Planning & Budgeting

March 17, 2021

March Revenue Forecast Shows Strong Economic Recovery

The COVID-19 pandemic drastically changed the economic outlook in Washington state. The June 2020 Revenue Forecast, released by the Economic and Revenue Forecast Council (ERFC), forecasted a precipitous economic decline as a result of the full shutdown in spring and early summer. While the September Revenue Forecast and the November Revenue Forecast demonstrated significant recovery from June estimates, deficits remained. Fortunately, the March 2021 forecast, released Wednesday, shows a full recovery, essentially returning the state revenue forecast to pre-pandemic levels. More background on state revenue forecasts is available here.

The March General Fund – State (GF-S revenue) forecast has been increased by $1.244 billion in the current biennium and $1.894 billion in the next. According to a press release from Governor Inslee, this increase in projected revenues would leave the state with a net surplus of nearly $3 billion — including reserves — at the end of current biennium. The March revenue forecast is still $570 million lower than the pre-pandemic February 2020 forecast in the current biennium, which was used as a basis for the current 2019-21 biennial operating budget. However, Governor Inslee vetoed a significant amount of that spending last April, likely offsetting some of that deficit.

The November 2020 forecast assumed that no additional federal pandemic relief funds would be forthcoming. Revenue collections have greatly exceeded expectations. The forecast cited federal stimulus approved in December and March along with strong real estate market activity, strong retail sales recovery, and faster than expected vaccine distribution, as factors influencing the positive forecast. Downsides included slower than expected employment growth, weakened business (for restaurants, bars, arts and entertainment, travel, etc.), as well as rising oil and gas prices.

Here is a quick summary of the total projected Near General Fund-State (Near GF-S) revenue for each biennium. As a reminder, Near GF-S includes revenue from the Education Legacy Trust Account (ELTA), Workforce Education Investment Account (WEIA), and Opportunity Pathways Account (OPA).

  • $52.334 billion for the 2019-21 biennium, 13.6 percent over the expected 2017-19 biennium.
  • $56.615 billion for the 2021-23 biennium, 8.2 percent over the expected 2019-21 biennium.
  • $59.906 billion for the 2023-25 biennium, 5.8 percent over expected 2021-23 biennium.

Some context behind the numbers for Near-GF-S accounts from which the University receives funding:

  • Forecasted revenue dedicated to the Workforce Education Investment Account (WEIA) was increased by $2 million in the 2019-21 biennium and $21 million in the 2021-23 biennium. The forecast was increased by $25 million in the 2023-25 biennium. Forecasted WEIA revenue is now $345 million for the 2019-21 biennium, $626 million for the 2021-23 biennium and $721 million for the 2023-25 biennium.
  • Forecasted Education Legacy Trust Account (ELTA) revenue for the 2019-21 biennium increased by $74 million, due to higher REET and estate tax receipts. The forecast for the 2021-23 biennium increased by $24 million and the forecast for the 2023-25 biennium increased by $17 million. Forecasted ELTA revenue is now $1.628 billion for the 2019-21 biennium and $1.286 billion for the 2021- 23 biennium. Forecasted ELTA revenue for the 2023-25 biennium is $1.072 billion.

The House and Senate will use these revenue estimates when crafting their proposed 2021-23 biennial operating budgets, which will be released in the coming weeks along with capital budget proposals.

Stay tuned to the OPBlog for updates on budget proposals, approved legislation, and COVID-19 pandemic emergency funding as we close out the remainder of the 2021 legislative session, which is scheduled to end on April 25.