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Originally published June 19, 2009 at 12:00 AM | Page modified June 19, 2009 at 9:22 AM

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State's tax collections seen falling an additional $482M

The state's lead forecaster projects tax collections will drop an additional $482 million between now and 2011, continuing a long string of bad news for the state budget.

Seattle Times Olympia bureau

OLYMPIA — The state's lead forecaster projects tax collections will drop an additional $482 million between now and 2011, continuing a long string of bad news for the state budget.

However, the state's chief revenue forecaster, Arun Raha, said it appears the worst is over for the state's economy.

"The free fall in the economy is behind us," he said in a briefing Thursday. "The recession trough appears to be near and the decline in revenue is moderating."

For now though, there's more cutting to do in the state budget.

Thursday's revenue forecast brings state reserves down to about $53 million by 2011, if the rainy-day fund is taken into account — unless things get worse. The governor's office plans to ask state agencies to further reduce spending to provide a bigger buffer.

"We're thinking we can probably save $200 to $250 million through putting a cap on hiring and other ... program reductions through 2011," said Victor Moore, the governor's budget director.

Gov. Chris Gregoire could call a special session of the Legislature if reserves were to drop too low. But for now lawmakers seem inclined to wait and see what happens over the next few months.

"If the governor's office feels like they can manage this, ... I'm happy to wait until we can get more clarity on the numbers," said Rep. Ross Hunter, D-Medina, chairman of the House Finance Committee, who is also a candidate for King County executive. "It feels like we're hitting the bottom of the slope here."

Lawmakers earlier this year had to close a $9 billion budget shortfall created by a sharp decline in tax revenue because of the recession.

Most of the gap was bridged using state reserves, one-time fund shifts and money from a federal stimulus package. But lawmakers still had to cut about $4 billion out of the state budget. They left several hundred million dollars in reserves, but those have now been largely wiped out.

State revenue is dropping because people are spending less money than expected, which means there's less tax revenue coming to the state. More than 70 percent of the money collected by the state comes from sales and business-and-occupation taxes.

"Our revenues are dependent on people buying big-ticket items," Raha said, noting that people are saving more than ever because of the recession. "People are not spending ... at rates they used to," he said.

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

Copyright © 2009 The Seattle Times Company

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Comments (60)
Speaking of taxes...I stopped making any extra purchases besides food or emergency essentials when the sales tax rate went beyond 9%. I just...  Posted on June 19, 2009 at 4:33 AM by Markus. Jump to comment
Here are a few novel ideas for Federal, State and local Governments "Stop spending money you do not have!!!!!! Throw out any and all...  Posted on June 19, 2009 at 6:11 AM by wagb281. Jump to comment
When taxes get too high, collections drop. That's because people stop buying stuff, or buy it elsewhere to avoid the tax. And 9.5% tax (10%...  Posted on June 19, 2009 at 6:03 AM by Swissman. Jump to comment

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