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The Washington State Economic and Revenue Forecast Council (ERFC) released its March revenue forecast on Monday, March 20, 2023. In November, we highlighted revenue projections for the 2023-25 biennium and summarized experts’ cautions regarding slowing economic growth. These concerns were associated with rising inflation and interest rates, in addition to geopolitical factors including the war in Ukraine and ongoing supply chain disruptions.

This month, the forecast projects slowing growth for the remainder of the current biennium with revenue projections revised downward for the 2023-25 and 2025-27 biennia. The Seattle-area consumer price inflation continued to exceed the national average, with the seasonally adjusted CPI rising 8.1% compared to the 6.0% increase in the U.S. City Average index. Given the continued high rate of inflation, the forecast assumes the Federal Reserve will raise interest rates to a range of 5.25% – 5.5% by June 2023. However, there is uncertainty regarding this assumption, as the Federal Reserve may choose to delay or reduce any rate hikes given the recent bank failures. Additionally, technology sector layoffs,  debate over raising the federal debt ceiling, and the Ukraine-Russia conflict continue to pose significant risks to the economy.

Given these challenges, the forecast projects that state revenue growth will continue to slow, increasing by only $194 million in the 2021-23 biennium over the November forecast. Revenue is then expected to decrease by $483 million in the 2023-25 biennium and decrease by $541 million for the 2025-27 biennium.

The changes from the previous forecast are driven by recent Real Estate Excise Tax (REET) collections, which were much lower than anticipated due to rising mortgage rates and slowing construction activity. Additionally, Revenue Act collections, which include the state sales tax and business and occupation tax, are slowing as is the growth in personal income.

The forecast does note some positive economic trends, including the continued strength of the job market as well as relatively strong revenue collections outside REET and the retail sector.

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. Though the forecast has been revised downward, overall revenue is still projected to grow each biennium.

• $64.15 billion for the 2021-23 biennium, 20.7% over the 2019-21 biennium.
• $65.70 billion for the 2023-25 biennium, 2.4% over the expected 2021-23 biennium.
• $70.34 billion for the 2025-27 biennium, 7.1% over the expected 2023-25 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) has decreased by $3 million in the 2021-23 biennium, $9 million in the 2023-25 biennium, and $11 million in the 2025-27 biennium. Forecasted WEIA revenue is now $748 million for the 2021-23 biennium, $784 million for the 2023-25 biennium, and $833 million for the 2025-27 biennium.
• The forecast of Education Legacy Trust Account (ELTA) revenue was increased by $74 million in the 2021-23 biennium. Forecasted ELTA revenue is now over $2.12 billion for the 2021-23 biennium, $2.01 billion for the 2023-25 biennium, and $2.29 billion for the 2025-27 biennium.

This latest revenue forecast was released as the Washington State House of Representatives and Senate prepare to release their proposed operating, capital, and transportation budgets for the 2023-25 biennium. These are all expected to be released by the end of March, with final compromise budgets approved by the end of the legislative session on or before April 23.

The next state revenue forecast will be released in June 2023. Stay tuned to the OPBlog for updates on the 2023 legislative session and the upcoming 2023-25 state budget.

The Economic and Revenue Forecast Council (ERFC) released its November revenue forecast on Friday, November 18, 2022. In September’s forecast, we highlighted revenue projections for the 2023-25 biennium and summarized experts’ cautions towards slowing economic growth. This was associated with rising inflation and interest rates, in addition to geopolitical factors including ongoing supply chain disruptions. This month, the forecast maintains a similar cautionary tone while emphasizing that growth is slowing, but not as quickly as projected in September. However, the forecast reported some positives in revenue projections over the next two biennia.

In Washington state, personal income was reported higher than anticipated, but building permits, one of the state’s revenue drivers, were lower than September’s forecast. Recent technology sector layoffs, continued inflation, and the uncertain Ukraine-Russia conflict continue to pose significant risks to the forecast, which continue to weight towards the negative. It was also noted that Seattle-area home prices may have peaked, with seasonally adjusted Seattle home prices falling 2.9% in August, following declines in the previous two months since the June forecast. However, the Seattle-area consumer price inflation continued to outpace the national average, with the seasonally adjusted CPI rising 8.9% compared to the 7.8% increase in the U.S. City Average index.

In addition to the 0.75% increase in interest rates in September, the forecast assumes the Federal Reserve will raise interest rates to a range of 4.75% – 5.0% by March 2023. On-going improvements in supply chain issues and reductions in COVID-19 cases are promising, but still provide significant disruptions and continued risks to Washington’s revenue collections. Nevertheless, revenue collections were stronger than forecasted for this period since September. Consequently, total state revenue projections were increased by $762 million in the 2021-23 biennium, and $681 million in the 2023-25 biennium.

Unlike September’s forecast, where taxable activity was declining, November’s Revenue Act Collections indicate that the current level of taxable activity is higher than previously estimated. As a result, the reported decline in forecasted Real Estate Excise Tax (REET) and the observed growth in Revenue Act collections have collectively contributed to the overall adjustments in forecasted revenue increases in the current and the next biennium.

Amid economic uncertainties, the forecast reported some positives since September, including employment growth both in Washington state and across the country, by over 14,600 and 576,000 jobs respectively. Additionally, Washington state revenue collections remain strong overall, despite the reductions in forecasted REET collections over the next biennium. That said, a looming economic recession, declining employment in the technology sector, and continuing geopolitical instability–in part from the Russia-Ukraine conflict–may adversely impact the projections, which set a cautionary tone to the forecast.

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

Near General Fund-State

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

• $64 billion for the 2021-23 biennium, 20.4% over the 2019-21 biennium.
• $66.2 billion for the 2023-25 biennium, 3.5% over the expected 2021-23 biennium.
• $70.9 billion for the 2025-27 biennium, 7.1% over the expected 2023-25 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) has been increased by $5 million in the 2021-23 biennium, $6 million in the 2023-25 biennium, and $10 million in the 2025-27 biennium. Forecasted WEIA revenue is now $751 million for the 2021-23 biennium, $794 million for the 2023-25 biennium, and $844 million for the 2025-27 biennium. The increased forecasts are due to realized higher personal income, expected increase in economic activity due to projected decrease in oil prices, and anticipated stabilization of inflation as well as a decrease in interest rates.
• The forecast of Education Legacy Trust Account (ELTA) revenue was increased by $196 million in the 2021-23 biennium but decreased by $2 million in the 2023-25 biennium. Forecasted ELTA revenue is now over $2 billion for the 2021-23 biennium, $2.1 billion for the 2023-25 biennium, and $2.4 billion for the 2025-27 biennium. The previous decreases in the forecast were related to reduced REET collections, but the current increases are due to sustained growth in revenue collections, increased consumer spending, and growth in labor productivity.

This latest revenue forecast was released as the University of Washington prepares for the 2023 legislative session and will inform the Governor’s budget proposals. The University has submitted high-priority budget requests to fund areas most impacted by the pandemic, including student support services, high-demand enrollments, UW Medicine, and others. They build upon investments made in the 2022 supplemental budget, prioritizing several needs across our three campuses.

The next state revenue forecast will be released in February 2023 and will inform the development of the legislature’s budget proposals. Stay tuned to the OPBlog for updates on the 2023-25 state budget request, the upcoming Governor’s budget proposal, and the state legislative session starting in January 2023.

Overview

The Economic and Revenue Forecast Council (ERFC) released its September revenue forecast on September 21, 2022. We noted in our June 2022 blog post that the June forecast showed continued economic growth, but warned growth was slowing in the face of rising inflation and interest rates, as well as continued supply chain disruptions and other economic challenges. However, this updated forecast showed growth slowing more quickly than anticipated in June.

In Washington state, personal income and building permits are lower than forecasted in June, and continued high inflation poses significant challenges. The Federal Reserve increased interest rates by 0.75% at the time of this forecast and has indicated they are likely to increase them again by a similar amount by the end of the year. While there have been significant improvements to supply chain issues, and reductions in COVID-19 cases, both still provide significant disruptions to Washington’s revenue collections. However, revenue collections remain robust overall, and this is considered a relatively modest change to the forecast from June. As a result, total state revenue projections were increased by $43 million in the 2021-23 biennium, and projections were reduced by $495 million for the 2023-25 biennium.

While a decrease in taxable activity was highlighted in the June forecast, the decline has been sharper than expected. This is largely a result of decreases in personal income, construction employment, and housing permits, which is a result of high inflation, interest rates, and economic uncertainty. Subsequent reductions in forecasted Real Estate Excise Tax (REET) and Revenue Act collections over the next biennium have contributed to the forecasted revenue reductions overall.

There are some positives in the forecast changes since June, including employment numbers being up for both Washington state and the U.S. In addition, revenue collections remain strong overall, despite the reductions in forecasted collections over the next biennium.

More background on state revenue forecasts is available in this 2019 blog post.

Near General Fund-State

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

• $63.2 billion for the 2021-23 biennium, 18.9 percent over the 2019-21 biennium.
• $65.5 billion for the 2023-25 biennium, 3.7 percent over the expected 2021-23 biennium.
• $70.1 billion for the 2025-27 biennium, 7.1 percent over the expected 2023-25 biennium.

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

• Forecasted revenue dedicated to the Work Force Education Investment Account (WEIA) has been decreased by $19 million in the 2021-23 biennium and $21 million in the 2023-25 biennium. Forecasted WEIA revenue is now $747 million for the 2021-23 biennium, $787 million for the 2023-25 biennium, and $834 million for the 2025-27 biennium. The decreased forecasts are largely due to weaker than expected collections since the June forecast and lower economic activity projected going forward.
• The forecast for Education Legacy Trust Account (ELTA) revenue was increased by $27 million in the 2021-23 biennium but decreased by $18 million in the 2023-25 biennium. Forecasted ELTA revenue is now $1.8 billion for the 2021-23 biennium, $2.1 billion for the 2023-25 biennium, and $2.3 billion for the 2025-27 biennium. The initial increase in the forecast is related to increased estate tax collections, but the subsequent decrease is due to lower expected REET collections over the next biennium.

This latest revenue forecast was released just after the University of Washington submitted its 2023-25 biennial budget requests to the legislature. These requests served largely to fund areas most impacted by the pandemic, including student support services, high-demand enrollments, UW Medicine, and others. They build upon investments made in the 2022 supplemental budget, prioritizing several needs across our three campuses.

The next state revenue forecast will be released in November and will inform the development of the Governor’s 2023-25 biennial state budget proposals. Stay tuned to the OPBlog for updates on 2023-25 state budget requests and the next state legislative session in January 2023.

Overview

The Economic and Revenue Forecast Council (ERFC) released its June revenue forecast on June 22, 2022. We noted in our previous blog post that the February revenue forecast showed continued economic growth, despite several challenges posed by emerging COVID-19 variants, supply chain disruptions, and rising inflation. COVID-19 case rates in Washington have since declined and remained relatively low; however, it was noted that the increase in the availability of home testing may impact the reliability of case numbers, given positive cases may not be officially reported. Inflation and interest rates have continued to rise since February, and the latest adjustments made by the Federal Reserve were reflected in this forecast. Despite these continued challenges, total state revenue projections increased by $1.5 billion in the 2021-23 biennium. This is an 18.9 percent increase over the 2019-21 biennium.

Washington has seen a positive variance of $590 million in collections, with most of the unforeseen increase resulting from Revenue Act tax collections. While growth in sales, B&O, real estate, and construction have bolstered revenue collections in the short term, long-term projections are less optimistic. Some of the increase in collections results from the ability of people and companies to maintain their level of real spending in the initial stages of an inflationary period, where taxable activity increases due to increased prices. This may not continue as the cost of goods continues to rise, and people and companies can no longer maintain their level of spending. While the fiscal growth for FY22 was significantly higher than previously forecasted, now at 11.6 percent, the fiscal growth for FY23 and beyond is significantly lower than we have seen in recent years (0.5 percent in FY23). Also of note, the Seattle-area consumer price inflation (CPI) outpaced the national average once again, rising 9.1 percent compared to the 8.2 percent nationally. Seattle home prices were also up 27.6 percent over the year, which set a record going back to the 2000-2001 period of growth.

It was noted that despite the strong growth in revenue collections, there are signs that growth is starting to slow, and there were several significant concerns noted about the direction the economy may be headed. In the U.S. forecast, both GDP and employment are now lower than expected, while in Washington state personal income and employment rates are lower than anticipated. The risks identified in this forecast also skew significantly towards the downside. Rising inflation, interest rates, and intensifying of the Ukraine-Russia conflict pose significant risks, including the potential to push the economy into a recession.

More background on state revenue forecasts is available in a 2019 blog post.

Near General Fund-State

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

• $63.1 billion for the 2021-23 biennium, 18.9 percent over the 2019-21 biennium.
• $66.0 billion for the 2023-25 biennium, 4.5 percent over the expected 2021-23 biennium.
• $70.2 billion for the 2025-27 biennium, 6.4 percent over the expected 2023-25 biennium.

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

• Forecasted revenue dedicated to the Work Force Education Investment Account (WEIA) has been increased by $81 million in the 2021-23 biennium and $56 million in the 2023-25 biennium. Forecasted WEIA revenue is now $766 million for the 2021-23 biennium, $809 million for the 2023-25 biennium, and $851 million for the 2025-27 biennium.
• The forecast of Education Legacy Trust Account (ELTA) revenue was increased by $80 million in the 2021-23 biennium and $21 million in the 2023-25 biennium. Forecasted ELTA revenue is now $1.8 billion for the 2021-23 biennium, $2.1 billion for the 2023-25 biennium, and $2.3 billion for the 2025-27 biennium.

This latest revenue forecast will be considered as the University of Washington prepares to submit its 2023-25 biennial budget requests to the legislature this September. These requests will build upon investments made in the 2022 supplemental budget, prioritizing several needs across our three campuses.

The next state revenue forecast will be released in September. Stay tuned to the OPBlog for updates on 2023-25 state budget requests and the next state legislative session in January 2023.

The Economic and Revenue Forecast Council (ERFC) released its February revenue forecast on February 16, 2022. We noted in our previous blog post that the November revenue forecast showed continued economic growth, despite rising COVID-19 cases, supply chain disruptions, and rising inflation. In Washington state, the COVID-19 case rates are now steadily declining from the recent surge in December resulting from the emergence of the Omicron variant. While rising inflation and oil prices, the threat of new and emerging COVID-19 variants, and geopolitical instability pose ever-present risks to revenue forecasting, total state revenues are expected to grow 16.1 percent between the 2019-21 and 2021-23 biennia, and 6.0 percent between the 2021-23 and 2023-25 biennia.

GDP and employment numbers remain relatively unchanged since the November forecast; however, Washington has seen a positive variance of $452 million in collections, due to stronger than anticipated personal income growth, stronger residential construction and construction employment, and stronger-than-expected growth in retail sales and real estate transactions. These factors combined with the continued rise in inflation, have all contributed to an increase of $1.45 billion for the current biennium (2021-23), and $1.32 billion for the next biennium (2023-2025).

More background on state revenue forecasts is available in a 2019 blog post.

Near General Fund-State

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

• $61.7 billion for the 2021-23 biennium, 16.1 percent over the 2019-21 biennium.
• $65.4 billion for the 2023-25 biennium, 6.0 percent over the expected 2021-23 biennium.
• $70.0 billion for the 2025-27 biennium, 7.1 percent over the expected 2023-25 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) has been increased by $6 million in the 2021-23 biennium and $5 million in the 2023-25 biennium. Forecasted WEIA revenue is now $684 million for the 2021-23 biennium, $753 million for the 2023-25 biennium, and $831 million for the 2025-27 biennium.
• The forecast of Education Legacy Trust Account (ELTA) revenue was increased by $56 million in the 2021-23 biennium and $2 million in the 2023-25 biennium. Forecasted ELTA revenue is now $1.7 billion for the 2021-23 biennium, $2.1 billion for the 2023-25 biennium, and $2.3 billion for the 2025-27 biennium.

This latest revenue forecast will be considered by the Washington state legislature as they prepare to finalize their 2022 supplemental budget proposals in the coming days. These proposals make adjustments to the enacted 2021-23 biennial budget. They follow previous proposals from Governor Inslee, who proposed significant investments in affordable housing, climate and clean energy, protection and restoration of salmon habitats, increases to K-12 learning support, as well as some initiatives that impact the University.

The next state revenue forecast will be released in June. Stay tuned to the OPBlog for updates on the 2022 supplemental budget proposals and the legislative session!

Overview

The Economic and Revenue Forecast Council (ERFC) released its November revenue forecast on November 19. We noted in our previous blog post that the September revenue forecast showed continued economic growth in the face of rising COVID-19 cases and hospitalizations. In Washington state, the COVID-19 case rate is down from the recent peak in September; however, there is a continued risk of emerging variants and another winter surge. The COVID-19 pandemic remains an ever-present risk for Washingtonians’ health and safety and continues to pose challenges for the state’s economic recovery and growth. Additionally, there are growing concerns over continued disruptions to supply chains and extraordinary inflation increases. Seattle-area consumer price inflation (CPI) outpaced the national average. From October 2020 to October 2021, the seasonally adjusted Seattle CPI rose 6.5 percent compared to the 6.2 percent increase in the U.S. City Average index. Despite these uncertainties, the November revenue forecast showed that the state taxable activity was much stronger than expected, and the Council increased revenue totals in the current biennium (2021-23) by $1.06 billion ahead of the 2022 state legislative session.

Before we dig into the numbers, more background on state revenue forecasts is available in a 2019 blog post.

General Fund State

Per the November revenue forecast, the final total of General Fund-State (GF-S) revenue for the 2019-21 biennium was $50.803 billion, unchanged from the September estimate. The GF-S has been increased by $1.06 billion in the 2021-23 biennium and $944 million in the 2023-25 biennium. Forecasted GF-S revenue is now $57.519 billion for the 2021-23 biennium and $60.864 billion for the 2023-25 biennium.

Near General Fund-State

As a reminder, Near GF-S includes revenue from the GF-S, the Education Legacy Trust Account (ELTA), Workforce Education Investment Account (WEIA), and Opportunity Pathways Account (OPA). Summing the changes to the Near GF-S forecasts, total state revenue subject to the budget outlook process was $40 million lower than expected in the 2019-21 biennium, unchanged from the September estimate given that the biennium is now closed. Forecasted revenue has increased by $898 million in the 2021-23 biennium and $965 million in the 2023-25 biennium.

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

• $53.132 billion for the 2019-21 biennium, 15.3 percent higher than the 2017-19 biennium.
• $60.238 billion for the 2021-23 biennium, 13.4 percent over the 2019-21 biennium.
• $64.047 billion for the 2023-25 biennium, 6.3 percent over the expected 2021-23 biennium.

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

• The final total of revenue dedicated to WEIA in the 2019-21 biennium was unchanged at $352 million. Forecasted revenue has been increased by $10 million in the 2021-23 biennium and $11 million in the 2023-25 biennium. Forecasted WEIA revenue is now $678 million for the 2021-23 biennium and $748 million for the 2023-25 biennium.
• The final total of ELTA revenue for the 2019-21 biennium was unchanged at $1.639 billion. The forecast was decreased by $179 million in the 2021-23 biennium and $44 million in the 2023-25 biennium, due to decreases in forecasted capital gains taxes. Forecasted ELTA revenue is now $1.687 billion for the 2021-23 biennium and $2.082 billion for the 2023-25 biennium.

The Governor will use these November forecast revenue estimates when crafting his proposed 2022 supplemental operating budget, which will be released in December. The supplemental operating budget will amend the enacted 2021-23 biennial budget approved during the 2021 legislative session. The Governor’s budget release is the first step in the budget process for the upcoming 2022 legislative session, which begins on January 10 and lasts 60 days.

Stay tuned to the OPBlog for updates on the upcoming 2022 legislative session!

Overview

The Economic and Revenue Forecast Council (ERFC) released their September revenue forecast on September 24. The last revenue forecast, released in June, showed promising signs of a full economic recovery. At that time, the number of COVID-19 cases in Washington state was declining. However, as noted in our previous blog post, risks remained and our post cautioned that more infectious COVID-19 variants could emerge. Over the last three months, the COVID-19 Delta variant has surged through Washington state, with average-daily case totals and hospitalization rates surpassing the previous three waves. Despite this challenge, the September revenue forecast showed overall, continued economic growth. While the latest forecast does show a revenue shortfall in the 2019-21 biennium, the Council did also increase revenue totals in the current biennium (2021-23) by nearly a billion dollars ($927 million). This is encouraging news as we approach the upcoming legislative session.

Before we dig into the numbers, more background on state revenue forecasts is available in a 2019 blog post.

General Fund-State

Per the September revenue forecast, the preliminary total of General Fund-State (GF-S) revenue for the 2019-21 biennium, which ended June 30, 2021, is $45 million lower than forecast in June. The shortfall was due to both an underperformance in Revenue Act taxes (including retail sales and use, business and occupation, public utility, and non-cigarette tobacco products) in May activity and a higher-than-expected amount of those taxes arriving too late to be tabulated before the end of the fiscal year. However, those late taxes subsequently added to revenues for the current biennium (2021-23). The GF-S forecast has been increased by $845 million in the 2021-23 biennium and $891 million in the 2023-25 biennium. The preliminary total of GF-S revenue for the 2019-21 biennium is $50.803 billion. Forecasted GF-S revenue is now $56.457 billion for the 2021-23 biennium and $59.870 billion for the 2023-25 biennium.

Near General Fund-State

As a reminder, Near GF-S includes revenue from the GF-S, the Education Legacy Trust Account (ELTA), Workforce Education Investment Account (WEIA), and Opportunity Pathways Account (OPA). Summing the changes to the Near GF-S forecasts, total state revenue subject to the budget outlook process was $40 million lower than expected in the 2019-21 biennium. Forecasted revenue has increased by $927 million in the 2021-23 biennium and $931 million in the 2023-25 biennium.

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

• $53.132 billion for the 2019-21 biennium, 15.3 percent higher than the 2017-19 biennium.
• $59.341 billion for the 2021-23 biennium, 11.7 percent over the expected 2019-21 biennium.
• $63.082 billion for the 2023-25 biennium, 6.3 percent over the expected 2021-23 biennium.

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

• The preliminary total of revenue dedicated to WEIA in the 2019-21 biennium is $352 million, $5 million lower than the June forecast. Forecasted revenue has been increased by $8 million in the 2021-23 biennium and $9 million in the 2023-25 biennium. Forecasted WEIA revenue is now $668 million for the 2021-23 biennium and $737 million for the 2023-25 biennium.
• The preliminary total of ELTA revenue for the 2019-21 biennium is $1.639 billion, $9 million higher than the June forecast. The forecast was increased $73 million in the 2021-23 biennium and $31 million in the 2023-25 biennium, due mainly to increases in REET. Forecasted ELTA revenue is now $1.866 billion for the 2021-23 biennium and $2.125 billion for the 2023-25 biennium.
• The preliminary total of revenue dedicated to the OPA for the 2019-21 biennium is $337 million, $1 million higher than the June forecast. The forecast was increased by $1 million in the 2021- 23 biennium and decreased by $1 million in the 2023-25 biennium. Forecasted OPA revenue is now $349 million for the 2021-23 biennium and $350 million for the 2023-25 biennium.

The Governor will use the November forecast revenue estimates when constructing his proposed 2022 supplemental operating budget, which will amend the enacted 2021-23 biennial budget.

Stay tuned to the OPBlog for updates as we begin planning for the 2022 legislative session!

Overview

The June revenue forecast again builds on the promising economic recovery we have seen in recent months. As a reminder, 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, both the March 2021 forecast and today’s June Revenue Forecast have shown a full recovery and signs of promising growth into the future.

More background on state revenue forecasts is available here.

The General Fund – State (GF-S) revenue forecast has been increased by $807.6 million in the current 2019-21 biennium and $1.239 billion in the upcoming 2021-23 biennium. Forecasted GF-S revenue is now $50.848 billion for the current biennium, $55.611 billion for the 2021-23 biennium and $58.979 billion for the 2023-25 biennium. Revenue increases are due to increased taxable economic activity in the state, especially in terms of retail sales and higher than expected real estate excise tax (REET) collections.

However, some risks due to COVID-19 remain. Worldwide, more infectious COVID-19 variants have led to increased COVID-19 cases and hospitalizations – including in regions with high vaccination rates. Slow supply chain recovery and growth in labor supply has lead to higher than expected inflation.

Near General-Fund
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). Summing the changes to the Near GF-S forecasts, total state revenue subject to the budget outlook process is forecasted to increase by $838 million in the 2019-21 biennium, $1.798 billion in the 2021-23 biennium and $2.246 billion in the 2023-25 biennium. These amounts reflect the following increases based on previous amounts:

• $53.17 billion for the 2019-21 biennium, 15.4 percent over the expected 2017-19 biennium.
• $58.41 billion for the 2021-23 biennium, 9.9 percent over the expected 2019-21 biennium.
• $62.15 billion for the 2023-25 biennium, 6.4 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 WEIA was increased by $12 million in the 2019-21 biennium, $35 million in the 2021-23 biennium and $7 million in the 2023-25 biennium. Forecasted WEIA revenue is now $358 million for the 2019-21 biennium, $661 million for the 2021-23 biennium and $728 million for the 2023-25 biennium.
• The ELTA forecast for the 2019-21 biennium was increased by $2 million. Forecasted ELTA revenue in future biennia has been greatly increased by the newly passed tax on certain capital gains of $250,000 or more.
  • The tax will be first collected in FY23, based on calendar year 2022 taxable gains. The first $500 million of the tax gets transferred to ELTA, with the minimum transfer increasing each year with inflation. The ELTA share of the tax is forecasted at $500 million for the 2021- 23 biennium and $1.028 billion for the 2023-25 biennium. The total forecast increase for the 2021-23 biennium is $506 million and the forecast increase for the 2023-25 biennium is $1.022 billion. Forecasted ELTA revenue is now $1.630 billion for the 2019-21 biennium and $1.793 billion for the 2021-23 biennium. Forecasted ELTA revenue for the 2023-25 biennium is now $2.094 billion.

Stay tuned to the OPBlog for updates as we close out the 2019-21 biennium and begin planning for the 2022 legislative session.