Economic recovery likened to mirage

OLYMPIA – With economic recovery described as “a mirage in the desert” and a projected gap between income and spending growing to $1.4 billion, state officials began setting the stage Thursday for a special legislative session to find ways to cut more from the budget.

“The November forecast may bring more bad news, so we can’t wait until the start of session in January to take action,” Gov. Chris Gregoire said in a statement released as the Economic Forecasting Council ended its meeting. “Today’s forecast demands that we take action.”

Arun Raha, the state’s chief economist, told the forecasting council that tax collections fell below projections this summer, and the Washington economy can expect continued problems over the rest of this two-year budget cycle.

Jobs aren’t coming back at a pace that is lowering the unemployment rate. Foreclosures are likely to go up and home construction is off. State revenues may be about $500 million below previous projections through June 30, 2012, and $900 million lower in the next fiscal year. Normal economic times “seem like a mirage in the desert, the closer we get to it, the further it moves away,” Raha said.

The four legislators on the council all seemed to expect some type of session to be called this fall, although they disagreed on how it might be structured or what it should consider.

Republicans leaned toward a short session for the full Legislature, with an agreed-upon agenda and list of cuts. That would be similar to a one-day special session held last December after leaders met and settled on some initial cuts before bringing all members to Olympia.

“It’s not like it can’t be done. It just takes a lot of work on the part of budget writers,” said Rep. Ed Orcutt, R-Kalama, the chairman of the forecast council.

“We have been working,” countered Sen. Ed Murray, D-Seattle, the chairman of the Senate Ways and Means Committee, but the magnitude of the gap is greater. “This is actually writing a supplemental budget. That is not something that can be done in two or three days.”

Rep. Ross Hunter, D-Medina, the House Ways and Means Committee chairman, said last December’s budget cuts had the agreement of all four caucuses and didn’t need any extra legislation. That’s not possible this time, he said. The size of the cuts would require new legislation, hearings, public input and likely amendments as the two chambers work through the process.

Republicans said they would not support tax increases to fill any of the budget gap: “New taxes are not the answer,” said Sen. Joe Zarelli, the top Republican on Senate Ways and Means.

“How do you get more revenue out of people who are still not back to work?” Orcutt asked. The state is still projected to bring in more money than in the previous biennium, so the solution is to find ways to get people back to work, he added.

Democrats said the prospect of another round of cuts means the state could jettison the things people need to get back to work, such as higher education programs. “We should give the voters an option about funding some of the things we would have to cut,” Murray said.

When legislators sit down to consider their options, they should leave their “talking points” at the door, Murray added. Orcutt’s comment that the state revenue is growing ignores the fact that the number of students in public schools and the cost of medical care the state covers are also growing, he said.

Within minutes of the forecast, interest groups began to weigh in. Steve Breaux of The Washington Public Interest Research Group said the Legislature needs to end “tax loopholes and subsidies” as part of a solution, and not rely strictly on budget cuts.”

The Legislature has tried an “all cuts” approach to pass budgets that just barely pencil out and end up revisiting those budgets when revenues don’t meet expectations, he said.

Tim Eyman, sponsor of a ballot measure to restrict the use of tolls on state roads and bridges, said the looming deficit is a reason why voters should approve Initiative 1125.

Cindi Laws, the chairwoman of a group opposing a ballot measure to require more training and oversight of home health care workers, said the deficit means voters can’t afford Initiative 1163.