The hits keep on coming …

A new report from the Washington Economic and Revenue Forecast Council says the U.S. economy is anemic, with the ever-present possibility that the recovery will stall out. Job growth is wimpy, the housing market has collapsed, consumers are hesitant to spend, and Europe’s debt and austerity woes are troubling.

Against that backdrop, in recent weeks the state economy also has stumbled, writes chief economist Arun Raha. He does note some upsides: exports to Asia, a dramatic turnaround in aerospace and manufacturing, software. He adds:

“We still expect the state economy to outperform the national economy in what is turning out to be a modest and moderate recovery.”

But he added more gloomy news for Governor Gregoire and the Legislature, who have been coming to terms with the likelihood that an expected $480 million in expected federal Medicaid money won’t be coming.  If that’s right, then we’re projected to dip into the red by several hundred million dollars.  The latest news is that actual tax collections during the last month were down below previously forecast levels. Collections counted thus far were down over $91 million. With some one-time receipts added in, the net change is minus $68 million.

The state’s two-year budget is about $31 billion.  The governor and lawmakers are discussing whether Gregoire should order across-the-board cuts to re-balance the budget, or whether the Legislature should convene in special session to deal with the red ink.