The September revenue forecast for Washington State government shows projected General Fund revenue down $238 million for the remainder of this biennium.

Dr. Arun Raha, the state’s chief revenue forecaster, is cautiously optimistic that the state’s economy has reached its lowest point and will soon be on the mend. The cloudy revenue forecast is related to weak revenue collections and consumer caution. He noted that as consumers continue to pay down debt and are guarded about spending, Washington’s revenue recovery will take more time. Employment will also lag the broader recovery. Businesses usually try to postpone hiring, and use current workers to produce more, until they are certain that that we have the economy has indeed turned the corner.

“Although we believe the recession has bottomed out, it will take some time for revenues to recover,” Gov. Chris Gregoire said. “I am preparing a supplemental budget request that accounts for the revenue shortfalls we have experienced since May.”

The governor signed a balanced budget in May to close a nearly $9 billion shortfall. When signed, the budget left a total of $739 million in savings, with $250 million in the constitutionally protected rainy day fund and $489 million in unobligated revenue.

“The budget I signed in May was built on tough decisions that I made together with the Legislature,” Gregoire said. “The shortfalls in the last two forecasts necessitate more spending cuts, as do the lawsuits that have restricted our ability to implement reductions.”

In June, Gregoire directed state agencies to further curtail their spending for the 2009–11 biennium. She required agency directors to place a cap on hiring, reduce General Fund employee costs by 2 per cent from the budgeted amount, and curb equipment purchases, out-of-state travel and personal services contracts. She also asked that higher education and separately elected officials voluntarily follow her hiring and purchasing directives.

Revenue for the current budget period, 2009–11, is projected to decrease $231 million, resulting in total projected General Fund revenue for the biennium of $29.6 billion. Revenue for the prior budget period, 2007–09, decreased $7 million, resulting in projected total General Fund revenue of $27.7 billion.

“Given the revenue reductions we have seen this year, further cuts will be necessary to keep the budget in balance,” said Victor Moore, director of the state’s budget office. “We have reached a point where we have to consider eliminating discretionary programs in our supplemental budget. When you add the revenue loss we’ve experienced plus some additional costs we’ve incurred, we may face a billion dollar shortfall or more in the coming session.”