OLYMPIA — Most of the state's projected budget reserves were wiped out by new tax-revenue estimates released Thursday.
Estimated reserves stand at a relatively skimpy $163 million, just one day after Gov. Chris Gregoire signed a two-year, $32 billion budget that pegged reserves at more than $730 million.
What changed?
The state's chief economist Arun Raha released a report Thursday saying the economy is recovering more slowly than expected.
"The U.S. economy has entered another soft-patch in a recovery that is proving to be far more bumpy and fragile than usual. While growth continues, it does so at a slower rate than before," he said.
That translates into slower growth in tax collections, as well. The governor's budget office now says the state is expected to collect $572 million less in taxes than lawmakers had anticipated between now and the end of June 2013 — reducing the state's reserves in turn.
Budget writers say they're not panicking. At least not yet.
"Right now I don't think it's a major problem because we've got two years," said Marty Brown, the governor's budget director.
Even if projected tax collections drop again later this year and take out the remaining reserves, lawmakers could probably wait until January to sort things out, Brown said, given that it's still early in the budget cycle.
That wasn't the case back in December. The governor called a one-day special session then because tax collections were below projections and there was a big hole in the budget, no money in reserve and only about six months left in the fiscal year.
Raha's report blamed the stumbling economy on a number of factors, including the earthquake and tsunami in Japan and high gas prices.
Raha said growth could pick up in the second half of the year, but he still says there's a greater "downside risk" to the economy than an upside.
Senate Ways and Means Chairman Ed Murray, D-Seattle, said that when the Legislature approved the budget last month that closed a $5.1 billion shortfall, "I believed we had a healthy ending fund balance. I no longer believe that."
But Murray said there's always a tension in the budget between reserves and state services. Leaving more money in reserve, he said, would have meant "you cut K-12 and human services and health care more."
Sen. Joe Zarelli, the ranking Republican on the Senate Ways and Means Committee, said in a statement he would have preferred leaving more money in reserve, but noted that getting a budget deal "required a number of compromises, and the size of the ending fund balance was one.
"Now we wait and see," he said. "If our chief economist is correct about a recovery beginning in the second half, we should be able to wait until 2012 to make any corrections necessary through the supplemental budget process."
Source: http://seattletimes.nwsource.com
Estimated reserves stand at a relatively skimpy $163 million, just one day after Gov. Chris Gregoire signed a two-year, $32 billion budget that pegged reserves at more than $730 million.
What changed?
The state's chief economist Arun Raha released a report Thursday saying the economy is recovering more slowly than expected.
"The U.S. economy has entered another soft-patch in a recovery that is proving to be far more bumpy and fragile than usual. While growth continues, it does so at a slower rate than before," he said.
That translates into slower growth in tax collections, as well. The governor's budget office now says the state is expected to collect $572 million less in taxes than lawmakers had anticipated between now and the end of June 2013 — reducing the state's reserves in turn.
Budget writers say they're not panicking. At least not yet.
"Right now I don't think it's a major problem because we've got two years," said Marty Brown, the governor's budget director.
Even if projected tax collections drop again later this year and take out the remaining reserves, lawmakers could probably wait until January to sort things out, Brown said, given that it's still early in the budget cycle.
That wasn't the case back in December. The governor called a one-day special session then because tax collections were below projections and there was a big hole in the budget, no money in reserve and only about six months left in the fiscal year.
Raha's report blamed the stumbling economy on a number of factors, including the earthquake and tsunami in Japan and high gas prices.
Raha said growth could pick up in the second half of the year, but he still says there's a greater "downside risk" to the economy than an upside.
Senate Ways and Means Chairman Ed Murray, D-Seattle, said that when the Legislature approved the budget last month that closed a $5.1 billion shortfall, "I believed we had a healthy ending fund balance. I no longer believe that."
But Murray said there's always a tension in the budget between reserves and state services. Leaving more money in reserve, he said, would have meant "you cut K-12 and human services and health care more."
Sen. Joe Zarelli, the ranking Republican on the Senate Ways and Means Committee, said in a statement he would have preferred leaving more money in reserve, but noted that getting a budget deal "required a number of compromises, and the size of the ending fund balance was one.
"Now we wait and see," he said. "If our chief economist is correct about a recovery beginning in the second half, we should be able to wait until 2012 to make any corrections necessary through the supplemental budget process."
Source: http://seattletimes.nwsource.com
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