Nothing Brightens State's Economic Picture, Economist Says

Still Looks Like State is Down $207 Million -- And Congress Could Make Things Worse



By special correspondent

Washington State Wire

OLYMPIA, July 26.--No news is bad news. A month after Dr. Arun Raha, the state’s top economist, told lawmakers that the economic recovery is flagging, he appeared before a legislative panel last week and said nothing has changed.

            Raha, executive director of the state Economic and Revenue Forecast Council, appeared before the House Finance Committee and said the latest tax-revenue figures confirm that the recovery “will be a slow slog.”

            His latest projection for state tax revenue, released in June, is down $207 million from the figure he provided to the Legislature in February. That's important because the February projection was the number on which the Legislature based its budget. The state left enough money in reserve that the new number doesn’t put it in the red. But when coupled with the congressional reluctance to pump Medicaid money to states that had been promised early in the year, it could spell trouble for the state. Lawmakers had been counting on $480 million and they used the anticipated revenue to balance the budget.

In his Economic and Revenue Outlook,  Raha said, there are some reasons for optimism as July ends, but was short on specifics. The state has had three consecutive quarters now of GDP and consumer spending growth, but key indicators like retail sales are now dropping.  It seems clear that while the Greek and European financial problems did not directly impact the state economy, the financial market impacts did hurt the state.

            Ballot Initiative Fiscal Notes To Be Published August 10

The Finance Committee also received a briefing on the obscure world of fiscal notes, the documents that attempt to quantify budget impacts on bills that come before the state Legislature.  With a single bill often impacting more than one state agency, over 10,000 individual state agency fiscal notes were compiled in the last two years alone.  House Finance Committee members have expressed doubts about a system that appears to treat even the same bill differently from year to year.

Office of Financial Management staff went over the Fiscal Note Basic Principles, but this raised as many questions as it answered.  Rep. Sharon Santos was clearly frustrated when she noticed Principle 5 appeared to contradict Principle 6.  Principle 5 states “the Department interprets the bill,” while Principle 6 states that when the sponsor of the bill and the Department cannot agree on the interpretation of a bill, “the fiscal note should be written according to what the Department believes the sponsor intended, even if the language doesn’t support this interpretation.”

Committee Chair Ross Hunter was not convinced by the OFM response and promised the committee would further study the Principles at a future meeting.