Looks like that slowdown in state government revenues that Washington State’s chief economist ChangMook Sohn has been consistently warning us about really has come to pass.
Sharp declines in predicted revenue from the real estate excise tax and a mild national recession have led the state’s top economist to downgrade his revenue forecast by $423 million.
But Washington’s economy will not fall into recession because of strong growth in aerospace, high tech and international trade, said ChangMook Sohn, executive director of the state’s Economic and Revenue Forecast Council.
“The outlook for the state economy is significantly brighter than for the U.S. but we will be affected by the national slowdown as well as our own housing market problems,” Sohn said Friday.
…
Though lawmakers had been predicting a decline in projected revenue for some time, the news came as a blow to Democrats who had hoped to pass a supplemental budget that would leave more than $1 billion unspent.Most now concede that that level of savings is no longer realistic.
That $423,000,000 drop in the forecast is compared to the previous forecast, which was made only three months ago. Will our lawmakers continue to ignore the obvious warning signs, and spend Washington into a corner, even as revenues continue to decline? Probably.
Don’t forget, while the housing bubble has been inflating revenues, our state’s legislative and executive branch have been spending it just as fast. Since 2004, state spending has increased 33 percent (source). I don’t think it’s likely that they’ll suddenly start cutting back as revenue growth slows to a halt and possibly reverses. But I’m cynical.
(Chris McGann, Seattle P-I, 02.15.2008)