Revenue forecast shows state still struggling from global recession

The Economic and Revenue Forecast Council adopted a new General Fund-State revenue forecast this morning, showing our state's near-term economic outlook has weakened since the March forecast, but growth expected to pick up momentum later this year, as supply chain disruptions from Japan recede, and oil prices stabilize.

Revenue collections through June 10 were $93 million (2.5%) above what we had expected in the period since the March forecast. This surplus, however, was due to the success of the tax penalty amnesty program, which brought in $198 million more than forecasted, as well as a one-time assessment payment of $40 million. Without the extra amnesty money and other one-time large payments and refunds, collections would have been $142 million (3.8%) below the March forecast.

In summary, the new General Fund-State forecasts are:
2009-11 biennium: $28.2 billion, which is $171 million higher than our previous forecast.

2011-13 biennium: $31.7 billion, which is $183 million lower than our previous forecast.

Here are some of the main points from Dr. Arun Raha's executive summary:

• The U.S. economy has entered another soft-patch in a recovery that is proving to be far more bumpy and fragile than usual.
• The largest part of the increase in consumer spending in April was money spent on gas and other energy goods.
• The repercussions from the disaster in Japan have turned out to be worse than we had thought.
• The May employment report for the nation was disappointing and confirms the slowdown in the economy.
• However, the economy is on the cusp of faster job growth if there is any increase in aggregate demand.
• With state and local governments cutting spending across the nation and the federal government on hold, the level of government demand is shrinking. So the recovery must now necessarily depend on private demand from domestic and overseas consumers and eventually businesses.
• The private sector added 11,100 jobs in March, April, and May but public sector employment declined by 2,700 jobs yielding a statewide gain of 8,400 jobs.

Here's the link to the forecast materials.

UPDATE: Some clarification to the numbers above...

The revenue forecast after a legislative session is often difficult to explain, because since the March revenue forecast, the Legislature adopted a number of changes that impact the revenue situation. This means the June forecast accounted for a number of changes which the Legislature had already assumed and a number of changes which were new.

For the current (2009-11) biennium, revenues were down, but amnesty receipts made it look positive since March. Compared to the balance sheet you'll see in the adopted budget, it was down by $184.7 million. That means that we are now negative $84 million in the State General Fund.

For the 2011-13 biennium, when compared to the legislative balance sheet (which can be found on page 8 here), revenues are down $387 million. Dr. Raha's comments made it sound better by saying it was only down by $183 million. The difference was not counted by the Legislature previously and was the impact of the amnesty program. He assumed that quite a bit of revenue that came in during the current biennium would have otherwise been part of the 2011-13 biennium.

Bottom line: The State General Fund is now negative $118 million. However, with over $281 million in the Budget Stabilization Account (rainy day) the total reserves are still positive – at $163.3 million.

When you add both biennia losses together, total revenues have dropped $571.8 million.

Transportation leaders see a Washington first

The Transportation Leader Bus Tour has just made its way through the gorgeous Yakima River Canyon Scenic Byway. This is Washington State’s first official Scenic Byway and a popular destination for visitors.

The Cascade Land Conservancy is raising funds to conserve and make improvements to this beautiful part of Washington.

Discover Pass is available starting today

Thanks to legislation passed this session, state parks will remain open throughout Washington this summer rather than being shuttered due to budget cuts.

But starting July 1, vehicles will need a Discover Pass in order to park at a state park. A Discover Pass is good for an entire year at all Washington state parks, as well as recreation lands managed by the state Department of Natural Resources and the Washington Department of Fish and Wildlife. It costs $30 and must be displayed on your vehicle in order to avoid a $99 fine. The website http://www.discoverpass.wa.gov/ lists locations where you can purchase a pass, as well as important information about which lands will require a Discover Pass.

While the Discover Pass is new for Washington state, neighboring states like Oregon, Idaho and California already have day-use fees for their state parks. All revenue collected from the Discover Pass goes to providing access to state-owned recreational lands. In addition, there will be 12 days each year when state parks will offer free entry for all.

(Photo courtesy of Washington State Parks)

Transpo leaders eye I-90 progress

A busload of transportation leaders that is heading to eastern Washington eyed progress at the historic I-90 widening project. The bipartisan leaders include Judy Clibborn, the House Transportation Chair who is also this year’s presiding co-chair of the Joint Transportation Committee.

I-90 is a vital east-west corridor and an economic lifeline to eastern Washington businesses and farmers. The major widening will provide three lanes in each direction, and an animal crossing to reduce delays and disruptions to the human traffic. I-90 is key to the goal of “One Washington” with interconnections throughout the state.

The leaders heard good news confirmed: The vital I-90 project is moving forward on schedule, and will be completed in 2013.

One nation, in the red...

An AP report today shows that nearly every state in the U.S. is still suffering from a shortfall in tax revenue due to the Great Recession, exacerbated now by the end of federal stimulus money.

The story goes on to cite the following:

• Twelve states started the year with deficits that were equal to 15 percent or more of their general fund, the budget that covers day-to-day operations.

• States with the highest per capita number of Medicaid recipients were among those with the largest budget deficits, as a percentage of general fund revenue.

• Twenty states enjoy general fund budgets that exceed their 2007 levels, while the remaining 30 states are still running behind.

• Tax revenue in Arizona, hit hard by the housing collapse, remains 19 percent below 2007 levels, the largest difference among the states. Next are California and Florida at 18 percent, and Michigan and Tennessee at 17 percent.

• The 50 states have a combined $689.5 billion in unfunded pension liabilities and $418 billion in retiree health care obligations. Five states have unfunded public employee pension liabilities of $50 billion or more.

Of those who have tried to cut or tax their way out of the hole:

In some cases, states have taken steps that actually made their fiscal situation worse.

In Louisiana, for example, the drop in the state's general fund can be tied in part to hefty income tax breaks passed by lawmakers in 2007 and 2008 for middle- and upper-income earners. The permanent tax cuts drained an estimated $580 million the state would otherwise have received this year and similar amounts in future years.

Most states have resisted the temptation to raise taxes during the recession, but there are exceptions.

Then-Gov. Arnold Schwarzenegger agreed to temporary increases in California's personal income, sales and vehicle taxes in 2009. Gov. Jerry Brown, elected last fall, wants to renew those increases for up to five years to bring in more than $9 billion annually.

Since the recession began, New York's general fund has shot up $3.5 billion, or 7 percent, largely because of some of the biggest tax and spending increases in state history, including a $4 billion income tax hike on wealthier residents.

In Illinois, state revenue is 20 percent higher than in 2007 after income taxes were raised. The $6.8 billion that the increase is expected to generate will allow Illinois to avoid some cuts and spend money on neglected programs, particularly the state's underfunded pension funds.

Read the full story here.

To read this blog post in Spanish, go here.

2011 High School Proficiency Exam results released

Today’s release of the High School Proficiency Exam results shows us that more than 90 percent of 12th graders in Washington state passed the reading and writing graduation requirements. As for math, 61 percent scored passing results. However, passing the math test is not a current requirement for 12th graders to graduate.

In addition, 49.9 percent of 10th graders passed the science assessment. This assessment will be required for graduation, starting with the class of 2015.

Click here, to view the full press release from the Office of Superintendent of Public Instruction. For more information on state testing, please visit www.WAtesting.com. Also, state testing and graduation resources are available at www.k12.wa.us/Resources.

To read this blog post in Spanish, go here.

Well, well, well...

Healthwise, things could be better in Washington. 75 percent of our state's adults and 25 percent of our state's children are overweight or obese. It's one reason Governor Gregoire proclaimed this to be Be Well Washington week.

This week at locations throughout Bellevue and Seattle you can get a free skin cancer screening, take some healthy cooking classes (oatmeal hazelnut chocolate chip cookies, anyone?!), get the lowdown on your BMI, HDL and LDL, and more.

The week of wellness ends with free wellness fair Saturday at Qwest Field.

To read this blog post in Spanish go here.