A new update of the State Revenue and Economic Forecasting Council (ERFC) offered no surprises of an economic slowdown resulting from the COVID-19 response. The “deep recession” has virtually guaranteed spending cuts for the current operating budget, and state officials on the CFRA in its meeting of June 2 said these talks should start as soon as possible.
“If nothing else, I think the legislature will meet sooner on this could convey some goodwill to taxpayers and voters in the state that we take this very seriously,” said the treasurer of the Duane Davidson State. “I think it can help build the confidence that we’ll need at this point.”
While an unofficial ERFC forecast estimates that revenues could fall by $ 7 billion over the next four years, much of that will depend on how long it takes before an economic recovery occurs. The latest revenue forecast update by ERFC from April shows state collections declined by $ 429 million – or 8.7. percent compared to what was expected in February. A preliminary forecast for May showed general fund income between April 11 and May 10 was $ 436 million, 22.5% lower than the February forecast.
ERFC Executive Director Steve Lerch told members that there is currently “a degree of uncertainty associated with the path of the economy. Will we have this rapid rebound, or will there be a second spike in COVID-19 cases? How will consumers react to the reopening of the economy? Lots of things that are difficult to know.
Lerch added that the economic downturn has so far resulted in unprecedented job losses and unemployment claims. The ERFC predicts that there will be 446,000 fewer jobs this year compared to what was forecast in the February forecast, while the state’s job security department last report shows that a total of nearly two million unemployment claims have been filed since March 7.
“We’ve never seen numbers like this before,” Lerch said.
One of the industries hardest hit was construction, which was labeled a non-core business under Governor Jay Inslee’s stay-at-home order that placed restrictions on businesses. Industry employment fell by 47,200 jobs between February and April, while building permits fell by 6,700 units from what was forecast in February for this year.
The other sectors most affected are hospitality, education, health services and manufacturing, which Lerch says could experience an unemployment rate of between 30 and 50%.
While Rep. Timm Ormsby (D-3) said a special session could address ways to help struggling businesses, Ways and Means Ranker John Braun (R-20) said it was was also an opportunity to examine potential spending cuts such as an upcoming three percent pay rise for state employees. Although Bureau of Financial Management Director David Schumacher downplayed the extent to which removing these salary increases could help reduce the budget deficit, Braun argued that “the sooner we stop digging, as we do. Said, the easier it will be to put everything in place later… and that doesn’t mean there isn’t a painful choice just yet.
Rep. Ed Orcutt (R-20) noted that while the issue of salary increases was put to one side in a special session, “that does not prevent us from looking at other areas of the budget. If we do something in June or July, you look at 11 months to spread out those discounts, if we wait until January … even though we could do something in the first two weeks, you limit yourself to five months.
Senate Ways and Means President Christine Rolfes (D-23) said the legislature should wait for the release of the updated ERFC revenue forecast later this month to get a more accurate picture of the state’s financial situation. This forecast will include data on the number of cases involving child care, health care and other services provided by the state.
“I’m looking at when will we have enough certainty… to be able to recall the legislature and make some sound decisions,” she said.
ERFC’s next revenue forecast will be released on June 15.