Planning & Budgeting

June 23, 2020

June Forecast Outlines Impact of COVID-19 Pandemic on State Revenue

The COVID-19 pandemic has drastically changed the economic outlook in Washington state. The projections detailed below demonstrate the sharp decline that the state economy has suffered in recent months, which stands in sharp contrast to the long period of growth that preceded it. In order to account for the losses discussed in the forecast below, we anticipate that the state legislature will announce a special session in the coming months, which will likely result in a significant reduction to FY21 state appropriations to the University.

The Economic and Revenue Forecast Council (ERFC) released their June revenue forecast on June 17. The projected General Fund-State (GF-S) revenue forecast decreased by $4.5 billion for the 2019-21 biennium and by $4.4 billion for the 2021-23 biennium. The report focused on the impacts of the COVID-19 pandemic on economic activity in Washington state and projects significantly lower revenue compared to the February revenue forecast.

Here is a quick summary of the total projected Near GF-S revenue for each biennium:

  • $47.800 billion for the 2019-21 biennium, 3.7 percent more than the 2017-19 biennium
  • $51.347 billion for the 2021-23 biennium, 7.4 percent more than the 2019-21 biennium
  • $54.702 billion for the 2023-25 biennium, 6.5 percent over expected 2021-23 biennium

More background on the state revenue forecast is available here.

Some context behind the numbers:

Washington state:

  • Business shutdowns from the COVID-19 pandemic have had a detrimental impact on state revenue. Cumulative major General Fund-State (GF-S) revenue collections from February 11 through June 10, 2020 came in $893 million below the February forecast. Much of the shortfall was due to the granting of payment deferrals for both property taxes and Revenue Act taxes, most of which will be received during the remainder of the biennium. Even taking the deferrals into account, however, the cumulative shortfall amounts to over $450 million.
  • Forecasted revenue dedicated to the Workforce Education Investment Account (WEIA) for the 2019-21 biennium decreased by $29 million and is now $322 million. Forecasted WEIA revenue for the 2021-23 biennium decreased by $56 million and is now $572 million. Forecasted WEIA revenue for the 2023-25 biennium is now $665 million.
  • Forecasted Education Legacy Trust Account (ELTA) revenue for the 2019-21 biennium decreased by $76 million, mainly due to lower real estate excise tax receipts. The forecast for the 2021-23 biennium increased by $6 million, as delayed real estate activity from this biennium is expected to boost receipts somewhat in the next.
  • Washington’s unemployment rate soared to 16.3 percent in April from 5.1 percent in March and 3.8 percent in February. It declined to 15.1 percent in May as limited business reopenings began. The April rate was an all-time high in the series that dates back to 1976. The February unemployment rate was an all-time low.

Local:

  • Seattle-area consumer price inflation (CPI) exceeded the national average due mostly to the volatile food and energy components. From April 2019 to April 2020, the Seattle CPI rose 1.3 percent compared to a 0.4 percent increase in the U.S. City Average index.
  • It is still too early to see any impact from the COVID-19 pandemic on home prices in the Seattle-area

As previously mentioned, the legislature is considering calling a special session this summer to address revenue shortfalls created by the pandemic. If so, they will use revenue estimates from this forecast when considering changes to the 2019-21 biennial budget.

We will provide updates as more information is known about a state special session or changes affecting FY21 appropriations. Stay tuned to the OPBlog for updates on the impact of the COVID-19 pandemic on the state budget.