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March 19, 2009 9:55 AM

More bad news from Olympia: State budget shortfall now at $9 billion

Posted by Andrew Garber

More bad budget news out of Olympia: State revenue is expected to be down another $552 million, according this morning's forecast.

That would put the overall budget shortfall, the way Senate budget writers calculate it, at around $9 billion between now and 2011.

If you take emergency state reserves, the federal stimulus money recently approved by Congress and some other recent belt-tightening moves into account, the real problem the Legislature has to solve is around $4 billion. That figure includes leaving several hundred million dollars in reserve.

That's still an enormous, and unprecedented, shortfall.

This is the last forecast before lawmakers release their budgets. The Senate is talking about releasing its proposed budget next week and the House is expected to follow quickly.

So far, lawmakers aren't willing to discuss specific cuts. They just say there will be sharp reductions in state spending.

The overall shortfall is the difference between how much tax revenue the state expects to collect compared to the amount of money needed to maintain state services at current levels, and cover expenses such as pay increases for state workers, through June 2011.

The gap is growing because people are spending less money, which means there's less tax revenue coming to the state. More than 70 percent of the money collected by the state comes from sales and business-and-occupation taxes.

The Legislature has already taken some moves to rein in expenses, such as a hiring freeze, which is expected to save the state around $1.3 billion between now and 2011, according to the governor's budget office.

You can read our most recent story about the state budget problem here.

UPDATE

The state's chief revenue forecaster, Arun Raha, told state lawmakers today that "the outlook is worse both for the nation and for the state."

But Raha also gave a glimmer of hope that we may have hit bottom.

"It is easy to miss the early signs of a recovery," he said this morning. "After a very weak holiday season, retail sales appear to be stabilizing, housing starts look like they have bottomed out, bond spreads have tightened, used car prices have firmed up.

"Some of the larger banks have indicated that they have been profitable in the first two months of the year and investors appear to be returning to the markets. We have taken note of these positive signs, but it is too early to tell if they will be sustained. I need to see them for awhile longer ... before I have confidence the economy has indeed turned the corner."

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Contributors

Andrew Garber
Covers politics and state government from Olympia.

Jennifer Sullivan
Covers the state Legislature from Olympia.

Chantal Anderson
Covers the state Legislature from Olympia.

Emily Heffter
Writes about the city of Seattle and local politics.

Mike Lindblom
Covers transportation.

Jim Brunner
Writes about money and power from Seattle.