Budget Gap Widens - Talk of Taxes Likely

The Economic and Revenue Forecast Council (Council) has issued a press release updating the revenue projection for Washington. The press release stated that there is a decline in tax collections from the November forecast. This decrease in tax collections equals a weaker forecast for the rest of the biennium.

Numbers have dropped drastically from those that were predicted in the February “Unofficial Early Guidance Report” from the Council; tax collections are now forecasted to be $552 million dollars lower in the next 28 months.

The predicted decrease in tax income has pushed the projected budget shortfall close to $9 million.

The calculation for the projected budget shortfall is done by finding the gap between tax collections and how much the state would need to spend in order to: maintain all state programs at currents levels; pay for growing school, prisons and Medicaid caseloads; give pay raises to state workers and teachers; and boost spending on programs for low income individuals and families.

Interestingly, although the budget shortfall has increased, the projected revenue for 2009-2011 is projected to be larger than it was in 2007-2009. With current cuts not closing the gap it is likely that talk of increasing taxes will become more prevalent.

Answers will come later this week when legislative budget writers are expected to unveil their spending plans for 2009-2011.