Tax collections in the state are coming in as expected, according to a monthly economic report released today.

Over the last three months, the state collected about $9.6 million more in tax revenue than estimated by the Economic Revenue and Forecast Council. That’s out of about $3 billion in collections, marking a mere 0.3 percent difference than what was predicted.

Nationwide, job growth over the last two months has been slower than expected. Yet at the same time, more people are buying cars and houses, and personal incomes are rising — which sends “mixed signals” about the state of the U.S. economy.

In Washington state, the economic picture is also “mixed.” Employment figures had been slowly growing over the last few months, but the current level is still slightly lower than expected. And although houses have been selling, the prices have been weak.

From the report:

“The risks to a continued recovery in Washington are still high. While oil and gasoline prices have receded somewhat, a European financial crisis remains a real possibility. … We are suffering from fiscal drag from state and local government budget cuts and a construction sector which has stopped declining but is not yet adding to growth.”

Looking ahead, the beginning of 2013 could bring a “severe fiscal contraction” when the Bush tax cuts expire and extended unemployment benefits end, it warned.

Tags: economic forecast

Gov. Chris Gregoire signed the final operating budget of her career Wednesday, saying she was pleased that it makes no cuts to education — a feat achieved “by the skin of our teeth.”

But that won’t be possible in the future without a new revenue source, Gregoire warned. It will cost about $1 billion to meet constitutional and “moral” obligations to the K-12 education system alone, she said at the bill signing.

“If anyone understands the harsh reality of the future, it’s me,” she said. “We cannot properly fund education in this state without more money.”

Gregoire said she was disappointed the Legislature didn’t eliminate more tax breaks after she gave them a list of options “as long as the room.” In the end, the Legislature ended a tax deduction that big banks can claim on first-time mortgages. That’s expected to generate about $15 million a year in new revenue, and another $12 million is expected to come from taxes added to roll-your-own cigarettes.

Many lawmakers opposed the roll-your-own measure, saying that it would put store owners out of business who have invested as much as $30,000 in the machines. But Gregoire said it is only right that people pay taxes on the product because “in the end, taxpayers pay the health care costs.”

The budget included several partial vetoes that will bring the ending fund balance down to $311 million. The original budget left about $320 in reserves.

Watch the full bill signing ceremony here.

Tags: Budget

Gov. Chris Gregoire is signing the capital budget, or “jobs act,” this afternoon at Tacoma Community College, one of the sites set to receive a chunk of money from the $1 billion supplemental capital budget. About half the spending in the capital budget is funded by bonds, and it’s expected to create 18,000 jobs across the state.

It authorizes new spending on dozens of construction projects such as storm water and sewer improvements, building renovations, and state park maintenance. Higher education facilities are slated to get $320 million in funds, including nearly $40 million for the health careers center at Tacoma Community College. The full list of projects is here.

Also today, the WorkFirst Oversight Task Force is holding a meeting at 2 p.m. to get an update on policy and budget changes to the Temporary Assistance to Needy Families (TANIF) program. WorkFirst is the state’s temporary cash assistance program for low-income families. TVW will air the meeting live.

Tags: capital budget

As the Legislative special session spilled into 7-and-a-half hours of overtime over the last 31 days, Gov. Chris Gregoire said she was as “angry” as she’s ever been in her tenure as governor.

“Temperatures were high, emotions were high,” as lawmakers attempted to break a stalemate over the budget, Gregoire said. “It was my most difficult legislative session,” she said.

But in the end, Gregoire said they accomplished something notable: A budget with broad bipartisan support.

In the state Senate, the budget passed with a 44-2 vote; Republican Senators Mike Padden and Cheryl Pflug both voted no. The vote was 64-34 in the House, with eight Republicans joining the Democratic majority to vote yes.

“I don’t recall having a budget passed out of the Washington state Senate with only two no votes,” Gregoire said today at a press conference. “The end product for people of the state of Washington is significantly bipartisan.”

Democrats did not want to cut education or social safety net programs like Disability Lifeline, while Republicans wanted reforms that would make the budget more sustainable long-term, Gregoire said. The budget that the Legislature passed in the early morning hours Wednesday encompasses both demands.

The budget makes no cuts to education and leaves the social safety net largely in tact. It incorporates a handful of reforms, including a constitutional debt limit, changes to the health insurance system for K-12 public school employees, ending some early retirement benefits for state workers and a four-year balanced budget requirement. It uses an accounting maneuver that holds onto the sales tax revenue collected from local governments about a month longer, which boots the state’s cash flow to the tune of about $238 million.

Gregoire said she regrets the state was unable to put more money into funding K-12 education, and she would have also liked to see a larger transportation investment.

Watch video of the full press conference below.

Tags: Budget

Miss the late night action during special session? We cover all the highlights on this 15-minute special session edition of Legislative Review.

Tags: Budget, health care, pension

The state Legislature passed a supplemental budget and adjourned at 7:30 a.m. this morning after pulling an all-nighter. The Senate passed the budget on a 44-2 vote, while the House voted 64-34. Read more in the AP story here.

Gov. Gregoire released a statement this morning praising lawmakers for their work, saying they came together to balance the budget and on reforms. Gregoire called for an additional one-day special session at midnight Tuesday after the clock ran out on the 30-day special session before lawmakers had come to an agreement.

We’ll have all the highlights of the night’s legislative activities tonight at 6:30 p.m. on a special session edition of Legislative Review.

Tags: Budget

Gov. Chris Gregoire intends to keep lawmakers working through the night after they did not reach a budget deal by midnight on the last day of the 30-day special session. The additional special session starts immediately, and Gregoire said she wants them done in one day.

“If I let them go home, the air will be out of the balloon again,” Gregoire said. “They know they have to keep working. They are on deadline.”

Lawmakers passed a number of bills in the hours leading up to the end of special session, including two measures that have been key to budget negotiations: a pension reform bill, and a four-year balanced budget requirement.

But Gregoire said that they had not yet been able to forge a deal on the last reform, a bill that makes changes to health insurance for K-12 employees.

Lawmakers working toward a midnight deadline cleared another hurdle when the House voted to pass a four-year balanced budget measure with a 79-19 vote.

The bill changed in negotiations from the version that the Senate passed on Monday, which would have required the budget to be in line with the four-year revenue forecast prepared by the Economic and Revenue Forecast Council.

Instead of relying on the revenue forecast — which critics said was too unpredictable — the bill assumes 4.5 percent revenue growth each year. That’s a figure that has remained fairly steady since the ’80s, said Rep. Ross Hunter, D-Medina.

“This will enable us to do solid regular planning and not get whip-lashed by large changes in the forecast,” Hunter said.

Rep. Mark Miloscia, D-Federal Way, said he hopes the bill will end the Legislature’s habit of going into multiple special sessions by forcing lawmakers to “look four years into the future for long-term solutions.”

UPDATE: The Senate passed the balanced budget bill with 38-9 vote following remarks by bill sponsor Sen. Jim Kastama, who said it was a good compromise.

Meanwhile, the Senate passed a bill that repeals Initiative 728. Voters approved the initiative in 2000 as a way to reduce classroom sizes, but without a way to fund it. The Legislature has regularly suspended the measure during economic downturns. It also establishes a task force focused on funding basic education.

Tags: Budget, Reform

The state Senate returned to the floor Tuesday evening to pass one of the key measures responsible for the budget stalemate — a pension reform bill that eliminates some pension benefits for state employees who retire early. It would apply only to new state workers hired after May 2013.

Republican Sen. Joe Zarelli said during the debate that the bill is a compromise that will save the state money, while still providing a “decent benefit” for retiring state workers. Employees who retire before the age of 65 will lose a percentage of their pension benefits for each year that they retire early.

But Sen. Karen Fraser, D-Olympia, said the bill will keep state workers on the payroll longer than they should — particularly teachers, or those with physically demanding jobs. “Public service should be a higher calling and I think this bill undermines that,” Fraser said.

The measure is expected to save the state $1.3 billion over the next 25 years.

UPDATE: The House voted to pass the bill around 11 p.m. with a vote of 56-42. The chamber had taken up the issue earlier in the evening, then deferred it.

Republican Rep. Gary Alexander said it was one of the “trifecta of reform bills” that will put the state on sound financial footing. Rep. Ross Hunter, D-Medina, urged members to vote for it as a way to move forward on the budget.

Tags: Budget, pension

There’s less than seven hours left of special session and still no formal budget agreement — although Mike Baker of the AP is reporting that there’s a deal on ending some early retirement benefits for new state workers, one of three major reforms that lawmakers have been negotiating. The others are changes to health care insurance for K-12 employees, and a four-year balanced budget requirement.

Lawmakers have been meeting behind closed doors since Monday afternoon, when Gov. Chris Gregoire put a new proposal on the table. We’ll post updates as they come. In the meantime, keep up with latest on our Twitter feed.