The Economic and Revenue Forecast Council today announced that the state's expected revenue will be over $400 million short of the amount needed to pay for current state commitments (2007-09). Including the 2009-11 bienium brings the total deficit to over $5 billion.

The response to the fiscal crisis should recognize that the driving factor is an economic crisis and should not compound the problems Washingtonians are already facing. When people lose their jobs, they often lose health insurance coverage. They also need affordable education and training to allow them to succeed when the economy turns around. And Washingtonians are unlikely to continue to be insulated from the mortgage crisis.

If $5 billion is cut from the budget, it would undermine the state's ability to ensure economic security for all. In addition, draconian cuts would exacerbate the downturn by reducing the economic activity of people and government that is critical for growth.

As the state is required to balance the budget each biennium, the Legislature and Governor will need to take quick action to close the current deficit when they convene in January. They will also need to pass a budget for the 2009-11 biennium that will require tough choices.

Revenue increases will likely be necessary. Economic theory suggests that contrary to conventional wisdom, tax increases would be preferable to spending cuts in terms of economic growth.

For more analysis of the state budget, see our recent policy brief (budget numbers have not yet been updated based on today's release).

For more information, contact Aiko Schaefer at 206.941.4817 or aikos@budgetandpolicy.org.