had regained all the jobs that were lost,” and had added another 50,000. Now, he says, jobs won’t be regained until Oct. 2013 — after the next biennium.

He said the biggest headwind to the economic recovery is the construction industry, which continues to lag.

As for house prices: Foreclosures are still high. “As these foreclosed homes come on the market, they will keep home prices depressed,” he said. “My best guess is that … by 2012, the outlook should start improving.”

“At this time, proportionately, our state’s employment has shrunk a little more than the nation’s,” he said. But we will “eventually see our jobs grow faster.” In terms of personal income: Washington will, eventually, see higher growth than the rest of the nation because of the high paying jobs in aerospace and software industries, among others.

“In conclusion, as Yogi Berra said, ‘the future ain’t what it used to be.’” (more…)

Tags: Revenue forecast

Today’s the day: The Economic and Revenue Forecast Council unveils its latest forecast, which lawmakers will use to write the biennial budget.

And TVW’s got it covered: At noon, we’ll be live on the web and TV with the forecast. That will repeat at 5:30 and 9 p.m. At 2 p.m., you can watch Gov. Chris Gregoire’s response live on the web. That will be televised at 8 p.m.

At 6:30 p.m., you can tune into Legislative Review, where we’ll have full coverage of the forecast in our daily 15-minute show. Then stick around for Inside Olympia at 7 p.m. — Austin Jenkins has exclusive interviews with House Ways & Means Chair Ross Hunter, Senate Ways & Means Ranking Republican Sen. Joe Zarelli, and state forecaster Arun Raha.

Tags: Revenue forecast

Arun Raha, the state’s top economist and the man responsible for the quarterly, just delivered the message: “These are difficult times … things will eventually get better,” he said. “That’s the best I have at this time.”

His forecast can be seen here.

After the presentation, Marty Brown, Director of OFM, said $1.2 billion has now vanished in a year. “I don’t think I’ve ever voted no on a forecast … but I’d like to at least discuss the possibility of splitting the supplemental forecast” from the next biennial forecast.

Raha said his concerns were understandable. “What we did essentially, if you look at the forecast from June to September, the decline was basically because the economic recovery fizzled out over the summer,” he said.

Next, Rep. Ross Hunter said the Legislature uses revenue forecasts to write budgets. “The question is … when will we know if we have, in fact, been overly pessimistic as (Marty) Brown suggested, or that you’ve been wildly optimistic?”

Raha said the economy is a moving target. “The economy might shift, even if you’re on target with the revenues.” He said the monthly revenue collection report could be used in a couple of different ways to determine that.

“We’re going to be talking about Basic Health — soon. We’re going to be talking about Disability Lifeline — soon… school districts are going to get nailed,” Brown said. “We’re in a major struggle. If we did this across-the-board, it’s 10.9 percent… and we can’t get all the money from higher education, we can’t get money from K-12 because the school years have already started.”

The council approved the forecast.

Update: Gov. Chris Gregoire releasedd the following statement:

“For the past two years we have been squarely focused on navigating the effects of the great recession. Our revenues have been closely tracking to the September forecast which is why today’s news comes as such a great surprise. Further across the board cuts, which would add 4.6 percent to the 6.3 percent reductions I ordered last month, are not feasible.

“I have been working with legislative leadership in both parties to collect ideas on how to address our current shortfall. This forecast has added even more urgency to those discussions and I’ve asked them to provide their options to me by November 29. Quite frankly we can’t cut any deeper without ending significant programs. Extremely difficult choices must be made and given this sharp revenue decline, they must be made now.

“As Governor I have limited tools in how to deal with these shortfalls. With the 6.3 percent across the board cuts currently being implemented, I have already pushed that option to the limit. The Legislature will need to act quickly – delay will only deepen the problem and limit the options.”

Tags: Revenue forecast

“Retail sales and B&O taxes appear to have reached bottom and are showing signs of improvement. Not so with use tax yet,” he said. He said people purchasing items online and not paying sales tax costs the state $85 million.

Overall, Raha said the council is reducing the revenue projection by $118 million.

He said in fiscal year 2012, the state will finally return to fiscal year 2008 revenue levels.

“Before I conclude, let me thank you for taking my advice for buying cars” and spending more on holiday shopping. Now, for his next request: “Please buy a house. Or, a strip mall!” Too much? “At least pay your use tax.”

“If things go well, we’ll have dug out of the hole we’re in by fiscal ’11.”

Now, for questions:

What effect does this have on the budget writing process?

Rep. Ross Hunter said the forecast is “well within the planning parameters” that the House is using. “I believe that’s true for the Senate as well.”

What’s the “official” number?

Victor Moore said it’s about $2.8 billion under what was initially forecast. Someone else suggested $2.7 billion. It’s somewhere around there.

When will Gov. Gregoire talk about a tax package?

Victor Moore said “all the moving pieces have stopped moving” and that we’ll hear from Gov. Gregoire soon.

Tags: Revenue forecast

Here’s the statement from the Office of Financial Management on today’s revenue forecast:

OLYMPIA – The February revenue forecast for Washington state government shows projected General Fund revenue down $118 million for the remainder of this biennium, which ends June 30, 2011. The figure was released today by the Washington State Economic and Revenue Forecast Council.

Included in the forecast was the loss of $154 million through the Dot Foods court case, which cost the state revenue from certain out-of-state companies operating in Washington. Absent that decision, a positive forecast would have occurred. Gov. Chris Gregoire has proposed a legislative fix to this loophole, which would recover a portion of the lost revenue. (more…)

Tags: Revenue forecast