State gains extra $85 million in taxes

Wednesday, July 12, 2006

By DAVID AMMONS
THE ASSOCIATED PRESS

OLYMPIA -- Washington's sizzling economy is being closely watched for signs of cooling, but in the past month, robust tax collections have produced an unexpected windfall of nearly $85 million, officials said Tuesday.

The surging collections, reflecting strong growth in nearly every sector of the state economy, will push the state's reserves to more than $1.5 billion, counting money that lawmakers socked away into savings accounts.

Less than a month ago, the state Economic and Revenue Forecast Council projected that state coffers would swell by more than $959 million during the next three years, erasing a projected deficit that had worried Gov. Christine Gregoire and legislators.

At the time, chief economist ChangMook Sohn said the numbers might be a little too optimistic over time, given that the state's recent boom has been caused largely by a single sector: construction and home sales.

In a report Tuesday, Sohn said the slowdown has yet to occur, and that indeed, some of the tax collections show the strongest monthly growth since the early 1990s.

Actual June tax collections were up nearly $85 million above projected levels, to nearly $1.3 billion. The windfall included nearly $14 million in real estate excise taxes, 17.9 percent higher than expected, while sales, business and other taxes rose by more than $71 million, 9.2 percent above projections.

The surge "reflects much stronger than expected consumer and business spending," Sohn wrote in a report to the bipartisan council of legislators and administration officials.

Real estate tax collections grew despite rising mortgage rates and inventories of unsold homes, he said.

In June, the actual number of sales declined, but the value per transaction soared by more than 19 percent, boosting revenue by 15.6 percent above the level of a year ago.

Still, Sohn tried to temper too much optimism about the economy, citing slower-than-expected national job growth and a recent uptick in state unemployment figures.

"Recent economic news has been positive, but not nearly as good as this month's revenue numbers imply," Sohn said.

Even before the latest report, Gregoire had said her proposed new two-year budget would not require tax increases.

The Legislature already has earmarked about $825 million in savings to appropriate next year for education, health services and pensions.

Minority Republicans continue to warn against overspending, given Sohn's comments about the potential of an economic slowdown.

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