Washington faces a projected $1.1 billion shortfall over the next four years, according to an outlook released by the Washington State Economic and Revenue Forecast Council.

The projection is actually better news that previously thought. Forecasters' earlier predictions for the current biennium (2011-13) increased, but only by $8 million.

In a release issued Wednesday afternoon, council executive director Steve Lerch said, Revenue collections are on track, but personal income is falling off slightly compared to our previous forecast.

Gov. Chris Gregoire said she is encouraged by many of the economic indicators underlying the forecast, especially in the areas of housing and exports. But she warned the outlook does not include any additional spending that will be needed to meet basic education needs mandated by the state Supreme Court in the McCleary decision.

We have a shortfall even before we begin trying to address McCleary, Gregoire said. I've instructed state agencies and my fiscal staff to scrub the budget for every possible savings. But, as I've been saying for months, it will not be possible to solve this problem entirely with spending cuts.

Responding to the governor s comments, Office of Financial Management (OFM) Director Stan Marshburn said, Finding new places to cut will be very challenging.

Gregoire, who is preparing her final budget before leaving office in January, noted that the Forecast Council's estimated $900 million near-General Fund shortfall for 2013-15 is slightly better than what the OFM had projected in a preliminary outlook in August.

The outlook released Wednesday is the first official four-year projection released by the Forecast Council under a law adopted this year by the Legislature.

The governor is required by law to propose a budget by December 20 for the next biennium, which begins July 1, 2013.

Jay Inslee will be inaugurated as Washington's next governor on Jan. 16.

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