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Washington state deficit widens amid weak revenue

SAN FRANCISCO (Reuters) - Washington state's budget shortfall will grow by an additional $1.4 billion through June 2013 when its next 2-year budget cycle ends as consumers continue to scrimp and construction is at a standstill, the state's chief economist said on Thursday.

Washington state does not have a personal income tax and relies heavily on collections from sales taxes as well as business spurred by construction activity to fill its coffers.

State Chief Economist Arun Raha told Reuters by telephone that the state's economy lost momentum over the summer, prompting him to project a weakening of revenue.

Raha said he expects the state will collect $770 million less through the June 2011-end of its current 2-year budget cycle, and $669 million less in its next 2-year budget cycle than forecast in June.

Washington Governor Christine Gregoire responded to Raha's revenue forecast with an order to state agencies for across-the-board spending cuts of just under 6.3 percent to take effect on October 1.

She also called on agency directors to begin financial planning for the next budget cycle. State leaders face a new shortfall estimate for budget cycle beginning next July of about $4.5 billion.

"The need to reinvent the way we write the state budget has never been greater," Gregoire said in a statement.

(Reporting by Jim Christie; Editing by Richard Chang)