Just a few hours after the state Legislature approved budget revisions that left a relatively tiny reserve fund, the state’s economic forecast office released a report on March tax collections that contained a relatively tiny amount of good news.
Collections for the last month were up $24.9 million above what was predicted. Combined with actual tax collections from February, collections are up $17.2 million from what was expected the last time the state economic and revenue forecast council released a forecast.
While that amount of money equates to rounding error, it suggests that the current forecast is on track. That is good news at a time when forecasts and collections have been on a downward spiral since this time in 2008. It is also good news because the budget approved this morning is barely balanced with unspent reserves of just $319 million in a $31 billion budget, barely half of what Gov. Chris Gregoire said she would be comfortable with.
The revenue report from the Office of the Forecast Council included the ominous language we have come to expect about threats to the economic recovery. National job growth in March was less than what economists had predicted and politicians had hoped for. The only reason the overall unemployment rate dropped was because discouraged people stopped looking for jobs thereby reducing the size of the workforce.
The state’s economists continue to fret about the effects of higher gas prices. Consumer confidence measures dropped slightly. And then there’s the whole Eurozone crisis.
“Although world financial markets did not react strongly to Greece’s recent default, larger European economies such as Spain and Italy have substantial budget deficits and weak economies and it is too soon to declare the Eurozone crisis as being resolved,” the report stated.
Need some good signs? Car sales are up and while sales of existing homes was done a bit they are well above year-ago levels.
At the state level, job growth has slowed with March numbers the weakest in the last five months.
“Twice before, in early 2010 and again in early 2011, we saw what appeared to be strengthening job growth which soon faltered. Still, job growth remains consistent with the relatively weak growth expected in the February forecast.,” the report stated.
The most significant drag on job growth is the continuing decline in public sector employment and the still-flat construction sector.
“Here in Washington State we are suffering from fiscal drag from state and local government budget cuts. Also, the construction sector, which is extremely important for Washington’s state revenue, has stopped declining but is not yet adding to growth.”