Chief Economist, Arun Raha

The state's chief economist Arun Raha announced the latest quarterly revenue projection at a press conference in Olympia today: Subtract another $698 million from projected general fund revenues. Add that to the $4.6 billion shortfall for the 2011-2013 budget cycle, and the state is looking at a $5.2 billion shortfall.

The latest forecast also downgrades revenues for the final months of the current biennium by $80 million, leaving the legislature with a $201 million shortfall right now. "There will be another supplemental budget," Sen. Ed Murray (D-43), chair of the senate ways and committee said at the press conference.

"The problem has becoming more daunting," Rep. Ross Hunter (D-48), Murray's house counterpart said. "I'm so sorry," he added when asked what he said to people who were rallying outside the hearing room to protest cuts and call for getting rid of corporate tax breaks.

Raha blamed "recent geopolitical developments" referencing the unrest in the Middle East, which is creating "uncertainties around oil prices" and the "tragedy in Japan"—which he noted is a "major trading partner" for Washington State. Specifically, Raha said he expected a rough hit to our agriculture exports.

"People said I was crazy," Raha said, referring to his earlier downcast predictions. "Apparently, I wasn't crazy enough," he added.

At this point in 1981-82 recession (35 months in), Raha said, adding some bleak context, we had regained all the jobs lost at the start of that recession, and in fact, had gained 50,000 jobs. Right now, we are still 179,000 jobs below where we were at the start of the recession. And he doesn't expect us to regain all the lost jobs until October 2013—which is not until after the next biennium.

The reason for the slow addition of new jobs, he explained, had to do with the origin of this recession—a the financial industry. The crash on Wall Street has frozen credit for small business, traditionally the largest producer of new jobs. Additionally, productivity is actually up, which shows that the 21st Century economy needs fewer people for the same output.