Sequester will hit state big

By Jan Teague, President/CEO

Washington Retail Association

David Schumacher, the new Office of Financial Management Director, said the next state fiscal projection report would be released March 20th but that it was too soon to say if it would show an increase or decrease in the state’s shortfall amount.

Part of the state’s forecasting problem is Congress, which might not compromise on its budget.  If Congress decides not to act and to simply approve across-the-board cuts, Washington State will be significantly impacted.  Washington is a key state for military installations and the military would take a big cut that would impact jobs, sales tax, B & O tax and increase the need for state services.  A Boeing representative also reminded the audience that it, too, has military contracts that would be impacted.

The reason for the big concern is that these job losses would only be the first layer of losses. There are many spin off jobs that occur from our military and Boeing jobs.  As I think about the retail sector, we could see 7,000-10,000 retail employees laid off by a lack of Congressional action.  I say this because that is what we lost during the recession and that we have finally recovered.  We have made incremental progress in retail job growth, but retail is nimble and if the shopping slows, we will have no choice but to cut back on employees.

I will never forget the story a 7-Eleven representative told me about how impacted the company is when Boeing goes on strike and workers are not going to work.  Store sales drop off dramatically because people are not stopping by to pick up that cup of coffee or a morning doughnut on their way to work.  Now that sounds like a small thing, but it isn’t.  It could be a lot of lost little sales that add up to a big problem for a retailer.

Schumaker’s final point was that while the last quarter was strong in terms of state tax collections, he’s not sure that even without the Congressional decisions looming that his forecast will view the last quarter as a positive trend for the state or a one-time blip.  He is well aware that legislators will use whatever number they get from OFM to plan the next state budget, and that if he is off by $50 million dollars, they will not be happy.  He was not willing to comment on what would happen except to say that his revenue report is a full month away from being finalized.