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State revenue decline
underscores need to save
money, hold line on spending, says Orcutt
Republican
Finance leader says Legislature needs to prepare for economic downfall
The Legislature needs to
resist spending a projected $1 billion revenue surplus in the coming
session and, instead, prepare now for a downturn in the economy, says
Rep. Ed Orcutt,
ranking Republican on the House Finance Committee.
Orcutt made his comments
following approval today of the
Economic and Revenue
Forecast Council's most recent forecast which predicts a $132.4
million reduction in incoming revenue to the state.
"This is the first time in
nearly four years that we have seen a decline in the revenue forecast.
After more than a year of weakening, the housing market is now reducing
revenue projections, and we are experiencing some slowing in retail
sales," said Orcutt, R-Kalama.
"More important than the
forecast is how the Legislature responds to it. Despite this forecast,
overall revenue is higher than when we finished the 2007 session. If
budget writers look at the overall increased revenue, but fail to
consider that it may trend downward, they may spend us into deficits
longer than already projected," added Orcutt.
"We can't continue to
outspend revenue like we have in the last couple of budget cycles," he
said. "This latest forecast shows that a downturn in our economy is
coming. The pain of that downturn will be determined in how we budget in
the coming 2008 session."
Orcutt noted that voters
were wise in approving
SJR 8206, which establishes that 1 percent of annual revenue be
placed into a constitutionally protected savings account ("rainy day
fund") for future downturns or emergencies.
"I'm quite concerned,
however, that 1 percent per year will not deposit enough into the rainy
day fund. If every decade we experience eight years of growth, but two
years of deficit, we may not have adequate reserves. At 1 percent per
year, we would have only 8 percent in the fund. Past experience shows
the deficits could be 10 to 14 percent. We could still be short by a
billion dollars or more," said Orcutt. "We need to put more money into
the rainy day fund to prepare for a future downturn in our state's
economy."
The 18th District lawmaker
also said oil prices could be a factor in future revenue collections.
"Economists don't expect
oil prices to reach $100 per barrel. However, if they remain high, it
could lead to further reductions in revenue," Orcutt warned.
"The housing bubble has
bolstered revenues over the last few years. However, that bubble is
beginning to deflate, which means less incoming revenue. If we want to
keep our state out of future budget deficits, the Legislature needs to
exercise fiscal restraint, put more money away into the rainy day fund,
and avoid creation of new programs," concluded Orcutt.
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For more information, contact:
John
Sattgast, Senior Information Officer: (360) 786-7257
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