Today the National Conference of State Legislatures (NCSL) released a Fall 2011 State Budget Update:

Better revenue performance is driving the improvement in state finances. Collections in most states have stabilized or are growing, and the general revenue outlook for the remainder of the fiscal year reflects confidence in continued modest growth. However, recent global economic volatility is generating concern among state officials about the rate of revenue growth. In fact, several states reported that revenue projections, as they enter the second quarter are not as optimistic as they were just a few months ago.

According to NCSL, Washington is one of only four states to have a budget shortfall in the current fiscal year:

Only four states—California, Missouri, New York and Washington—report that a budget gap has appeared since the fiscal year began. This compares with 15 states that had gaps this time last year.

The cumulative new budget gap for FY 2012 is $4.4 billion, compared with $26.7 billion for FY 2011 in November of last year.

As I noted briefly in this post on Governor Gregoire’s proposed 2012 supplemental budget, in the hopes of avoiding some budget reductions, the governor is proposing a half-cent increase in the state sales tax that would expire July 1, 2015.

Washington isn’t the only state that is considering raising taxes to deal with budget problems.  Stateline reports today that California and New York are as well.  New York’s governor may propose to raise income taxes on the wealthy.  (Of course, Washington voters rejected I-1098 in 2010, which would have imposed an income tax on high earners.)

In a combination of both approaches, California’s governor will likely propose to increase income taxes on the wealthy and increase the sales tax by half a cent.  Both changes would be temporary through 2016.