Washington's tax collections are projected to be down another $780 million, further deepening the projected budget deficit as lawmakers attempt to balance the state's budget.
Chief economist Arun Raha said the earthquake and tsunami disaster in Japan and the conflict in the Middle East are expected to help stymie the state's economic recovery. Japan is one of the state's biggest trading partners. Uprisings in several nations in oil-producing Middle East have contributed to spike oil prices.
"The uncertainties around oil prices and the tragedy in Japan are combining with the slow housing market to hold us back," Raha said.
Raha said revenues are expected to be down an additional $80 million for this fiscal year, which ends in June. This fiscal year is part of the 2009-2011 budget cycle, which now has a total budget of $28 billion.
That additional estimated drop in revenue makes the deficit for the current fiscal year at $200 million, said Marty Brown, the state's director of the Office of Financial Management. Earlier this session, lawmakers passed a package of cuts and money transfers to deal with the decrease in revenue.
"We must act quickly in closing the remaining shortfall in the current budget so we can begin tackling the even greater challenges in the next budget," Brown said in a statement.
Raha reported that job growth continues to slog; the housing market remains sluggish; and credit remains tight for small businesses, a key economic driver.
People curtailed their shopping after the holidays, and the winding down of federal government stimulus spending along with cuts in spending from local and state governments are also helping challenge the state's fiscal recovery.
Key lawmakers now turn their full attention to writing budgets for the 2011-2013 cycle. Revenue is expected to be down for that budget by an additional $700 million, Thursday's forecast said. Now, the deficit is estimated to be about $5.1 billion, but that includes voter-approved mandates that lawmakers don't plan to fund.
Lawmakers have been reluctant to talk about raising taxes to fill the gap this session, and have focused on cutting state programs and spending so far.
"We're looking at a bunch of different ideas; there are a lot of bad ideas in the world; some are less bad than others, some are very bad. We're going to try to do the least-bad set of options we can do," said Rep. Ross Hunter, D-Medina, and budget writer for the House Democrats.
But deficits are fluid because an array of assumptions and factors into the budget. The Office of Financial Management estimates a range for the deficit for the 2011-2013 budget is between $4 billion and $6 billion.