Washington budget outlook shows no signs of improvement

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A state revenue forecast released Friday reinforces Washington lawmakers and the next governor may face difficult spending decisions next year.

The economy is projected to generate just under $66.5 billion in tax receipts for the budget cycle that runs through next June. That’s a drop of about $50 million from the forecast David Reich, Washington’s chief economist delivered to the Economic and Revenue Forecast Council three months ago.

When combined with the June revenue report – which showed revenues tumbling $477 million –  tax receipts are now expected to be roughly $525 million below figures lawmakers and Gov. Jay Inslee relied on to pay for new spending in the current fiscal year.

Rep. Timm Ormsby, D-Spokane, the chair of the House Appropriations Committee, said he didn’t anticipate a need for any large changes in the current budget to deal with less-than-anticipated revenue totals.

“We’re only going to be able to spend what we have,” he said.

Meanwhile, work is underway on the 2025-27 operating budget which is also predicted to have less in tax collections than the Legislature anticipated earlier this year.

Inslee will put forth his proposal in December that will serve as a template for lawmakers and the next governor when they write spending plans in the 2025 session.

In recent days, the leader of one of Washington’s largest state employee unions said that in contract negotiations, state officials warned of a massive budget deficit in 2025.

Asked Friday about a potential deficit, Pat Sullivan, director of the Office of Financial Management, said the department is “early in the process” of developing the next spending plan.

He expressed more concern in a statement issued by his office following release of the forecast.

“We will face significant challenges in meeting all our obligations in our next budget,” he said. “There are some tough fiscal choices ahead.”

Meanwhile, voters could complicate the budget picture in November when they could approve a ballot measure to erase the capital gains tax, a source of several hundred million dollars a year. Friday’s forecast assumes that won’t happen but it does acknowledge it is a risk.