Planning & Budgeting

November 26, 2024

November Revenue Forecast Down Slightly for Current and 2025-27 Biennia, Further Straining State Budget

The Washington State Economic and Revenue Forecast Council (ERFC) released its November revenue forecast on Wednesday, November 20, 2024. Revenue projections were down slightly for the current 2023-25 biennium as well as for the upcoming 2025-27 biennium.

In September, we highlighted that experts expected revenue to remain steady relative to previous projections for the current and upcoming biennia. Declines in expected revenue from the State’s sales tax were largely offset by positive revenue growth from the estate tax and real estate excise tax (REET).

The November 2024 forecast notes that inflation is slowing but that Seattle-area consumer price inflation (CPI) continues to exceed the national average, with the seasonally adjusted CPI rising 3.0% compared to the 2.6% increase in the U.S. City Average index. With inflation slowing, the Federal Reserve recently reduced interest rates by a quarter percentage point. Another rate cut is expected during the Federal Reserve’s December meeting, with the potential for additional rate cuts next year. However, current high interest rates, the ongoing conflicts in Ukraine and the Middle East, and the potential for tariffs imposed by the incoming Trump administration all pose risks to the economy.

Given these factors, the forecast projects that state revenue will decrease by $89 million for the current 2023-25 biennium and decrease by $181 million for the 2025-27 biennium compared to the September forecast.

These revisions are due to declines in expected revenue from the State’s sales and business and occupation (B&O) tax as well as from the State’s lottery. These declines are partially offset by positive revenue growth in other areas.

the revenue revisions for November are relatively modest, the projections further strain Washington’s $72 billion biennial budget. Currently, the Governor’s Office of Financial Management is projecting between a $10 and $12 billion budget deficit over the next four years. This projected deficit is the result of several factors including increasing demand for state services, rising costs and inflation, and decreasing revenue, as well as newly negotiated collective bargaining agreements for state workers. The Legislature could rely on a mix of budget cuts and revenue increases to balance the budget when it meets early next year. As such, OFM recently asked state agencies to prepare initial plans for budget reductions.

More background on the state revenue forecasts can be accessed on our website.

Near General Fund-State

Below is a summary of the total preliminary and projected Near General Fund-State (GF-S) revenue for each biennium.

  • $66.39 billion for the 2023-25 biennium, 0.1% below the previous forecast. However, total revenue for this biennium is still forecasted to grow over the previous 2021-23 biennium.
  • $71.43 billion for the 2025-27 biennium, 0.3% above the previous forecast.

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) has decreased by $4.0 million for the 2023-25 biennia and by $7.6 million for the 2025-27 biennia. Forecasted WEIA revenue is now $881.8 million for the 2023-25 biennium and $944.7 million for the 2025-27 biennium.
  • The forecast for Education Legacy Trust Account (ELTA) revenue has increased by $48.5 million in the 2023-25 biennium but decreased by $54.2 million in the 2025-27 biennium. Forecasted ELTA revenue is now $2.09 billion for the 2023-25 biennium, and $2.3 billion for the 2025-27 biennium.

The November revenue forecast will inform Governor Inslee’s 2025-27 biennial budget proposals, which will be released in December. This is Governor Inslee’s final proposal, as Governor-elect Bob Ferguson will be taking office in January. Stay tuned for updates on those requests, as well as the upcoming legislative session, which begins January 13, 2025.