The News Tribune

Washington now faces an estimated $8 billion budget shortfall, thanks to a steep dive in how much the state expects to collect in taxes in the next 28 months.

The grim outlook has legislative leaders openly talking about asking voters to raise taxes to help the state get through a lingering recession.

Arun Raha, the state’s chief economist, told members of the Economic Review and Revenue Forecast Council on Thursday that he expects state tax collection through mid-2011 to be $2.3 billion lower than he forecast as recently as three months ago.

That scenario would have produced an $8.3 billion gap between tax collections and how much money the state would spend to maintain all state programs at current levels; pay for growing school, prison and Medicaid caseloads; give pay raises to state workers and teachers; and boost spending on the programs for the poor.

However, the Legislature and Gov. Chris Gregoire trimmed $300 million from that amount earlier this week by cutting spending for the final six months of the current two-year budget cycle.

Raha stressed that his guidance is not a formal revenue forecast. He was merely giving legislators on the council the educated guess they were asking for to help them persuade their colleagues to get serious about writing a supplemental budget for 2007-09 and a new budget for 2009-11. The official forecast will be March 19, and circumstances could change dramatically, he said.

“The Washington economy, which had been outperforming the rest of the nation, hit a wall late in the year,” Raha said. Home sales, construction, car purchases, and the job market have all gone into the tank, and for a state that relies so heavily on sales taxes, that means much less money, he said.

Consumers are afraid to spend money because they might not have jobs in the near future, he said. Washington can expect to lose 90,000 jobs by June, when the job market will hit its trough, he said.

If not for the $789 billion federal stimulus package approved by Congress, our state would be losing an additional 74,700 jobs, Raha said.

Senate Majority Leader Lisa Brown, D-Spokane, told reporters just before the revenue update that she and her colleagues were expecting a $2 billion hit to the state budget. That offsets nearly all of the $2 billion to $2.5 billion in federal funds that may be available to help the state with its budget, she said.

Brown said the Senate will come out with its 2009-11 budget in late March, after the official March 19 revenue forecast and after a mid-March update on caseloads – how many children are expected to enroll in school and how many others will sign up for state-paid health care and other state programs.

“People need services more after they lose their jobs,” she said.

She and her Senate Democrat colleagues have been talking about the possibility of tax increases, but not about specific amounts. However, any tax package would be put on the ballot for voter approval. And any new taxes would be linked to specific spending programs, she said.

“We’re going to proceed with cuts first,” she said.

State senators are planning to hold a series of town hall meetings over the March 14-15 weekend to solicit feedback from constituents.

Rep. Ed Orcutt, R-Kalama, a member of the revenue council, said it’s way too early to be talking about raising taxes.

“I don’t think we should throw in the towel and ask taxpayers for a bailout,” he said.

Sen. Joe Zarelli of Ridgefield, top Republican on the Senate budget-writing committee, said lawmakers should further cut spending, and be quick about it. Thursday’s forecast means the state has to cut at least $600 million over the next four months to finish the current budget cycle in the black, he said.

Rep. Kelli Linville, D-Bellingham, chairwoman of the House’s main budget committee, said she told the chairpersons of her three appropriations committees weeks ago to assume they were facing an $8.5 billion budget problem, with no help from the federal government. And she gave each of the three targets of cuts to make in state government spending.

She said she told her committees not to assume they would get any help from the federal government or from new state tax increases.

“If I pay attention to that, I don’t dig deep enough” in spending cuts, Linville said.

Linville said it would be a mistake to consider the stimulus money, which she pegs at about $2 billion over the next 30 months, to be anything other than a bridge to get through the next two years.

“If we don’t do the digging (cutting) now, we’ll have the same problem in 2011,” she said.

Joseph Turner: 253-597-8436

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HOW STATE'S REVENUE PICTURE CHANGED

When the Legislature adjourned in March 2008, its members expected to finish the current 2007-09 budget cycle, which ends June 30, with $851 million in the bank. Here's how the revenue picture changed with each subsequent forecast:

Since June 2008, the state has been forced to lower its tax collection forecast for the three years from mid-2008 through mid-2011 by nearly $5 billion because of a worsening recession.