Victor Moore, budget director for Gov. Chris Gregoire, told a meeting of the AWB's Governmental Affairs Council Wednesday that he's preparing for a shortfall of at least $500 million when the state's quarterly revenue forecast is released Thursday.
"That's kind of my low-end number on the damage tomorrow," Moore told the group.
The expected decline in revenue combined with a large rise in demand for social services could require the Legislature to hold a special session later this year, something that neither Moore nor Marty Brown, the governor‘s legislative liaison,is excited about.
Caseloads for Medicaid and general assistance have increased significantly as the economy has worsened, raising costs by "hundreds of millions," Moore said. "More people qualify for Medicaid and general assistance," he said.
Officials are making various contingency plans based on the size of the revenue decline, but the governor is limited by law in the ways she can adjust spending, Moore said.
Lawmakers managed to close an approximately $9 billion shortfall in the state budget earlier this year without a general tax increase, largely by making deep spending cuts.
But as the economy worsens, it will become more difficult to avoid raising taxes, said Brown, who addressed the group with Moore.
Legislators have “very little stomach to do a heck of a lot more cuts,” Brown said. “If we lose another billion dollars, I don’t know what we’re going to do."
The state likely has enough reserves to get through the current biennium, but could go into the red in the next two-year budget depending on the size of the revenue drop, according to Moore.
Because of the financial worries, Gregoire’s focus will remain on the budget and streamlining government, Brown said. Brown asked business leaders to compile a list of the various government agencies that impact them to help the governor eliminate redundancies.
“How many agencies touch you and how do they touch you?” Brown asked. “We need to hear from you folks.”
Officials were flabbergasted by the decline in revenue this spring, prompting lawmakers to recalibrate what they could stomach in the way of cuts, Moore said. The state avoided a general tax increase in part because of $3 billion in federal stimulus funding, but those funds go away in two years and could prompt them to recalibrate again.
Don’t expect a quick turnaround in the economy to help, Moore said. New data released Tuesday showed the state’s unemployment rose to 9.4 percent in May, and Dr. Arun Raha, the state’s chief economist, predicted it will rise to 10 percent and hover for a while.
“That’s not what you call a robust recovery,” he said.
