The latest revenue forecast for Washington's 2009-11 biennium has fallen by $760 million since September, Arun Raha, Washington's chief economist announced today.
Officials now expect to collect $28.8 billion, an estimate driven down largely by a "crisis of confidence" that has consumers continuing to pay down debt and save money rather than spend it, Raha said.
The news, which was expected but nevertheless sobering, means that lawmakers must now find a way to fill a $2.6 billion shortfall when the 2010 Legislature convenes -- up from a previously estimated $2 billion shortfall.
"It's getting to be kind of numbing to us, the size of the mountain we need to climb," said Victor Moore, director of the state Office of Financial Management.
In his September forecast, Raha said Great Recession was over, but the recovery would be slow and weak.
On Thursday, Raha reiterated that the recession has ended -- that's the good news -- but the bad news is that the state economy is experiencing a "revenue-less recovery."
Weak consumer confidence is largely to blame, Raha said. The high unemployment rate and relatively high gas prices are holding back spending, he said.
Raha does not see gas prices falling anytime soon. His best guess for when unemployment will peak is around the second quarter of next year.
The state's unemployment rate is currently 9.3 percent. Raha predicts it will peak at 9.8 percent.
Another problem is a tight credit market for small businesses. Although large banks are returning to normal lending practices, smaller banks are increasingly getting into trouble, Raha said.
Small businesses -- which create most of the new jobs in the economy -- are hurt disproportionately when these banks are unable to lend, he said.
On the bright side, exports are strong and are expected to help Washington recover from the recession faster than the nation, Raha said.
Also, the state's high-wage aerospace and software manufacturing sectors are relatively stable, he said. That's important because it will allow spending to improve once consumers regain their confidence.
Raha sprinkled the mostly negative presentation with his trademark humor, starting off by announcing that he had good news and bad news.
The good news, he said, is that Ken Griffey Jr. has re-signed with the Seattle Mariners. The bad news is that Griffey batted .214 last year.
Remarking on an economic model that gave misleading results, Raha quipped: "This is not the first time I have been led astray by a model."
But there was no disguising the brutal statistics.
Since the council first produced a forecast for this biennium in February 2008, it has declined $5.3 billion including Thursday's forecast, a testament, Raha said, to the "gut-wrenching recession" the economy has been through.
When asked by reporters how they might respond, some lawmakers said they must consider raising taxes -- something AWB President Don Brunell has warned against.
"For me personally, taxes are on the table," said state Sen. Craig Pridemore, D-Vancouver.
Rep. Ross Hunter, D-Medina, said lawmakers would look at every option and consider the impact each would have on the economy, the business community and citizens.
"I don't think anything is off the table," Hunter said.
But Rep. Ed Orcutt, R-Kalama, said lawmakers should "absolutely not" consider raising the business and occupation tax or sales tax, and he cautioned his colleagues not to forget about the struggles that Washington's citizens are experiencing.
"We cannot focus so much on the budget that we forget about the problems of real people," Orcutt said.
State Sen. Joe Zarelli, R-Ridgefield, said the problem only gets worse the longer that lawmakers wait. He urged lawmakers to use the challenge as an opportunity to make government better and more efficient, rather than simply cut programs.
For more on the meeting, check out TVW's blog, The Capitol Record.
The Herald of Everett's Jerry Cornfield blogs on it here.
The Seattle Times has AP's report here.
The News Tribune's Peter Callaghan blogs on the economic elements here and Raha's humor here.
