‘Everything is on the table right now,’ says top Democrat budget writer

  SEATTLE — The other shoe dropped on June 17, as the state’s Economic and Revenue Forecast Council sliced $4.5 billion from anticipated revenues for the 2019-2021 biennium and $4.3 billion more from 2021-2023 projections.

  The $8.8 billion four-year hit is considerably more than the $7 billion projected in a previous, informal estimate, and there is a high degree of uncertainty surrounding forecasts during the coronavirus pandemic.

  The Washington Research Council gave this analysis: “With the new forecast, revenues are expected to be lower than previously estimated in each year beginning with 2020. (And 2021 revenues are now expected to drop below the 2019 level.) The June revenue forecast for 2019-21 is 8.7 percent lower than the February forecast (on which the 2020 supplemental was based), but 2019-21 revenues are still expected to be 3.7 percent higher than 2017-19 revenues.”

  The Washington Research Council projects, as in the recession of 2008-09, about a two-year dropoff in state revenue before the strength of the economy picks up again.

  Responding to the state’s deteriorating budget situation, Gov. Jay Inslee canceled some anticipated pay raises and directed agencies to begin implementing furloughs. The Seattle Times reported Friday that a major state employee union had reached an agreement with the administration to preserve raises.

  That deal set a schedule for furloughs as state officials grapple with a steep economic downturn in the wake of COVID-19. 

  “As a union, we successfully preserved the 3% raises provided under our current contract,” wrote the Washington Federation of State Employees in a Friday morning post on its website.

  And there’s this: Under the deal, the union’s website said, furloughed workers would potentially see a net increase in pay, because they could be eligible for unemployment insurance and potentially federal assistance.

  Legislative leaders anticipate tax hikes and spending cuts. In Crosscut, the independent news site, Melissa Santos reported on reaction to the revenue forecast.

  Top Democratic leaders have said they expect they will have to approve some combination of spending cuts and new revenue to solve the budget crisis, Santos said. That is likely to happen in a special session sometime later this summer or in early fall.

  “Everything is on the table right now,” said state Sen. Christine Rolfes, a Democrat from Bainbridge Island who is the lead Senate budget writer.

  Taxes are not yet on the table for Republicans, Santos reports, adding that voters in 2010 rejected legislatively-approved tax increases on candy, soda and bottled water. That same year, voters also rejected an income tax aimed at high earners.

  Raising taxes to sustain state spending would be a mistake, writes Association of Washington Business president Kris Johnson. Cutting programs is hard, so there are already calls for tax increases to help sustain state spending. 

  “There’s a great degree of fragility in the economy and in communities across the state,” according to Johnson. “With approximately 1.2 million unemployment claims in Washington as of mid-May — and thousands of businesses forced to close their doors, some never to reopen — putting additional burdens on our state’s employers, employees and communities would not be helpful.”

  “Businesses pay more than half of all state and local taxes in Washington, so if they aren’t able to succeed, the state’s tax revenue will continue to fall.”

  There was also some evidence, although tentative and fragile, that the national economy is beginning to grow again. Industrial production, retail sales and homebuilder confidence were all up last week. And initial claims for unemployment benefits were again down. 

  The decline in UI claims was, however, disappointingly small and suggests there may be more shaking out.  

  This was from Associated Press: The figures surprised and disappointed analysts who had expected far fewer people to seek unemployment aid as states increasingly reopen their economies and businesses recall some laid-off people back to work. The data also raised concerns that some recent layoffs may reflect permanent losses as companies restructure their businesses, rather than temporary cuts in response to government-ordered closures.

  The report is “telling us that the scars from the job losses in the recession will be longer-lasting than we expected,” said Gregory Daco, chief U.S. economist at Oxford Economics.

— from Opportunity Washington

COVID-19 Numbers, Updated June 30

Sources: Whatcom County Health Department, Washington State Department of Health

Area Cases Deaths Tested Negative
Whatcom County 622 40 17,564
Washington State 32,824 1,332 524,451