The much anticipated quarterly revenue forecast was released this afternoon in Olympia and as predicted for the past several weeks, it dropped. Dr. Chang Mook Sohn, in his final meeting as chief revenue forecaster, estimates that the state will take in $423 million less for the remainder of the current biennium than predicted last November. More than half of the expected decline is related to lower real estate excise tax collections resulting from the slowing housing market. The remainder of the forecast adjustment is related to declining consumer confidence related to the worsening national outlook.
Dr. Sohn went to great lengths in his remarks this afternoon to stress that while a mild national recession is now expected for the first two quarters of 2008, the Washington state economy is significantly brighter than the U.S. picture and that a recession is not expected here.
As for the impact on the state budget picture, today’s drop in revenue reduces the expected size of the budget reserve from $1.4 billion to just under $1 billion, before any 2008 supplemental budget adjustments are made. While legislative and executive fiscal experts expect the forecast to result in a significant curtailment of new general fund spending or new tax reductions, so far, no one has suggested making major changes to the underlying 2007-09 biennial spending plan.