State to lose billions in revenue from COVID-19 closures

MOSE LAKE — A presentation last week by the Republican leaders in the state legislature forecast a $3 billion to $6 billion fall in tax revenue because of business closures related to COVID-19, according to Sen. Judy Warnick, R-Moses Lake.

Warnick said the forecast “is a moving target” that will not only include lost sales tax revenue from business closures but also business and operations (B&O) taxes lost as companies go out of business or simply cannot pay.

“It might take two to three years to recover and get everybody back working,” Warnick said.

According to the presentation given last week to GOP legislators, 230,000 businesses in Washington are currently classified as “non-essential” under Gov. Jay Inslee’s order that closed non-essential businesses and schools, and limited the size of public gatherings.

Most small businesses have less than two months of cash reserves on hand, the report says, making it difficult for many small-business people to “shelter in place” for very long without income.

In addition, the report said Boeing — which employs roughly 70,000 people and is the state’s largest employer — is “essentially not operating.” On April 2, the company offered a “voluntary layoff” plan that would allow employees “who want to exit the company to do so with a pay and benefits package” as a way of forestalling the need for “other workforce actions,” according to a Boeing press release.

Warnick said that despite being on the front lines of COVID-19, hospitals across the state have lost $900 million since the outbreak as all elective procedures were canceled, also under official mandate.

“The health care industry has taken quite a hit,” Warnick said.

According to the report, in 2017, the tax take from the construction industry alone was nearly $1.3 billion, with another $1.25 billion coming from the sales of cars and car parts, and $1 billion from restaurants and bars. Combined, those three categories accounted for $3.5 billion of the state’s tax take.

However, the effect on the state’s tax collections won’t be seen until early May, when sales tax receipts for March begin to arrive.

“Businesses are not required to report until the end of the following month in which they had sales. We likely won’t have any data until May,” said Mikhail Carpenter, communications manager with the State Department of Revenue.

In spring of 2019, the state legislature approved a $54.2 billion operating budget for Washington for 2019-2021, and approved an additional $2.4 billion in spending in the recently completed spring session.

Warnick said she and other Republicans hope Inslee will alter his order and allow for private residential construction to resume quickly. According to the state’s Employment Security Department, around 24,000 of the 170,000 people who made first-time claims for unemployment insurance for the week ending April 4 were construction workers — the largest single category of unemployed workers that week.

“I’m hoping the governor will rethink restriction on residential construction,” Warnick said, noting that low-income and public housing are considered “essential” under Inslee’s current order.

“Other states are allowing construction,” she said. “We have to figure out a way to keep people safe.”

Charles H. Featherstone can be reached at cfeatherstone@columbiabasinherald.com.