State Revenue Forecast Plummets -- And That Could Trickle Down to Kirkland

The state’s budget hole got a bit deeper Thursday, with a lowered revenue forecast that reflects a “fragile” economic recovery held back by slow job growth, sluggish construction and the effects of Middle East unrest and the disaster in Japan, said the state's chief economist.

Depending on how the state Legislature deals with the reduced revenue, it could have an impact on the services the City of Kirkland provides to residents.

For the current 2009-2011 budget, state revenue is expected to be $28 billion, which is $80 million less (three-tenths of 1 percent less) than the state’s previous projection in November, according to the Economic and Revenue Forecast Council.

And looking ahead to the next two-year budget, which lawmakers are grappling with now, revenues are expected to be $31.9 billion, which is $698 million less (2.1 percent less) than the previous forecast.

And even this latest projection is uncertain because of global events.

“First, we had the volatility in oil prices because of political unrest in the Middle East,” said Arun Raha, the state’s chief economist, in a statement accompanying the forecast. “Now we have the tragedy in Japan, the world’s third-largest economy, and one of the state’s leading trade partners.

“The recovery continues to face other headwinds -- slow job growth; a sluggish housing market; tight credit for small businesses; consumer retrenchment after the holidays; and fiscal drag from the federal stimulus winding down, as well as cuts in state and local government expenditures," Raha said. "Boeing’s tanker win will provide an important economic and psychological boost to Washington state; however the recovery in Washington, as in the nation, is being held back by a weak housing market and sluggish job growth.”

Lawmakers will have to figure out where to make cuts as they deal with the lowered projections. If it comes from the revenue the state shares with cities, the cities also could have to look at cuts in services.

“All cities receive a portion of state liquor excise tax and profits,” said Tracey Dunlap, Kirkland’s director of finance. “If they were to look at changing the share, that would be a concern for us. Also, depending on program cuts and what they are, that could roll downhill, so to speak.”

State revenue sharing is not a huge portion of the city budget, but the largest part of it is profits from the Liquor Control Board and liquor excise taxes, and that goes into the city general fund, which pays for primary services like police and fire.

For the city’s 2011-12 budget, state entitlements totaled $2.2 million -- $1.83 million (about 83 percent) from the liquor revenues. The total city general fund amount for the period is $160 million.

“That’s not a big percentage, but when you’ve already had revenue reductions … we’d have to figure out where to cut, unless our own revenues recover,” Dunlap said.

And that could happen. Dunlap said the city revenue stream has “stabilized,” rising 6 percent so far this year.

“That’s good” she said. “It was down 30 percent from its peak.”

The legislative session is set to run through April 24, though there's some doubt it will wrap up in time.

For more details, find the state revenue forecast here and the state’s news release about it here.