Gov. Chris Gregoire plans to order another round of state government spending cuts after Thursday’s revenue forecast showed the state will almost run out of money by mid-2011 unless reductions are made.

Arun Raha, Washington’s chief economist and chairman of the state Economic and Revenue Forecast Council, said he now expects tax collections over the next 25 months will be $487 million lower than what he predicted back in March.

The bottom line: Without any changes to state spending, the state’s main checking account will have a negative balance of $194.5 million. There still would be $247 million in an emergency savings account, so overall the state budget would be a positive $53 million.

That’s not much of a cushion considering the state expects to collect $29.83 billion in taxes for its general fund between July 1, 2009, and June 30, 2011.

Victor Moore, the governor’s budget director, said he can’t count on tapping into the savings account, so his office will tell state agencies to cut their payroll costs by about 2 percent to trim $200 million to $250 million in state spending.

Basically, the governor will be imposing a “hiring cap,” Moore said.

“If the (2009-11) budget said an agency could hire 100 people, now they will be limited to 97 or 98 people,” he said.

Democrat and Republican budget writers said there appears to be no need for a special session in advance of January 2010, when the Legislature is scheduled to convene a 60-day session. However, they will take another look at that possibility if the September or November revenue forecasts show a worsening budget situation.

Sen. Joe Zarelli of Ridgefield, the top Republican on the Senate budget committee and a member of the forecast council, noted that almost all of the money the Legislature put in reserves for the 2009-11 budget is gone. And the budget cycle doesn’t even start for two more weeks, he added.

Although the Legislature had planned to set aside $822 million in savings, its failure to pass some last-minute bills, the governor’s vetoes and a consolidation of other budget accounts have combined to reduce that to only $53.2 million.

Zarelli predicted the budget situation will grow even worse by September.

Raha said the economy is giving mixed signals, which is typical of the beginnings of a recovery.

“The free fall of the economy is behind us,” he said.

Nonetheless, he said, Washington depends heavily on retail sales taxes and consumer confidence must rebound so people start buying more big-ticket items, such as houses and cars.

Raha now predicts Washington’s jobless rate will peak at 10.6 percent in the second quarter of 2010. That’s even higher than the 10 percent figure he predicted in March.

“We will continue to lose jobs, but at a slower rate,” he said.

The state already has lost 122,000 jobs from its high point in 2007, he said. He expects a total of 145,000 jobs will be lost in Washington before the state reaches its trough in April-June 2010, and “construction jobs will continue to decline into late 2010.”

Rep. Kelli Linville, D-Bellingham, chairwoman of the House’s main budget committee, said she doesn’t think the Legislature will have to come back early for a special session to address the budget.

“I think the governor is going to be able to make those cuts” to balance the budget, Linville said.

Joseph Turner: 253-597-8436

joe.turner@thenewstribune.com

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