New forecast: State budget shortfall $5B

The bottom just fell out of the state budget.

A new state forecast released this morning estimates tax revenues will drop an additional $1.9 billion below projections.

If that number holds true, state lawmakers could face about a $5 billion shortfall when they meet in January to put together a new two-year budget. That's up from a $3.2 billion gap projected in September.

"This is as bad as I've ever seen it," said Victor Moore, the governor's budget director.

Growth in state tax revenues have fallen sharply in recent months as the national economic downturn has gotten worse. Washington isn't the only state in this fix. Throughout the country, state governments are projecting large budget shortfalls.

The new forecast projects the state will bring in $500 million less than expected in the current two-year budget, and revenues will be down an additional $1.4 billion in the 2009-11 budget. Moore said some of the shortfall in the current budget will likely slop over into the next two-year budget. That, combined with increases in the social-services caseload and public school enrollment, will likely boost the total shortfall to around $5 billion. Assuming things don't get worse.

Gov. Christine Gregoire has announced several steps in recent weeks to reduce state spending including a freeze on hiring, out-of-state travel, personal service contracts and equipment purchases.

The governor's budget office also has told agencies to prepare for deep budget cuts. The state's colleges and universities are preparing for cuts up to 20 percent, or $600 million over two years.

The current two-year general fund budget is $33.6 billion. State spending has increased by $8 billion since Gregoire was elected governor in 2004. Half of that money, around $4 billion, was spent on public schools and higher education.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com