Economy costly to state coffers

OLYMPIA — Washington's treasury will take a $423 million revenue hit from a "short and shallow" recession that has gripped the nation, the state's chief economist said Friday.

The closely watched report from ChangMook Sohn and the state Revenue Forecast Council plunged state government well below the $1 billion mark that Gov. Christine Gregoire and the Democratic-controlled Legislature had hoped to keep in reserve as they revise the second year of the current two-year budget.

Even without adding a dime to the current $33 billion budget, the reserves have dropped to less than $954 million.

Rep. Hans Dunshee, D-Snohomish, vice chairman of the House Appropriations Committee, said Friday night he hopes lawmakers will be able to save at least $700 million. He said lawmakers may save money by "pausing" the phase-in of new spending, such as daylong kindergarten.

The governor, who earlier asked for budget additions of $234 million and a reserve of $1.2 billion, said lawmakers should trim the old budget and carefully scrutinize any new spending.

"I have it under the microscope," she said.

Gregoire declined to give specifics about programs that can be trimmed or spending that can be postponed, saying she didn't want to negotiate with lawmakers in the media.

She also declined to say how much legislators should salt away for next year, saying only that "I want a good reserve ... a healthy reserve."

Minority Republicans and Gregoire's GOP challenger for re-election this fall, former Senate budget Chairman Dino Rossi, seized on the downturn and the dwindling reserves as a clear sign that Gregoire and the Democrats have overspent.