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Dark Economic Clouds on the Horizon?

And I’m not just talking about the weather (which has been miserable as you know).

Tomorrow we hit the one-third mark of this legislative session and while policy committees are in a full blown state of frenzy as they approach their cut-off dates next week, the hallways and corridors are filled with some apprehension and anxiety about the state of the Washington economy and what might happen to the next general fund revenue forecast.

Tomorrow, the Economic and Revenue Forecast Council will hold its quarterly economic review meeting and on February 15, will release it’s updated projections of general fund revenue collections for the remainder of the biennium.  The preliminary news from legislators and staffers who follow these issues closely has been a bit gloomier than anyone would like.  While the state’s economy is still considered stronger than many others around the nation, most all of the hot housing market which fueled the last two years of unprecedented revenue growth is gone.  Couple that with a strong chance of a national recession and it’s hard to be very optimistic about the future.

While the current consensus is for a short and shallow economic dip, even modest changes to the state’s revenue forecast can cause havoc for budget writers because even small percentage drops could mean the loss of one or two hundred million in the forecast.  With all eyes on the size of the ending fund balance (which the Governor made her top supplemental budget priority), a drop in the revenue forecast in two weeks could mean all those wonderful ideas we have for additional spending might have to be reduced or possibly postponed.

Well, at least the mood seems to match the weather.