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March Revenue Forecast Shows Strong Economic Recovery

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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 in a 2019 blog post.

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.

Legislative Session Update

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This week marks the halfway point of the 2021 “long” biennial legislative session. We are currently tracking 316 bills and looking ahead towards a busy remainder of session. Major policy topics this year have included diversity, equity, and inclusion; climate and sustainability; and health care. We have posted a full list of bills the University is tracking on this page, which is updated regularly.

Earlier this week marked the House of Origin cutoff, which means that bills needed to be voted out of the chamber that they originated in (either House or Senate). Bills that did not pass a chamber are now considered “dead” unless they are later deemed necessary to implement the budget (NTIB). Bills that are still “alive” will now need to pass through policy and fiscal committees in the opposite house, before receiving a final vote on the floor of the opposite chamber. Any legislation that passes both chambers is then remitted to the Governor for approval, veto, or partial veto.

On the budget side, we are preparing for the release of the March revenue forecast from the Economic and Revenue Forecast Council (ERFC), which is expected on or around March 17. Budget proposals from leadership in the House and Senate will follow later this month or in early April, and will use the March projections as the resource base for crafting their proposals. While we anticipate that the forecast will demonstrate continued growth, it is unlikely to completely eliminate the state revenue deficit resulting from the COVID-19 pandemic. We are monitoring the recent passage of additional temporary federal emergency relief for states and local governments, which is welcome news for the overall budget picture.

OPB will release a budget brief summarizing the House and Senate budget proposals when they are released. After that, leadership in the two chambers will convene to reach compromise budgets in advance of the end of the legislative session on April 25.

As always, we will be releasing summaries of the March Revenue Forecast on our blog. Budget briefs will be posted on our Briefs page.

UW Fast Facts 2021 – Now Available!

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A redesigned version of UW Fast Facts is now available. You can find it on the UW Fast Facts page and in the Quick Links bar on the right. This year, we have incorporated a number of new dashboards to provide a more complete picture of where we are as a University.

A special thank you to OPB’s Institutional Data & Analysis team, the University Marketing & Communications team, and to our partners around the UW for their work to gather, verify, and crosscheck data points and to finalize the document!

November Revenue Forecast Shows Continued, but Cautious, Growth

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The COVID-19 pandemic has drastically changed the economic outlook in Washington state. The June 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. Fortunately, the September Revenue Forecast and the November Revenue Forecast, released Wednesday, have shown a significant recovery from June estimates. More background on the state revenue forecast is available in a 2019 blog post.

It is important to note that it is unclear if this revenue forecast will fully account for the impacts of the most recent “wave” of COVID cases, and the economic restrictions that were enacted on November 16 as a result. Given that we cannot be sure how long the heightened cases and associated restrictions will be a reality, it is difficult to determine the full economic impact.

Compared to the September forecast, the November General Fund-State (GF-S) revenue forecast has been increased by $607 million in the 2019-21 biennium, $297 million in the 2021-23, biennium, and $16 million for the 2023-25 biennium.

Despite the promising forecasts detailed in the most recent reports, the GF-S forecast is still significantly lower than what we saw in the February, pre-COVID forecast. The November GF-S forecast is $1.8 billion lower than the February 2020 forecast for the 2019-21 biennium, $1.8 billion lower for the 2021-23 biennium, and $2.0 billion lower for the 2023-25 biennium. As a reminder, the February forecast was what was used to amend the current 2019-21 biennial state budget.

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).

  • $50.995 billion for the 2019-21 biennium, 10.7 percent over the expected 2017-19 biennium.
  • $54.666 billion for the 2021-23 biennium, 7.2 percent over the expected 2019-21 biennium.
  • $58.007 billion for the 2023-25 biennium, 6.1 percent over expected 2021-23 biennium.

Some context behind the numbers:

  • Cumulative major General Fund-State (GF-S) revenue collections from September 11 through November 10, 2020 came in $380 million above the September forecast.
  • Forecasted revenue dedicated to the Workforce Education Investment Account (WEIA) was increased by $5 million in the 2019-21 biennium and $4 million in the 2021-23 biennium. The forecast was decreased by $4 million in the 2023-25 biennium. Forecasted WEIA revenue is now $343 million for the 2019-21 biennium and $605 million for the 2021-23 biennium.
  • Forecasted Education Legacy Trust Account (ELTA) revenue for the 2019-21 biennium increased by $19 million, due mainly to higher Real Estate Excise Tax (REET) receipts. The forecast for the 2021-23 biennium increased by $22 million and the forecast for the 2023-25 biennium increased by $14 million, due to increases in both REET and estate tax forecasts. Forecasted ELTA revenue is now $1.554 billion for the 2019-21 biennium and $1.262 billion for the 2021-23 biennium.

The Governor will use these November forecast revenue estimates when crafting his proposed 2021-23 biennial operating budget, which will be released in December. The Governor’s budget release is the first step in the budget process for the upcoming 2021 legislative session, which begins on January 11 and lasts 105 days. An additional revenue forecast in March will guide legislative leadership as they develop budget proposals during the session.

Stay tuned to the OPBlog for updates on the impact of the COVID-19 pandemic, and the upcoming 2021 legislative session!

September Revenue Forecast Shows Promising Recovery

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The COVID-19 pandemic has drastically changed the economic outlook in Washington state. Fortunately, September Revenue Forecast, released yesterday by the Economic and Revenue Forecast Council (ERFC), details modest growth. This stands in stark contrast to the June Revenue Forecast, which forecasted a precipitous economic decline as a result of the full shutdown throughout spring and early summer.

The September GF-S revenue forecast has been increased by $2.1 billion in the current biennium and $2.2 billion in the next. The forecast of GF-S revenue for the 2023-25 biennium has increased by $2.5 billion. This still leaves the GF-S forecast $2.4 billion lower than the February 2020 forecast for the current biennium, $2.1 billion for the next biennium and $2.0 billion for the 2023-25 biennium. Importantly, the February forecast was used as the basis for the current biennial budget, so the state is effectively facing a $2.4 billion deficit in FY21 that will need to be resolved. The September forecast, however, is a drastic improvement from the nearly $9 billion total deficit forecasted in the current and next biennia in the June Revenue Forecast.

Forecasted GF-S revenue is now $48.189 billion for the current biennium and $52.181 billion for the 2021-23 biennium. Forecasted GF-S revenue is $55.917 billion for the 2023-25 biennium.

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

  • $50.022 billion for the 2019-21 biennium, 8.6 percent more than the 2017-19 biennium
  • $53.737 billion for the 2021-23 biennium, 7.4 percent more than the 2019-21 biennium
  • $57.28 billion for the 2023-25 biennium, 6.6 percent over expected 2021-23 biennium

More background on the state revenue forecast is available in a 2019 blog post. Some context behind the numbers:

Washington state:

  • Cumulative major General Fund-State (GF-S) revenue collections from June 11 through September 10, 2020 came in $963 million above the June forecast. Although these collections were above the June forecast, collections for February 11 through September 10 were $840 million less than forecasted in February.
  • Forecasted revenue dedicated to the Workforce Education Investment Account (WEIA) was increased by $17 million in the 2019-21 biennium and $30 million in the 2021-23 biennium. Forecasted WEIA revenue is now $339 million for the 2019-21 biennium and $601 million for the 2021-23 biennium. Forecasted WEIA revenue for the 2023-25 biennium is now $700 million
  • Forecasted Education Legacy Trust Account (ELTA) revenue for the 2019-21 biennium increased by $164 million, due to both higher real estate excise tax receipts and higher estate tax receipts. The forecast for the 2021-23 biennium increased by $149 million and the forecast for the 2023-25 biennium increased by $125 million. Forecasted ELTA revenue is now $1.535 billion for the 2019-21 biennium and $1.241 billion for the 2021-23 biennium. Forecasted ELTA revenue for the 2023-25 biennium is $1.041 billion.
  • Employment continued to rise in June, July, and August following the historic decline in March and April. As of August, the state’s economy has recovered nearly half the jobs lost in March and April.

Given the promising numbers in this revenue forecast, we do not anticipate a special legislative session before the regularly scheduled 2021 session. The Governor will use the November forecast revenue estimates when crafting his proposed 2021-23 biennial budget proposal. Stay tuned to the OPBlog for updates on the impact of the COVID-19 pandemic, and the upcoming 2021 legislative session!

 

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

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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.

Economic and Revenue Forecast Council Releases April Budget Outlook

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On Thursday, April 30, the Economic and Revenue Forecast Council met to review and approve the April 2020 budget outlook. The budget outlook used the February revenue forecast and contained no major changes to revenues or appropriations for the 2019-21 biennium. During their meeting, the Council acknowledged that there will likely be changes to the revenue forecast in June, but declined to speculate on the size of the impact.

In preparation for Thursday’s meeting, Council Chair Rep. Ed Orcutt requested that staff prepare an unofficial revenue forecast. The Seattle Times reported that, “preliminary numbers show Washington could lose $7 billion in state revenue through 2023 as the coronavirus pandemic takes its toll.” The unofficial forecast is “based on assumptions and come with ‘substantial uncertainty’ given state tax data isn’t yet available for March and April.”

The state’s rainy day fund is approximately $2.5 billion. It is likely that the legislature will convene after the official revenue forecast in June to adjust appropriations in the current biennium.

More background on the state revenue forecast is available here. OPB will provide updates on this blog in the event of a special legislative session, so stay tuned.

House and Senate Proposed 2020 Supplemental Operating and Capital Budgets

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Earlier this week, leadership in the House and Senate released their 2020 supplemental state budget proposals, which include technical corrections and other changes to the enacted 2019-21 biennial budgets.

An OPB brief outlining these proposals is available on the OPB Briefs page. We will update the brief in the event that proposals are amended, and will release another brief when legislative compromise budgets are released in the coming days. The legislative session is slated to end March 12.

February Revenue Forecast Shows Continued Growth

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The Economic and Revenue Forecast Council (ERFC) released their February revenue forecast on February 19. The projected Near General Fund-State (GF-S) revenue forecast increased by $606 million for the 2019-21 biennium and by $536 million for the 2021-23 biennium. The report projects higher than forecasted revenue compared to the November revenue forecast.

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

  • $52.339 billion for the 2019-21 biennium, 13.6 percent more than the 2017-19 biennium
  • $55.690 billion for the 2021-23 biennium, 6.4 percent more than the 2019-21 biennium
  • $59.176 billion for the 2023-25 biennium, 6.3 percent over expected 2021-23 biennium

More background on the state revenue forecast is available here.

Some context behind the numbers:

Washington state:

  • Revenue collections have been higher than forecasted in November. Cumulative major GF-S revenue collections from November 11, 2019 through February 10, 2020 were $162 million above the forecast. About $90 million of the collections surplus came from a larger-than-expected spike in real estate activity ahead of the January 1 increase in real estate excise tax (REET) rates on property worth more than $1.56 million.
  • Cumulative Revenue Act taxes (retail sales and use, business and occupation, public utility and non-cigarette tobacco products taxes), which make up the bulk of GF-S revenue, were $64 million (1.4 percent) higher than forecasted.
  • Forecasted Education Legacy Trust Account (ELTA) revenue for the 2019-21 biennium increased by $310 million, mainly due to higher-than-forecasted estate tax receipts.

Local:

  • Seattle-area home prices rose over the year for a fourth consecutive month in November following year-over-year declines in the previous four months. According to the S&P/Case-Shiller Home Price Indices, seasonally adjusted Seattle home prices increased 0.8 percent in November. Because of the strong growth in the last five months, November Seattle home prices were up 3.3 percent over the year. In comparison, the composite-20 index was up 2.5 percent over the year.
  • Seattle-area consumer price inflation slightly trailed the national average in December despite above average shelter cost inflation. From December 2018 to December 2019, the Seattle CPI rose 2.2 percent compared to a 2.3 percent increase in the U.S. City Average.

The legislature will use revenue estimates from this forecast when crafting the proposed 2020 supplemental operating budget, which will amend the enacted 2019-21 biennial budget. These proposals follow previous proposals from Governor Jay Inslee. A subsequent compromise budget will be released in the coming weeks.

Stay tuned to the OPBlog for updates on the 2020 supplemental budget proposals and the legislative session!

Governor Inslee’s Proposed 2020 Supplemental Operating and Capital Budgets

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On Wednesday, Governor Jay Inslee released his proposed 2019- 21 supplemental operating and capital budgets. The budgets include corrections and technical changes to the 2019-21 biennial budgets passed in April 2019. For a detailed analysis and summary of the Governor’s proposals, or to look back at OPB’s brief on the biennial budgets, please see OPB’s briefs on this page.

Overall, the Governor’s operating budget does not make significant changes to the enacted biennial budget. The largest change in the higher education sector was a transfer of nearly $28 million to the Workforce Education Investment Account (WEIA) to ensure that the fund would not go into deficit in the 2019-21 biennium, given the forecasted caseload for the Washington College Grant. The most significant adjustments for the UW are:

  • A budget-neutral shift of allocations to provide one-time payments to eligible represented employees at the UW;
  • A significant increase to the amount that the Governor’s Office of Financial Management (OFM) will bill the University for central services charges beginning in FY21; and,

As for the capital budget, the University received $1 million for its request for predesign to study a multi-phased approach to renovate or replace portions of the Magnuson Health Sciences Center. New space will accommodate the growing demands of education space for the health sciences schools, including space for interdisciplinary innovation and collaboration.

The release of the Governor’s budget proposals represents the first step in the supplemental budget process. Lawmakers in the Senate and the House will release their own proposals throughout the upcoming 2020 legislative session, beginning on January 13.

For more information regarding the UW’s current requests for state funding, please see OPB’s 2020 operating and capital request submissions on the State Budget Information page.

Stay tuned to the OPBlog for updates during the 2020 legislative session!