OLYMPIA – Washington’s economy is slowly, steadily growing, aided by a sizzling real estate market and the prospect of new Boeing jobs, and the economy is expected to pump an additional $132 million into state coffers this year, state economists said Thursday.
That isn’t a lot compared with the state’s $23 billion budget, but it will help lawmakers and the governor deal with a looming budget hole that could total $1 billion.
The state Revenue Forecast Council, a bipartisan group of legislators and the state revenue and budget directors, adopted the new, mostly upbeat revenue update on Thursday.
The lame-duck administration of Gov. Gary Locke will await a November update before finalizing a two-year budget proposal for the 2005 Legislature and the new governor. The budget office also needs fresh projections of social service caseloads and school enrollment, as well as the final price tag for state employee collective-bargaining agreements, state budget chief Marty Brown said.
Locke, who is on a trade mission to Asia, released a statement saying the new forecast shows that the state is on a slow path to recovery. He said big fiscal challenges remain for the Legislature and the next governor, in part because of soaring health care costs for nearly 1 million low-income and disabled people.
State economist Chang Mook Sohn, the council’s director, said the state economy is pulling out of bleak times, albeit very slowly, and is expected to outpace the national recovery.
National monetary policy, including very low interest rates, is driving the latest expansion of the economy by prompting people to buy houses, Sohn said. Of the state’s latest $132 million uptick, nearly all of it was due to expanded real estate excise tax collections, Sohn said.
The state charges 1.28 percent of the purchase price of a home.
The tax will bring in an estimated $1.1 billion this two-year budget cycle, up a whopping 32 percent over last biennium, and has become the state’s fourth-largest revenue source after sales, business and property taxes, he said.
But Sohn also cautioned that the housing market is likely to soften as interest rates rise again.
Sohn said Boeing and the aerospace industry, while only half the size it was just six years ago, is again becoming a benefit to the state economy rather than a drag. Boeing is expected to hire about 2,000 people by year’s end and continue the trend in the new year, he said.
Overall, job growth is running a little under 2 percent a year as the state experiences its slowest recovery in modern times, Sohn said.
Some 32,800 jobs were added in the first eight months of 2004 – 15,300 in the Seattle area and 17,500 in the rest of the state. Previously, Seattle had been losing jobs while other parts of the state were holding steady, he said.
State revenue update
* Bottom line: Tax revenues are projected to rise by $106 million between now and July 2005, and an additional $26 million in the following biennium, compared with June’s forecast.
* Income: $23.1 billion is projected for two-year cycle that ends June 30, 2005, and $24.78 billion is predicted for the 2005-07 biennium. That compares with $22.14 billion in the last biennium.
* Reserves: $571 million.
* Economy: The state is slowly recovering and adding jobs, although consumer spending has cooled off, oil prices remain high and the war in Iraq continues. More than 32,000 jobs have been created in Washington so far this year.
* Online: The state Office of the Forecast Council’s Web site is www.erfc.wa.gov.
State revenue update
* Bottom line: Tax revenues projected to rise by $106 million between now and July 2005, and an additional $26 million in the following biennium, compared with June forecast.
* Income: $23.1 billion projected for two-year cycle that ends June 30, 2005, and $24.78 billion predicted for 2005-07 biennium. Compares with $22.14 billion last biennium.
* Reserves: $571 million.
* Economy: U.S. and state slowly recovering and adding jobs, although consumer spending has cooled off and oil prices remain high and the war continues. More than 32,000 jobs created in Washington so far this year.
* Online info: Forecast Council’s Web site is www.erfc.wa.gov
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