State shows economy on the red side of ‘flat’

Mike Baker’s Associated Press story today on the state’s economic forecast emphasizes the most salient point, something that could be lost in the press releases.

“Washington state government can expect to bring in $16.1 million less than projected in the current budget cycle because of a lackluster economic recovery, forecasters said Wednesday” is what Baker wrote in the AP story Wednesday.

That might be confusing to some who read the state’s Office of Financial Management press release that carries the headline “Washington quarterly revenue projection for 2011–13 increases $156 million.”

Both are correct, but context is important. State revenues are up $172 million for the two-year budget because of “policy changes and fund shifts,” wrote Brad Shannon at the Olympian. Subtract $16 million from revenues lost by the overall economy and you get that $156 million increase.

In relative terms the $16 million is more or less flat, according to House Ways and Means Chairman Ross Hunter, a Medina Democrat. Compared to the forecast a year ago when revenues were projected to be down $780 million from earlier predictions, that’s true. The celebrations over the most recent numbers, however, are tepid at best and fraught with warnings about events that could make the numbers a lot worse.

OFM’s press release follows, as does the governor’s official statement and those from Republican budget leadership. If Democratic leadership from the Legislature issues any statements I’ll add them.


OLYMPIA – The June revenue forecast for Washington state government shows projected General Fund revenue for the 2011–13 biennium increasing by $156 million, compared to the previous quarterly forecast in February. The figures were released today by the Washington State Economic and Revenue Forecast Council.

“Economic indicators continue to show mixed signs, but in general remain close to our last forecast,” said Steve Lerch, the state’s interim chief economist. “Our forecast reflects the lackluster recovery from the recession.”

The new forecast increases projected General Fund revenue for the biennium to $30.4 billion. The revenue increase, which was offset slightly by a small decline in the council’s economic forecast, is due to legislative actions during this year’s legislative sessions and has already been assumed in the 2011–13 budget. Combined with fund transfers and accounting adjustments approved by the Legislature and Gov. Chris Gregoire, the state’s resources for the current biennium total $30.7 billion.

In 2011, the Legislature and Gregoire agreed on a 2011–13 budget that included about $4.6 billion in cuts to state services and programs. But three consecutive downward revenue forecasts have prompted the governor and the Legislature to cut another $1 billion during the past year, bringing the current two-year budget down to $30.7 billion.

The council also increased its forecast for the 2013–15 biennium by $187 million. The state now projects revenue collections will grow to about $32.6 billion for the next two-year budget cycle, which begins July 1, 2013, and ends June 30, 2015.

Since the start of the Great Recession in 2008, the state has reduced existing and projected spending by more than $11 billion.

“Today’s forecast shows revenues remaining stable for the rest of the biennium, and suggest the state’s economy is gaining steam,” said Marty Brown, director of the Office of Financial Management. But budget officials are still urging caution. That was the overarching message of a recent memo from Brown to state agencies summarizing instructions for the 2013–15 biennium budget process.

“Despite some positive signs, we still face a degree of uncertainty about revenues and caseloads in both the current and ensuing biennia,” Brown told agency leaders. “The new budget must continue to re-examine all state functions to ensure that only essential services are funded, and that those services are delivered with maximum efficiency and attention to outcomes.”

Gov. Gregoire

“After a series of downward projections, today’s revenue forecast is welcome news. The economy is slowly recovering, but is not yet stabilized. Our priority has been and will continue to be to put people back to work and get the economy on its feet. With gas prices beginning to fall and signs of stabilization in the Greek financial crisis, consumer confidence should be increasing. However, action or inaction in Congress on key financial issues will play a significant role in the fate of our state’s and our country’s economic recovery.”

State Rep. Ed Orcutt, R-Kalama, ranking member on the House Ways and Means Committee:

“We’ve kind of flatlined. We’re not any worse off than the previous revenue forecast, but we’re not in better shape either.

“Although the new revenue forecast shows the initial numbers are up, most of this is due to legislative action not any improvement in the state’s economy. In other words, the Legislature took money from dedicated accounts rather than improve jobs and the economy.

“While it’s tempting to think about what our state’s economic recovery would look like had the Legislature invested more time and energy into measures that would help provide relief for employers and get the private sector moving again, the fact is we must look forward.

“Employers need regulatory and fiscal certainty to know that all the money coming in is going to be available to reinvest in new jobs – not go to higher taxes or to pay for costly new regulations. And, consumers need protection against the further erosion of their limited disposable income.

“Any actions taken by the Legislature or elected officials at the state, local or federal government level must be carefully examined to be sure that our state’s economic recovery is not hampered further. Any actions that threaten to hamper our recovery should be rejected.”

State Sen. Mark Schoesler, R-Ritzville, member of Senate Ways and Means Committee:

“My focus as a budget negotiator is on the drop of another 16 million dollars in economic-related revenue predicted for 2011-13. While this forecast is close to flat and certainly preferable to a big decline in revenue, it’s clear our state economy still isn’t headed in the right direction. As in 2011, we’re going to have to wait and see whether the rest of the year brings any significant economic growth, and what that means for the budget. The September and November revenue forecasts will be more telling when it comes to predicting what the next Legislature and the next governor will face.

“This is also a reminder of the importance of leaving a strong budget reserve during difficult times. The bipartisan Senate coalition had proposed a set-aside of more than 437 million dollars, but that number fell by nearly 120 million dollars in the course of reaching a final agreement with the House majority party. It’s good that our bipartisan coalition prevailed this year on policy reforms that will save big amounts of money over the long haul; however, it sure would have been nice to also have a larger financial cushion here at the halfway point of this biennium.

“This Legislature didn’t do nearly as much as it should have to encourage employers in our state, and the new state unemployment figures are disappointing – but at least our coalition got in the way of all that talk about big tax increases that would have added to the burdens on Main Street. As a farmer I’m an eternal optimist, but I also know that the more we do to promote job growth and economic activity without increasing the tax burden, the sooner our revenue forecasts will return to being positive.”

2 thoughts on “State shows economy on the red side of ‘flat’

  1. Not good news at all.I went to the forum thatRep Rolfes spoke at and she stated 2 billion need to be cut out of the budget to make ends meet .

    I am expecting cuts to the Ferry system and also social services for the low income levels . I would not expect much help in educationspending being increased regardless of the lawsuit . .

    Really the solution is private sector jobs , need more people paying into the pot then are using it . Tax reform would help that , and stopping the growth of government with no exceptions is obviously the least that should be done .

    Does not even seem like either political party speaks to it effectively . McKenna seems to have a grasp on it , I am voting for him .

  2. Particularly inspiring, the words of Sen M Schoesler, an incorporated farmer from the Ritzville area: job growth, economic activity, without increasing the tax burden.

    The feller and his family received $93K in farm subsidies from 2003 to 2005. Who does he think paid for that if not every city employee in Ritzville, every county and state employee?

    Conservatives who cannot follow the money are jokes.

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