Hold on to your wallets

The state's supplemental budget debate just got a lot more interesting. Previous budget forecasts estimated a $621 million deficit by the end of the next biennium. According to a new report by the Senate Ways and Means Committee, the projected deficit has worsened. Richard Davis at the Association of Washington Business broke the news today:

"As we posted earlier, OFM has discontinued production of the familiar six-year budget outlook. Sen. Joe Zarelli subsequently asked the Senate Ways and Means Committee to make the forecast. The committee's projections are here and its methodology here.

By the end of the next biennium, in 2011, the outlook shows the General Fund running in the red by $937 million. Looking out to the end of the 2011-2013 biennium, the General Fund shortfall is $2.5 billion. The outlook also looks at the emergency reserve account and budget stabilization account, both of which would be drained (assuming the requirements to tap the budget stabilization account could be met)."

It is likely this bad news will only get worse on February 14 when the state's new revenue forecast is released. This situation illustrates the importance of limiting increases in the budget to ongoing revenue instead of using one-time money to balance the budget.

Earlier this session a bill was introduced (HB 2932) to require six-year budget outlooks be available following the adoption of a budget and quarterly revenue forecast. From the bill:

"No later than thirty days after enactment of each omnibus operating budget act, and no later than seven days after adoption of each quarterly revenue forecast under chapter 82.33 RCW, the state council on fiscal management shall present a three-biennium outlook on the state's operating budget."

In light of today's news it will be interesting to see if this proposal moves forward to help provide this type of information multiple times a year to help guide spending decisions.