The Associated Press November 18, 2010, 2:02PM ET

Wash. tax collections fall again, deficit swells

Washington state tax collections are down again, swelling the budget deficit by more than $1 billion over the next two-and-a-half years as lawmakers grapple with recent voter rejection of higher taxes.

Thursday's state revenue forecast from chief economist Arun Raha adds another $385 million to the hole in the current year's state budget, which runs through June 2011.

Gov. Chris Gregoire already has ordered spending cuts to address that problem, but her actions won't be enough to fill the additional budget gap. Gregoire has limited ability to adjust the budget without help from the Legislature, but she could call lawmakers into a special session to fix the shortfall.

The revenue forecast also says Washington will collect about $810 million less than previously hoped for the next state budget, which lawmakers will write in the 2011 legislative session. The 2011-2013 deficit is now pegged at about $5.7 billion out of a roughly $33 billion general fund.

Raha said the continuing erosion of tax income shows that damage from the Great Recession continues, even though the recession officially ended last year.

"It will be a while yet before the losses can be fully tallied or even known," Raha told the state's Economic and Revenue Forecast Council. "Uncertainty will continue to prevail until a new normal -- whatever that may be -- settles in. We are in uncharted territory."

Revenues had been flowing relatively close to target in recent months, making the immediate deficit projection a surprise to some state officials.

Republicans immediately renewed calls for a December special session to begin making spending cuts to help fix the budget hole. Democrats remain in control of the Legislature, but voters essentially tied their hands earlier this month by rejecting several tax increases and making it difficult for lawmakers to pass future tax hikes.

Raha's report of individual economic indicators painted a discouraging picture for economic growth in the immediate future.

Credit to small business remains tight and recovery in commercial construction isn't expected until 2012. Single-family housing remains weak, and a recent uptick in multifamily housing is not presumed sustainable. Auto sales are rising but are still well below pre-recession levels, Raha said.

On the positive side, Raha said, the state's strong aerospace and software industries along with important export ties to Pacific Rim nations means Washington still could perform better than other U.S. states in the economic recovery.


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