Washington Deficit Balloons to $8 Billion

OLYMPIA, Wash. (AP) — Washington’s tax revenue is expected to drop another $2.3 billion through mid-2011, pushing the state’s projected deficit to about $8 billion, state officials said Thursday.

The rapidly worsening deficit will almost certainly force legislators to develop plans for new taxes. But that’s no slam-dunk solution: Voter-approved tax limits would require new revenue streams to be sent to the ballot, in the middle of a lingering recession.

The new revenue projection was unveiled late Thursday afternoon in a special, preliminary meeting of the state’s economic forecast council. Arun Raha, the state’s chief economist, said Washington and the nation remain in the midst of “an unprecedented economic crisis.”

“The state economy is caught up in a downward spiral that has devastated the national economy,” Raha said.

The 21/2-year deficit has now grown by about a third since the Legislature convened earlier this year. The new drop in revenue breaks down as about $700 million less for the current fiscal year, and about $1.6 billion less for the 2009-2011 budget cycle.

Lawmakers have taken some early actions to address the problem. On Wednesday, the Legislature passed and Gov. Chris Gregoire signed into law some immediate spending cuts and money transfers that freed up several hundred million dollars to help the state’s bottom line.

The federal government also has chipped in, sending a limited bailout through the new stimulus package — but that alone won’t solve the problem. Details are still being sketched out, but the stimulus package is expected to include about $2 billion that could be used to help backfill the budget hole.

The new “rainy day” emergency savings fund also will help fill the gap. Lawmakers may have to raid it sooner than expected, perhaps dipping into its reserves just to get through the current fiscal year, which ends June 30.

After that immediate budget problem is solved, lawmakers will still have to fix the budget for the 2009-2011 period, which is where most of the shortfall is.

Democratic leaders said they still must wait until March, for a more firm projection of revenue and state spending growth, before writing their budgets in earnest. The governor’s budget director, Victor Moore, agreed.

Minority Republicans, however, reiterated their call for even more immediate spending cuts, saying the Democratic majority isn’t moving fast enough in the face of a massive budget hole.

“I think still that there’s an opportunity to do some things here and save some pain by moving earlier,” said Sen. Joe Zarelli, R-Ridgefield.

Even with Thursday’s dour news in hand, top Democrats said it was still premature to begin publicly discussing new streams of tax revenue.

Leaders acknowledge that some tax package will probably have to be part of the budget solution, but they’re still planning to pencil out deep spending cuts first. Only then will they ask whether the public would support taxes to keep some favorite programs, said Senate Majority Leader Lisa Brown, D-Spokane.

“If we decide an all-cuts budget is not something we can accept because of its impact on the social safety net, and because of how much backwards we’d have to go in education and higher education, then we will consider revenue options at that point,” Brown said.

Senate Democrats are even planning to leave the Legislature for a few days in March for town-hall meetings to gauge their constituents’ feelings about the proposed budgets, Brown said.

Republicans, however, are warning that a deep recession is the wrong time to reach for more money from taxpayers.

“I just don’t think we should be throwing in the towel and asking the taxpayers for a bailout,” said Rep. Ed Orcutt, R-Carrolls. “We’re in a consumer-led recession. If we take money out of the taxpayers’ pockets, they’re not going to be able to increase their consumer spending.”

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