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New state revenue report has good news and bad news; but mostly good news

Post by Peter Callaghan / The News Tribune on May 11, 2010 at 4:30 pm |
May 11, 2010 4:31 pm

The good news is pretty good – okay, with two years of bad news, it LOOKS pretty good.

For the first time since September of 2008, state Revenue Act collections showed a year-over-year increase. Sure, last April was pretty lousy. But it shows how bad things have been that it took until the latest report to have an increase.

The Revenue Act created the state’s basic taxes – sales tax, business and occupation tax and some smaller levies. According to the report issued by the state Economic and Revenue Forecast Council, April collections were up 2.3 percent.

Overall, tax collections are below what the council estimated they should be as recently as February. In the three months of actual collections, the state is behind about $50 million. But given that the state collects about $.125 billion a month in taxes, it’s not much. Only if it remains down month-after-month does it add up to yet-another budget problem.

But the May economic and revenue update doesn’t anticipate that. In fact, the forecast – led by state economist Arun Raha – was pretty upbeat.

“We remain comfortable with our February forecast,” the report stated.

Here’s the nut graph:

– “Economic data released since the February 2010 forecast release continue
to support the view that the state’s economy has turned the corner and is
expanding at a moderate rate. As expected in the February forecast,
employment increased 6,600 during the first three months of 2010. Washington
housing permits continued to grow in the first quarter of 2010, exceeding the
February forecast by about 12%. Consumer spending appears to be coming
back and the outlook for manufacturing remains positive. However, construction
employment continues to decline.”

The report was especially optimistic about retail sales. Based on reports from electronic filers (the reports that come in the quickest and can be an early indicator) year-over-year tax payments were up 5.9 percent.

“This was the largest year-over-year increase since November, 2007,” the report stated.

The one new threat identified in the report is the European debt crisis which has led to an increase in the value of the dollar vs. the Euro. But the report states that just 7 percent of the state’s non-transportation trade (meaning without jets) is with Europe.

“Washington State is much more reliant on exports to emerging markets in Asia and elsewhere and the dollar is virtually unchanged versus emerging market currencies,” the report states. “Therefore, we do not see the EU debt crisis as a major threat to Washington
unless it degenerates to the extent that it derails the global recovery.”

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