It may have been by design, though perhaps it was simply fortuitous, that the Economic and Revenue Forecast Council voted to extend the contract for the state’s current Chief Economist Arun Raha another year before they heard what he had to say today.
The embattled chief economist delivered a quarterly revenue projection that was unambiguously depressing.
According to the forecast, state revenue collections for the 2009-11 budget were reduced by $25 million. And projected revenue collections over the course of the current 2011-13 budget fell by $1.4 billion.
The result is a gaping hole in the current budget.
It is important to keep in mind, the state is still expecting more revenue in the current two-year budget than it did in the last two-year budget. Even though the governor and legislature are now expecting less money than they were projected to have at the last quarterly forecast in June, the state is still taking in $2.1 billion more in 2011-13 than it did in 2009-11. That’s an increase of 7.5 percent.
Nevertheless, current expenditures remain out in front of current revenue.
After assuming full use of the Budget Stabilization Account, the “Rainy Day Fund,” the state is facing a revenue shortfall of almost $1.3 billion over the next two years.
A press release accompanying the revenue forecast relays the somber tone of today’s meeting:
We are in the fragile aftermath of the Great Recession where a return to normalcy seems like a mirage in the desert – the closer we get to it, the further it moves away. Fear and uncertainty have overwhelmed consumer and business behavior. Every time our state has looked like it would break out of the malaise, it has been sucked right back in. Political gridlock in the nation’s capital gives little hope that the full toolkit of policy options will be acted on. In an increasingly interconnected world we are not immune to Europe’s problems either. Downside risks outweigh upside risks.
All economic and revenue signs point to more weakness in the future. Chief Economist Raha concluded today’s meeting by saying he wished he could tell everyone the current nightmare is about to end, but that he sees no end in sight.
Not that long ago Raha was predicting an economic turnaround in the second half of this year. But the world, and the state along with it, has taken a dive. Talks of recover have shifted to worries of an increasing likelihood Washington state and the country may be in for a double dip recession.
Such being the case, now is, perhaps more than ever, time for the governor and legislature to prioritize state spending and act quickly to stop the hemorrhaging. The economy is not going to bail the state out of its current slump, so we need to find a way to live within our means.
The sooner action is taken, the greater the number of available options. The longer elected officials sit on their hands, the faster the window will close on certain policy options making the task before them all the more difficult.
Elected state officials cannot wait until January to start working on the $1.3 billion budget problem. For all they know, the next forecast in November will only bring more dire news.