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Suddenly, some rosy economic news for WA ?>

Suddenly, some rosy economic news for WA

Light at the end of the tunnel: Washington economists are projecting a $96 million increase in the state’s revenue.

Coupled with news that state government will save $330 million in lower caseload costs and that House Republicans will support closing a banking tax loophole, it could mean lawmakers can avoid calling a special election to ask voters to boost the state sales tax a half-cent for the next three years. It also makes it more likely that the Legislature will wrap up within its 60-day limit.

“We’re finally seeing movement in the right direction” after the Great Recession knocked billions from the state’s treasury, said Senate budget Chairman Ed Murray.

Tough budget decisions still remain, though.  Budget and revenue leaders on the Revenue Forecast Council said that, in round numbers, lawmakers face a billion-dollar problem — a budget gap of $500 million and the need to salt away reserves of $500 million.

“We’re still pretty deep in the hole,” said House budget Chairman Ross Hunter, while acknowledging that the new revenue and caseload forecast numbers make it easier.  Both he and Murray declined to say whether majority Democrats will be able to balance the budget without a public tax vote.  Gov. Chris Gregoire had proposed a half-cent sales tax hike, bringing in about $500 million for each of the next three years.

Chief economist Steve Lerch characterized the revenue update as a relatively small change in a $30 billion, two-year budget. He said the state continues to outpace the national economic recovery a little, led by gains in aerospace (up 11,500 jobs since May of 2010), software, agriculture and export trade.  The construction sector remains flat, but employment is no longer falling.

The state economy will “muddle through” during the next year, with “a high degree of downside risk,” including the weakness in Europe and gridlock in D.C., Lerch said.

Murray said it now appears likely that lawmakers will be able to adjourn on time, March 8. Hunter said House Democrats will unveil their budget plans next week and Murray said the Senate will roll out its plan the following week.  Murray is building the Senate plan in consultation with minority Republicans.

Gov. Gregoire welcomed the news, noting that Olympia may be able to handle the budget gap (without the tax referendum), but added:

“We’re not out of the woods yet, and solving the budget problem remains a significant and daunting task.”

 

Lawmakers kick off election-year session ?>

Lawmakers kick off election-year session

Washington lawmakers are back at work, confronting a $1.5 billion budget gap, the possibility of a tax referendum, and a number of touchy social issues, including gay marriage, marijuana, and abortion — all within the context of 2012 being the first election since redistricting.

The session got off to a very quiet start at noon Monday, with few speeches and few protesters outside.  That was in marked contrast to the noisy reception lawmakers got when Occupy Olympia and thousands of protesters swarmed the Capitol during the early days of their most recent gathering, a 17-day emergency session called by Gov. Chris Gregoire to begin the tough job of re-balancing the $30 billion, two-year state budget.  Lawmakers trimmed about $470 million from the problem, but adjourned once they had exhausted their list of consensus cuts.

(The Office of Secretary of State took a 10 percent budget cut, which compounds cuts made in previous budgets. Elections, the State Library, State Archives, heritage activities, and the administration will all take cuts, as will TVW, the popular public-access television service that receives pass-through funding via the Secretary of State.)

Legislators are considering a combination of further spending cuts and a tax referendum that would go to the voters. The governor has proposed a three-year half-cent increase in the state’s 6.5 percent sales tax. That would raise about $500 million per year. Other taxes, fees and closure of some tax preferences also are under consideration.

As if the budget mess weren’t enough, lawmakers also will face an unusually large assortment of politically sensitive issues, including gay marriage, mandated abortion coverage by private insurers, and measures dealing with medical marijuana and legalizing pot.

The session is limited to 60 days, although many are predicting that overtime will be needed. The Legislature and governor will be awaiting the Feb. 16 revenue forecast update, hoping for some good news.

Special session adjourns after trimming budget $480m ?>

Special session adjourns after trimming budget $480m

Washington lawmakers have adjourned their unprecedented 17-day November-December emergency session designed to start trimming the state budget to size.

But they won’t be gone for long.  The regular 2012 session, supposedly limited to 60 days, is just around the corner — Jan. 9.

The Democratic-controlled Legislature didn’t do the complete $2 billion budget-and-tax deal that Democratic Gov. Chris Gregoire had strongly recommended when she called the session.  They gave strong bipartisan agreement to a plan, House Bill 2058, that begins the task by shaving $480 million from the budget — a combination of cuts, fund shifts and revenue-generating ideas. The latter does not include taxes, such as the voter-approved half-cent sales tax hike the governor has in mind.

Legislators called it a down-payment, although unhappy minority Republicans called it only a partial down-payment with all the tough decisions yet to come.

The Office of Secretary of State, which includes the Elections Division, Corporations and Charities Division, State Archives, State Library, Address Confidentiality Program, and other programs assigned by the Legislature, was included in this first new wave of budget cuts — $2.6 million in all.

Cuts include $498,000 from the State Library, which has sustained heavy cuts in recent sessions; $1.6 million from administration of the agency; $203,000 from Elections; $300,000 in pass-through support for TVW, the state’s version of C-SPAN; and $30,000 from the Legacy Project, which produces oral histories and other projects.  The State Archives also are sustaining cuts due to declining contracts from public agencies for preservation and digitization of public documents.  The Corporations Division does not receive General Fund support and generates money from fees to sustain their operations and to help pay for schools and other General Fund programs.

Governor calls emergency budget session for Nov. 28 ?>

Governor calls emergency budget session for Nov. 28

Washington Gov. Chris Gregoire has called the Legislature into emergency special session, beginning the Monday after Thanksgiving, to deal with a gaping $2 billion hole in the two-year state operating budget.

The decision, which will trigger a session that can last for up to 30 days, was expected, following a dire new revenue projection that knocked another $1.4 billion hole in the budget.   If the Legislature doesn’t raid the “rainy day” fund and provide additional reserves, the problem becomes about $2 billion.

Gov. Gregoire, in a news conference at the Capitol on Thursday, said “Our work will be brutal.”

She didn’t talk about new taxes, and said cuts could amount to 23 percent of the $8.7 billion portion of the budget that is not constitutionally protected or an entitlement.  She said the bulk of the cuts will have to come out of the four areas with the largest unprotected budgets: social programs, health care, K-12 and higher education, and prisons and community protection.

The governor said the timing of the session will allow lawmakers to get the Nov. 17 revenue forecast update. She said the guess is that the problem will only grow worse.

Gregoire said lawmakers can’t wait until their regularly scheduled session in January.

“We’ve got to get going.  You delay a day and the hole gets bigger.”

Gregoire said she will soon send lawmakers agencies’ own budget-cut ideas. Her budget office recently directed agencies to submit 5 and 10 percent budget reduction plans.  Gregoire said even the 10 percent plans alone won’t fix the problem, since some areas, such as corrections, can’t absorb that level of cut and not affect public safety.

The governor said she will have her own plan next month, and that both houses and both parties need to begin their own work so that the special session will get off to a fast start.

WA revenue forecast plunges another $1.4 billion ?>

WA revenue forecast plunges another $1.4 billion

Economic recovery seems “like a mirage in the desert” and Washington’s economic forecast has been chopped by another $1.4 billion. Will there be a special session of the Legislature?

The grim news came at a meeting at the Capitol of the bipartisan Economic and Revenue Forecast Council.  House budget chief Ross Hunter said lawmakers now face the the prospect of slicing perhaps $2 billion out of a $30 billion budget that has been repeatedly “scrubbed” during the Great Recession. State budget Director Marty Brown said Gov. Chris Gregoire and the budget office will work closely with all four legislative caucuses to come up with yet another round of cuts.  The governor has ruled out across-the-board cuts, but has asked all agencies to come up with 5 percent and 10 percent cutback ideas.

Some lawmakers expect a special session before the regularly scheduled January session, and Sen. Joe Zarelli, the Senate Republicans’ budget leader, has suggested putting together a bipartisan House-Senate panel to devise a cutback plan.

In his report, chief economist Arun Raha said that in normal times, it would be hard to explain all the red ink in a state that has booming aerospace, manufacturing, agribusiness,  export and software sectors. Raha used the image of a mirage, with economic recovery always seeming close at hand, only to fade away as one gets near.

“Fear and uncertainty have overwhelmed consumer and business behavior. Political gridlock in the nation’s capital gives little hope that the full toolkit of policy options will be acted on….

“Every time our state has looked like it would break out of the malaise, it has been sucked right back in.”

Housing continues of “bump along the bottom,” and the job market is very weak, he noted.

The forecast for the rest of the biennium, ending in summer of 2013, is for $30.3 billion in revenue, down $1.4 billion from the June forecast.  The ending fund balance is down $1.275 billion in the red.

 

‘Sharp slowdown’ in WA as recovery struggles ?>

‘Sharp slowdown’ in WA as recovery struggles

A new state report says tax collections were down $70 million below forecast levels in May, due to a “sharp slowdown” in the economy.  Still, even accounting for that, total collections since the March forecast are up $93 million, thanks to one-time collections under the tax “amnesty” program.

Arun Raha, the state’ s chief economist and director of the Economic and Revenue Forecast Council, said in an update that the national economy has “entered another soft patch in a recovery that is proving to be far more bumpy and fragile than usual.” High gas prices and Japan’s woes have “taken the wind out of the sails of the recovery,” but the second half of 2011 looks better, he said.

Washington’s payrolls are growing, but not as fast as projected, he said. Meanwhile, the Department of Revenue’s program of allowing payment of past-due taxes without fines or penalties has been a boon,  he said.

WA lawmakers button down hard-times session ?>

WA lawmakers button down hard-times session

Washington lawmakers are heading back to their home districts after completing a brutal recession-era 135-day session.  Budget cutbacks, including salaries of state employees and teachers and budgets of virtually every area of government, were the rule of the day as lawmakers grappled with a budget gap of billions.

Cuts and freezes totaling $4.6 billion will affect K-12, higher education, “safety  net” programs, and a variety of state services, from parks to prisons.  The $32 billion two-year budget takes effect July 1, and will include hundreds of layoffs and a pay cut of 3 percent and higher health care costs for state workers.

The operating and construction budgets passed in the waning hours of the session and enjoyed bipartisanship support, particularly in the Senate, where the two parties crafted the spending plans, pension reform and workers’ compensation overhaul. Governor Gregoire called the session the toughest in recent memory, but hailed reforms and “a new spirit of bipartisanship” in Olympia.

The budget leaves over $700 million in reserves in case there are further revenue problems as the state and nation slowly pull out of the worst recession in decades.

The budget sweeps away the Heritage Center savings account that had been authorized previously as seed money for a new facility on the Capitol Campus to consolidate the State Archives, State Library, education center and history exhibits.  The $13 million was redistributed to the state history museums in Tacoma and Spokane, the state Arts Commission and other programs that were stripped of their General Fund support.  The fund source will not be available in two years. (more…)

State budget deal: cuts and more cuts ?>

State budget deal: cuts and more cuts

As Washington struggles to emerge from the deepest recession in 80 years, lawmakers have reached an 11th-hour budget deal for the next two years, cutting expenses in virtually every sector of state government.

The $32.2 billion plan, hammered out behind closed doors by negotiators from all four caucuses, relies on nearly $4.6 billion in spending cuts, including $1.2 billion saved by not funding two voter-approved education initiatives.  Other monster cuts are higher education, $535 million, offset by an expected $376 million in much higher tuition; $344 million in future pension benefits for PERS1 retirees; $215 million for smaller K-4 class size; $179 million by presuming a 1.9 percent pay cut for teachers; $177 million from a 3 percent pay cut for most state workers; $150 million from hospital rates; $129 million from tighter eligibility for Basic Health Plan; $116 million by recasting the Disability Lifeline program; and so on.

Legislative leaders and budget negotiators rolled out the new plan at a joint news conference, praising the unusual bipartisan approach to this budget.  Gov. Chris Gregoire, a Democrat, quickly endorsed their work.

Lawmakers are racing a midnight Wednesday adjournment deadline, and several potential hangups remained, including the construction budget and a constitutional amendment to roll back the percentage of the state General Fund that can be used for construction bond debt.

The Office of Secretary of State, meanwhile, saw its Heritage Center fund swept away, shifted to  history museums, arts and preservation organizations. The Heritage Center was authorized by the Legislature as a central home for the State Archives, State Library, and education and history exhibits on the Capitol Campus. The $12 million savings account, primarily generated by previously authorized fees on filing of documents, had been set aside to await a final legislative decision on site, design and bond authorization.

The budget also ended, at least for the next two years, the state’s Productivity Board, which solicits money-saving efficiency plans from state employees.  The program has saved nearly $60 million since its inception. (more…)

WA prez primary cancelled; Top 2 primary still on ?>

WA prez primary cancelled; Top 2 primary still on

Washington state has suspended its 2012 presidential primary in order to save taxpayers over $10 million.  Secretary of State Sam Reed emphasizes that the state’s regular Top 2 Primary in August is “absolutely unaffected.”

Legislation requested by Secretary Reed and Gov. Chris Gregoire was signed into law by the governor on Thursday. Both continue to be big fans of the presidential primary as the preferred method of engaging the electorate in picking presidential favorites.  At the bill-signing ceremony, both the Governor and Secretary made it clear that they proposed the measure, Senate Bill 5119, only because of the state’s dire financial straits.

The state will use the precinct caucus and convention system to choose national convention delegates.

Reed said:

“We absolutely prefer the presidential primary to the old caucus system.

“But $10 million IS a lot of money when the budget gap is $5 billion and there are so many needs out there, and the voters have compelled Olympia to solve the crisis without new taxes.”

Both houses already have passed budget drafts that book the savings.

Reed, the state’s chief elections officer, said ordinarily he would vastly prefer the presidential primary, because it involves many more voters than the caucuses, which tend to attract a more activist crowd.

In 2008, for example, fewer than 100,000 people attended caucuses, even with all the interest in both parties for a wide-open White House. By contrast, 1.4 million voters participated in the presidential primary – more than 10 times as many as the caucuses.

Reed also stressed that suspending the presidential primary in no way affects our regular state primary, which we’ll have each year in August.

He added:

“When some folks hear that we’re suspending the presidential primary, they somehow don’t hear the `presidential’ part and worry that we have cancelled the entire state primary. That, of course, isn’t so. We will have a Top 2 primary this August and again every August in the future.”

Tax-amnesty windfall could speed budget deal ?>

Tax-amnesty windfall could speed budget deal

Glum Washington lawmakers, last seen slogging through House-Senate budget talks, have just gotten a jolt of good news — a  $182 million windfall.  Governor Gregoire and the budget negotiators say that could go a long ways toward finding a budget solution and wrapping up the special session on time.

The surprise was in the form of a gusher of unexpected tax receipts generated through a three-month “tax amnesty” that Gregoire and the Legislature authorized. Companies have been allowed to pay overdue tax bills without penalty and some have settled their tax disputes with the state, rather than continue appeals.

Bottom line: The actual tax collections amounted to $321 million for state and local coffers. The state share, $263 million, was $182 million more than the Legislature had counted on.  Revenue chief Suzan DelBene said nearly 9,000 businesses responded, including hundreds that weren’t even on the tax rolls.

This is the second week of a 30-day special session.