And then there was $954 million.
The state’s chief economist handed state lawmakers a setback Friday when he issued the latest economic forecast, striking a hefty blow to what had been a $1.4 billion surplus.
The Democrats in charge at the Capitol had been counting on that money. A healthy surplus would have allowed them to dole out a few hundred million dollars and still sock away $1 billion as a demonstration of fiscal discipline.
Now the job gets more difficult. With the state expected to collect $423 million less between now and June 2009, the Legislature’s budget writers face a bigger test of their resolve to restrain spending.
Restraint will be crucial if the state is to weather the coming downturn.
Economist ChangMook Sohn previously warned that a deteriorating housing market would hamper revenue growth. But the slump came quicker and turned out to be more severe than he had expected.
Washington is still doing better than most states, but it can’t count on generating the kind of revenue growth it will need over the next few years to simply maintain current services. The current $33 billion budget puts state spending on pace to grow nearly $5 billion in the 2009-11 budget, according to information from the Senate Ways and Means Committee.
Lawmakers squandered some flush years building that unsustainable bow wave. The state’s sickly rainy-day account is finally on the mend thanks to voter approval of a constitutional mandate. But with the good times coming to an end, the fund is nowhere near as large as it should be.
Every dollar saved now will not only help buffer state emergencies or a national recession, but will also help keep state coffers from being overextended any further than they already are.
Gov. Chris Gregoire set the right tone in December when she unveiled a budget that saved nearly all of the surplus. After Friday’s new forecast, she sounded another cautionary note, saying that she still wants a fat reserve.
How fat, she wouldn’t say. But lawmakers should aim high as budget negotiations begin in earnest this week. If the Legislature postpones or cuts some programs, it might be possible to leave the $954 million surplus unspent and still have money to cover necessities such as helping victims of last year’s floods.
Tough budgeting now will save a world of hurt later.