Not too soon for state to tighten belt
Wednesday, December 19, 2007 12:15 PM PST
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E-mail this articleGov. Chris Gregoire will need to be every bit as tight-fisted with the state's surplus revenue as she's promised to be in her new supplemental state budget proposal. All indications point to difficult times ahead for state budget writers here and around the nation over the next year or two -- perhaps as difficult as the recessionary period at the beginning of the decade, when Washington lawmakers faced $1 billion-plus revenue shortfalls.
A recent analysis of state finances by the Washington, D.C.-based Center on Budget and Policy Priorities found that at least 11 states currently face large revenue shortfalls for the coming fiscal year, even though the national economy has yet to go into recession. Earlier reports by the National Conference of State Legislatures and the National Governors' Association rang similar alarms, according to Associated Press writer Andrew Welsh-Huggins. The governors' association reported that a few states already are planning to dip into reserve accounts.
"We're at the early stages of some pretty serious problems," Corina Eckl, the NCSL's fiscal program director, told Welsh-Huggins, "and whether or not those get worse depends on what happens with the national economy."
Washington's revenue growth is slowing, but the state remains well in the black. Last month the state Economic and Revenue Forecast Council cut roughly $132 million from its revenue projection, lowering the state's budget surplus estimate from around $1.5 billion to $1.38 billion. Should the national economy go into recession, that surplus could evaporate fairly quickly.
The good news is that Washington lawmakers and voters had the good sense to create a constitutionally mandated "rainy day" savings account earlier this year. The not-so-good news is that, like the rainy day funds in most other states, Washington's savings account has yet to accumulate the revenue that likely would be needed in the event of a recession. It automatically captures 1 percent of state revenue each year. The account had about $430 million in the early fall. That's far less than the 15 percent of annual spending suggested for rainy day funds by the Center on Budget and Policy Priorities.
Washington lawmakers are aware of the slowing economy and the need to avoid spending down the surplus, no doubt. But it'll take some fortitude to hold the line on spending. The fact is, legislators of both major political parties find it difficult to say "no" when their core constituencies come calling. That's true even in difficult economic times. When there are surplus dollars, it becomes particularly tough.
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