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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

March 18, 2011 at 12:59 PM

Looking inside Washington’s budget shortfall

Every time it looks like chief state economist Arun Raha might be ready to deliver some good news, events slam his forecast back into the red. The latest report, delivered Thursday, shows the state will see a $700 million shortfall in revenues over the next two years.

The new forecast takes into account higher oil prices, and worries about the effect of the disaster in Japan. In addition:

The recovery continues to face other headwinds – slow job growth; a sluggish housing market; tight credit for small businesses; consumer retrenchment after the holidays; and fiscal drag from the federal stimulus winding down, as well as, cuts in state and local government expenditures.

Now the governor and Legislature face even worse Sophie’s Choices, and so do state workers. It would be helpful if austerity were not used to demonize public servants, who are not the enemy. The problem, however, goes deeper.

Washington faces a systemic disconnect between the government services most of its citizens want — and which have added to the quality of life and competitiveness that have made the state a winner — and tax revenues. A majority of citizens also have handcuffed the Legislature through the initiatives pushed by “conservative” activist Tim Eyman. The disconnect was cloaked by the construction boom, but that’s gone and will not come back soon at its old velocity. So something’s got to give.

Make no mistake, the fiscal crisis and government cuts will be a drag on recovery. Done wrong, they risk the future, especially where they hit funding for the universities, K-12 education and infrastructure.

Today’s Econ Haiku:

Bank stress tests are done

Here come dividends, pay checks

Only for the few

Comments | More in State fiscal conditions

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