It seems the September state revenue forecast that showed some hope for a recovery in state tax collections was a fake. In a revenue update approved today, state economist Arun Raha said the recession is over but state revenue continues to decline.
He dubbed it a “revenue-less recovery.”
As a result, tax increases are no longer being whispered about in Olympia, they’re “on the table.”
The November forecast that will be used to make adjustments to the state budget came in much-lower than anticipated. With the $760 million reduction in estimates for tax collections during this two-year budget period, the state now faces a $2.6 billion budget hole.
That’s on a $31 billion, two-year budget that will only have 18 months left to run by the time session begins. That makes cuts even harder to make. And the fact that legislative leaders and Gov. Chris Gregoire have said they think it will be difficult – legally and politically – to resolve the shortage with cuts alone, taxes will be considered.
Large areas of the budget are off limits to cuts due to federal and state laws and the state constitution. Also, by accepting big chunks of federal stimulus money for higher education and public schools, the state agreed not to cut those areas below 2008 levels.
“I have said that everything is on the table,” said state budget director Victor Moore. “I just need a bigger table.”
Sen. Rodney Tom, the Bellevue Democrat who is No. 2 on the budget-writing committee, said the big three taxes would be looked at last. Those are the sales tax, property tax and the business and occupation tax. That leaves so-called sin taxes and yet another look into closing tax loopholes as the first places Democrats will look.
House Finance Committee Chairman Ross Hunter, D-Medina, said the solution will be both taxes and cuts.
“We’re not going to raise $2.6 billion in taxes,” Hunter said. “You’ll see deep, pervasive cuts. But if we cut $2.6 billion, we’re not going to be making government better.”
Minority Republicans were clear in their attitude toward any tax increases.
“Absolutely not,” said Rep. Ed Orcutt, R-Kalama.