Fewer housing permits, falling car sales and fewer jobs in the construction sector helped blow away $529 million in expected future state tax collections, top state revenue forecasters said Thursday.

The new quarterly forecast, issued by the Office of the Economic and Revenue Forecast Council in Olympia, sets up a potential $3.2 billion budget shortfall in 2009.

In response, Gov. Chris Gregoire ordered her budget director to look for $200 million more in cost savings. Gregoire last month ordered a hiring freeze, along with fuel-use and travel reductions, to save an estimated $90 million in the next nine months.

"The national economic slowdown is clearly affecting Washington's economy," Gregoire said in a statement released after the forecast. "We anticipated this decrease, and we are better prepared to weather this storm because of fiscally responsible initiatives such as the Rainy Day Fund and adjustments to spending over the past few months."

Gregoire's Republican challenger for governor in the Nov. 4 general election took shots at her for the budget shortfall.

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