Washington's revenues up again; reserves now $1.9 billion
OLYMPIA, Wash. – Washington's "strong but slowing" economy will produce another windfall of $57 million, driving the state's reserves to nearly $1.9 billion, state revenue officials said today.
Gov. Chris Gregoire will use the new projection from the state Economic and Revenue Forecast Council to write a new two-year state operating budget next month. She told reporters she wants to use some of the surplus for education and health care improvements.
"The revenue forecast reinforces that our economy is strong," she said. "We have to remain diligent and make smart investments based on what works and maintain an appropriate reserve."
ChangMook Sohn, the state's chief economist and the council director, said the new forecast amounts to "very minor fine-tuning" from the September estimate of revenue expected between now and summer of 2009.
Since March 2005, Sohn's forecasts have risen by more than $2 billion over expected levels, including $1.4 billion in the last two quarterly updates, primarily because of an unusual and unsustainable surge in housing.
The extra money erased budget office projections of a deficit in the next two years and started building up a sizable reserve.
The $1.88 billion reserve includes about $740 million that lawmakers set aside for pensions, education and health care for use in the upcoming budget. The current budget is about $27 billion.
Gregoire's budget chief, Victor Moore, wasn't turning backflips over the new numbers. Much of the money will be needed to pay for current-level services, labor contracts and new policy goals, such as health care and extending kindergarten to full day in more districts, he said. The governor also wants to leave a healthy reserve unspent, lest the state get on a "roller-coaster" cycle of spend-cut-spend, he said. He declined to give a target number.
Moore told reporters that many interest groups are looking for big budget increases, and that they needed to lower those expectations.
Sen. Joseph Zarelli, R-Ridgefield, the Senate Republicans' lead on the budget-writing panel, urged the Democratic-controlled Legislature and governor to create a constitutional "rainy day" fund and set aside some of the windfall.
The council chairman, House Finance Chairman Jim McIntire, D-Seattle, said the new money is nice after having to deal with huge budget gaps in recent years.
"It's nice to have a sunny day," literally and figuratively, he said as the heavy fall storms subsided outside for a while.
But he and other panel members joined in the call for budget restraint.
Sohn's views were mostly optimistic, though he said the expected cooling of Washington's once-torrid housing and construction sector is under way as he had long predicted. Earlier forecasts built in the prediction of slower growth.
"Clearly in terms of income and employment, the Washington economy is doing a lot better than the U.S. economy," he said. "We are enjoying a very strong economy."
Washington job growth has topped 3.6 percent in the last 12 months, compared with the 1.4 percent national rate.
Four high-wage sectors are leading the way, he said, referring to gains in software, construction, aerospace and professional and business services.
The new forecast adds $49 million more for the two-year budget period that ends in June, plus another $8 million in the upcoming biennium.
A look at Washington state's revenue update
Bottom line: State tax revenue is projected to rise an additional $49 million between now and June 30, 2009, compared with the September forecast.
Income: $27.37 billion is projected for the two-year cycle that ends next June 30 and $29.53 billion in the 2007-09 biennium that begins next July. That compares with $23.39 billion last biennium and $22.14 billion collected the biennium before that. The state has a $27.3 billion two-year state budget, counting savings accounts.
Updates: Revenue is expected to climb $49 million during the current two-year budget cycle and $8 million in the upcoming biennium.
Reserves: Nearly $1.9 billion.