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Washington lawmakers face $1.2 billion shortfall

Mike Baker, Associated Press

OLYMPIA, Wash. (AP) -- Washington's budget shortfall has grown to $1.2 billion, officials said Wednesday, as increased reliance on government services overpowered relative stability in the state's economy.

The state Economic and Revenue Forecast Council cited higher-than-forecast expenses in areas like Medicaid as the cause of new budget trouble. Government revenues remained stable, something Gov. Jay Inslee's budget director cited in calling the forecast relatively good news.

"It could have been worse," said David Schumacher, director of the Office of Financial Management.

Forecasters say the revenues for the next budget cycle could still fluctuate dramatically in either direction. A variety of outside economic forces could help or hurt the state, including how Congress handles its recent budget cuts, Europe's economic troubles and whether the Chinese economy slows down.

The state projections assume the automatic federal budget cuts, which impacts pay for workers at Joint Base Lewis-McChord and elsewhere, will be resolved by the middle of the year. Steve Lerch, the state economist, said those cuts would cost the state about $6 million a month if they remain in place.

Lerch was optimistic about strong automobile sales and construction activity in the state.

Budget writers entered the year with a roughly $1 billion shortfall and had expected that the numbers may get worse. The Legislature is separately under court order to add more money — perhaps another $1 billion — to K-12 education.

Some Democrats have talked about new tax revenues — or the extension of temporary taxes — to help balance the budget, but Republicans say the Legislature can finish a budget without new money.

"In general, the goal is not to extend expiring taxes and also not to introduce new ones," said Republican Sen. Andy Hill, who is leading budget efforts in his chamber. "The goal is to live within our means."

Democratic Rep. Ross Hunter, the top budget writer in the House, said he finds it hard to resolve the state's budget shortfall without looking at revenues. He noted that costs are on the rise, with basic things like inflation, health care costs and more residents. State employees have already gone through job reductions and remaining workers took temporary pay cuts expected to be restored in the next budget that starts in July.

Lawmakers are expected to release their budget proposals in the coming weeks.