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State revenue drops; deficit expected to top $5 billion

Wednesday, November 19, 2008 5:57 PM PST

By Curt Woodward
The Associated Press

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OLYMPIA — The deeply troubled economy is sapping Washington’s tax collections again, saddling newly re-elected Gov. Chris Gregoire — who pledged not to raise taxes — with a $5.1 billion budget hole.

Gregoire is preparing an austere, no-new-taxes plan to deal with the deficit, which includes about $500 million in needed savings this year and another $4.6 billion for the 2009-2011 state budget, which takes effect in July.

Some savings measures for the current budget already are in motion, including an across-the-board spending cut and hiring freeze. Gregoire’s budget director, Victor Moore, said Wednesday the administration hopes to expand those savings for the current fiscal year without calling a special session of the Legislature.

But lawmakers from both parties agreed that once they convene the regularly scheduled session in January, work must begin immediately to bridge the daunting shortfall.

“This will be ugly,” said Rep. Ross Hunter, D-Medina, chairman of the House Finance Committee. “It’s much larger than I expected it to be.”

In a letter to state workers, Gregoire said bridging the budget gap “will require great sacrifice on everybody’s part.

“We must fundamentally transform the way state government does business, and I ask you to step back and look at ways we can do it through the eyes of the Washingtonians we serve,” Gregoire wrote. “Ask yourselves: If you were starting from scratch, is this how we should be doing business?”

Policy makers learned of the new budget gap at Wednesday’s meeting of the state Economic and Revenue Forecast Council. The panel, which includes state lawmakers, said the state would collect about $1.9 billion less than expected through the 2011 fiscal year.

Arun Raha, the state’s chief economic forecaster, said a national recession is now certain, even though it has not been officially declared. He noted that since the council’s last meeting in September, “what had until then been a festering financial malaise exploded into a full-blown global credit crisis.”

Washington has been helped by its strong aerospace and software sectors, Raha said, but the financial crisis has hammered consumer spending — a major driver of tax revenue in a state with no separate income tax.

“Right now, no one is buying cars or houses, and at best we can expect a holiday shopping season that shows no decline over last year,” Raha said.

There will be another quarterly revenue update before state lawmakers finalize their 2009-2011 budgets. Majority Democrats on the forecast council did not rule out tax increases to help bridge the gap, but Republicans warned that consumers and businesses likely can’t afford more taxes.

The Senate GOP’s budget chief, Joe Zarelli, R-Ridgefield, said Democrats were trying to pin too much blame for the deficit on the national economy.

“The shortfall was projected at $2.5 billion even before the 2008 legislative session ended. No one can say they didn’t know a huge deficit was coming,” he said.

Gregoire’s budget office recently asked state agencies to project what kind of cuts would be needed to save as much as 20 percent from their budgets. Some expenses are relatively safe from major cuts, including K-12 education and prisons. But other large state expenses, such as higher education, could be in for a major squeeze.

Interest groups across the political spectrum immediately began jockeying for public support after Wednesday’s deficit update. Real estate agents warned lawmakers not to reach for more taxes, while a liberal think tank said the state needs to raise more money from taxpayers to support the social safety net.

Gregoire said during her successful re-election campaign that she would not raise taxes or fees to balance the budget during the economic downturn. But that leaves room for the Legislature to propose tax hikes, particularly if they’re sent to the voters for approval.

On the Net:

Forecast Council: http://www.erfc.wa.gov/

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Gondolapete wrote on Nov 19, 2008 10:23 AM:

" maybe if the state actually had a reasonable tax code and a reasonable L@I rate for employers, they would not have these shortfalls...you CANNOT tax yourself into prosperity..when the dust settles, the masses will finally see just who is actually at fault in this state, this nation..and its not the GOP... "

Common Sense 24 wrote on Nov 19, 2008 11:19 AM:

" Well said Gondola: Unfortunately, all the people who blindly support people with a D after their name will rush to insult and ridicule you with references to ol' Bush. Personally I think Bush should have come out and backed Obama for president. Everybody hated him so much that it would have been the kiss of death for his campaign. He should have ran his own campaign to elect Obama. I would have laughed so hard if that'd happened. "

TDN Bad Boy wrote on Nov 19, 2008 11:22 AM:

" I'm guessing that our tax queen won't have any choice now. Get ready for a broken campaign pledge by the Liberals. Her campaign promise: Remember when my lips move to say No New Taxes I'm lying. "

Saturos wrote on Nov 19, 2008 12:08 PM:

" No taxes? Oh yeah that will help a lot.. Come up with something more effective and creative! What next? Protective tariffs? "

onmymind wrote on Nov 19, 2008 1:17 PM:

" Nice to see a couple of you with the same old and boring story. If it is so easy to blame democrats and the Governor then do we blame the republican governor of California for the deficit his state is in. Maybe just maybe it could be Bush and the Republicans handling of the national economy that has created the problem. Even if it was the whiny republicans would never admit it. "

TDN Bad Boy wrote on Nov 19, 2008 1:51 PM:

" onmymind, so you totally give the Liberal governor a free pass for increasing state spending $8 billion during her first 4 years? We don't have a state deficit because of Pres. Bush. As much as you would like to believe it. As the CEO of this state, it was the governor's job to spend judiciously, not at free will. She chose the latter. Pres. Bush had nothing to do with that. Did he? Business owners know that if they spend every bit of their revenue just because they can, most likely they are eventually going to have problems because of it. She created this, she needs to dig us out and without any new taxes. That was her promise. But already we have the Liberals in court asking the Liberal courts in this state to throw out the voter initiative against the 60-percent requirement to pass new taxes. Why is it, that the Liberals only believe the way out of these messes that they create is new taxes? "

crowsfeet wrote on Nov 19, 2008 2:53 PM:

" California's Budget Problems Exacerbated by Illegal Immigration
onmymind wake up - While Governor Arnold Schwarzenegger has called for increases in the sales tax and cuts in services to reduce the budget deficit of $11.2 billion, a population group has noted that the shortfall is about the same as the costs of illegal immigration to the state. "

crowsfeet wrote on Nov 19, 2008 3:01 PM:

" Heres the rest onmymind -
Los Angels County:

10% of Los Angeles County residents are illegal aliens (the highest percentage of county residents in the country)

Illegal aliens cost the county greater than one billion dollars per year in taxpayer costs, not counting education.
Breakdown:
$444 million for welfare and food stamps
$400 million for health care
$220 million for correctional services, law enforcement and other public safety costs

New statistics from the Department of Public Social Services reveal that illegal aliens and their families in
Los Angeles County collected over $37 million in welfare and food stamp allocations in November 2007, which is up $3 million dollars from September.

Children of illegal aliens receive 25% of welfare and food stamp money.

---Mike Antonovich, LA County Supervisor "

Lucky7 wrote on Nov 19, 2008 3:42 PM:

" Who here thinks Washington is the only state with deficit issues?????? CNN Money just listed our state as the 2nd best economy in the country! That's #2 BEST out of 50! As bad as it is, and I'm not disputing that we've got a big economic problem.... It's a lot worse in the vast majority of states. Times are tough and I just don't see our economy growing at all until at least the 4th quarter of 09. We're in for a lean year and you can point fingers anywhere you want but at least at the state level when you're #2 out of 50 someone has done something right. "

reasonable1 wrote on Nov 19, 2008 3:43 PM:

" Here's why you have a deficit: Every time your state government - doesn't matter which party - tries to fund itself, the "Yernotdabossameeee State" whines and moans about paying for services. And it won't change. If you people ever lived in a state where government services were adequately funded and running effectively, you'd realize how insanely out of touch the West coast is with its propositions and initiatives. "

TDN Bad Boy wrote on Nov 19, 2008 4:15 PM:

" Well reasonable I totally disagree with you. Our propositions and initiatives are true democracy. Act of the people. Not a political party. I wish we could do away with the Legislature and run the entire state that way. I would truly feel that I have more of a say in how my government operates. But hey you are welcome to go back to whereever it is you come from that is so enlightened and leave us westerners alone. We sort of like it that way anyway. Oh and by the way about around say 1750 or 1760, you would not have been very popular in those colonies. Weren't they also saying "Yernotdabossameeee" to the British over the way government taxed and ruled? Seems then that a group of dissenters is truly American. Or maybe you just like a big government that taxes and does everything for you. That must be it. Another Tax and Waste Liberal. "

kitten wrote on Nov 19, 2008 7:13 PM:

" And so it begins to sink in for the masses. I was wondering how long it would take? This has been coming on for years people. I've said it before and I will way it again, "We cannot expect to send all of our production overseas and survive as a nation of consumers." It will never work. Thank you supporters of the Free Trade
Act and Walmart for getting it all started. "

northender wrote on Nov 19, 2008 9:07 PM:

" How about to start with ... a 20% wage cut across the board. A 10% lay off ... each department. No increase in any budget.No more paid holidays.Workers only covered on medical benefits.Do not likee... This is the tax payers dilemma every day! The common citizen cannot afford our out of control,tax and spend government.Not one current or newly elected official will govern as they will require we the tax payer to run our homes or business!Not only no new taxes or fees....CUT TAXES AND FEES!Recently, while working in a state office...I viewed a poster on a peg board...It read in bold words,RESPECT BEGINS WITH OUR CONTRACT!!The state employees labor union. government workers and the unions have forgotten who works fo who!! It is time to require government live within OUR means!! "

vikingtwin5 wrote on Nov 19, 2008 10:06 PM:

" Most of Washington's and Oregon's propositions and initiatives aren't the acts of the people, they're the acts of Tim Eyman and Bill Sizemore who are just doing it to line their own pockets. The rest are mostly compliments of various lobbies; liquor, tobacco, insurance companies, doctors, and lawyers. A lot of the money for them comes from out of state too. "

whatsinaname wrote on Nov 19, 2008 10:38 PM:

" THE state troopers will be ordered by Gov. G. to increase their ticket quotas to raise money for the state. "

country gal wrote on Nov 19, 2008 11:14 PM:

" vikingtwin5: you must be one of those politicians. "

vikingtwin5 wrote on Nov 20, 2008 6:19 AM:

" country gal, since my post didn't mention any politicians liberal or conservative, Dem. or Rep.,who are "those politicians" that you think I must be? "

TDN Bad Boy wrote on Nov 20, 2008 8:59 AM:

" Vikingtwin5, I don't care who funds an initiative or who works on one. What I care about is that the people get to vote and make their own politcal state. The smoking ban and the 66-percent majority to raise taxes are two classic examples. Do you think that special interest money is only involved in initiatives? You must be crazy. Lobbyists from every group you name works the legislature like crazy. The difference is, when Legislators pass a bill we don't get to vote on it. When we pass an initiative, legislators get the same vote as I do. I prefer the latter form of government. You go ahead an trush your legislators, in this state that probably means you are a Liberal. As a fiscal conservative, the only way my voice gets heard in Washington government is through the initiative process. And I gurantee you that if Liberals try to raise taxes or impose a state income tax, they will hear the voices of recall through the initiative process. "

Proud Teacher wrote on Nov 20, 2008 11:35 AM:

" So, Bad Boy, did you pay attention in your civics classes in school? (I teach American History and Government.) There would be complete chaos if "We the People" were to vote on every little thing that gets brought before the legislature or Congress. Do you really feel the need to have that much control? Again, my friend, a short civics lesson. The framers of the US Constitution (on which the Washington State Constitution is based) knew we needed a republic, not a democracy. Therefore we send our duly elected representatives to do most of the votes for us. Since you are the great fiscal conservative, I'm sure you know how much elections cost. I am not opposed to fiscal conservatives being in government, in fact I am all for it! However there aren't perfect correlations between how you run a business and run government. (I used to work in the private sector before I became a teacher, which is a MUCH better life calling. Please TDN Bad boy, run for public office! You always seem to know exactly what to do, so put your money where your mouth is, and see how well you can do in the Legislature or Congress! I'm sure my taxes will go down, and my level of service will go up with you in control. Just please, read up on the state and federal Constitutions. You might need them. "

skeezix wrote on Nov 20, 2008 12:24 PM:

" Bad Boy..."And I gurantee you that if Liberals try to raise taxes or impose a state income tax, they will hear the voices of recall through the initiative process." Just wondering, exactly how many voices do you hear? "

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