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June Revenue Forecast Up for Current and Upcoming Biennia, But Significant Challenges Remain

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The Washington State Economic and Revenue Forecast Council (ERFC) released its June 2025 revenue forecast on Tuesday, June 25. Revenue projections were up for the current 2023-25 biennium, which ends on June 30, as well as the upcoming 2025-27 and 2027-29 biennia.

Overall, the forecast projects that state revenue will increase by $692 million for the current 2023-25 biennium, by $3.80 billion for the 2025-27 biennium, and by $3.59 billion for the 2027-29 biennium compared to the previous forecast. However, these increases are largely due to the new taxes and fees passed by the Legislature earlier this year to help balance Washington’s budget. For previously existing revenue sources, collections are expected to fall by $490 million in the 2025-27 biennium and by $638 million in the 2027-29 biennium.

In March, we highlighted that the ERFC expected revenue to hold steady for the current biennium but decrease for the upcoming biennia. This was driven by declines in the state’s sales and business and occupation (B&O) taxes as well as decreased interest revenue earned from state reserves. The June 2025 forecast continues to identify slowing revenue growth as a concern, along with uncertainty regarding tariff levels, federal fiscal policy, and the Israel-Iran conflict.

On the positive side, the forecast notes that inflation is slowing. The Seattle-area consumer price inflation (CPI) rose less than the national average, with the seasonally adjusted CPI rising 1.7% compared to the 2.3% increase in the U.S. City Average index. Additionally, U.S. employment remains resilient, though Washington’s unemployment rate is expected to tick up 0.5% this year.

General Fund-State Revenue

Below is the total preliminary and projected General Fund-State (GF-S) revenue for each biennium:

  • $67.14 billion for the 2023-25 biennium, 1.0% above the previous forecast.
  • $74.76 billion for the 2025-27 biennium, 5.4% above the previous forecast.
  • $80.01 billion for the 2027-29 biennium, 4.7% above the previous forecast.

Below is the total preliminary and projected GF-S revenue for accounts from which the University receives dedicated funding:

  • Forecasted revenue dedicated to the Workforce Education Investment Account (WEIA) has increased by $40.3 million for the 2023-25 biennium, by $620.1 million for the 2025-27 biennium, and by $900.2 million for the 2027-29 biennium. Forecasted WEIA revenue is now $955 million for the 2023-25 biennium, $1.56 billion for the 2025-27 biennium, and $1.92 billion for the 2027-29 biennium.
  • The forecast for Education Legacy Trust Account (ELTA) revenue has increased by $288.9 million in the 2023-25 biennium, by $284.3 million for the 2025-27 biennium, and by $250.7 million for the 2027-29 biennium. Forecasted ELTA revenue is now $2.41 billion for the 2023-25 biennium, $2.77 billion for the 2025-27 biennium, and $2.96 billion for the 2027-29 biennium.

State Budget Outlook

At the end of the 2025 session, the Legislature passed a balanced operating budget for the upcoming 2025-27 biennium. The budget relied on a mix of tax and fee increases and spending cuts to close a projected $12-16 billion deficit over four years. However, declining revenue growth, as well as federal spending cuts, could cause a new shortfall. While Governor Ferguson is not expected to call a special session immediately, it is possible he will call one later in the year to address this challenge.

Stay tuned for additional updates, including the next state revenue forecast in September. More background on the state revenue forecasts can be accessed on our website.

March State Revenue Forecast Steady for Current Biennium, Revised Downward for the 2025-27 and 2027-29 Biennia

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The Washington State Economic and Revenue Forecast Council (ERFC) released its March 2025 revenue forecast on Tuesday, March 18. Revenue projections were steady for the current 2023-25 biennium but down for the upcoming 2025-27 and 2027-29 biennia.

Overall, the forecast projects that state revenue will increase by $54 million for the current 2023-25 biennium but decrease by $479 million for the 2025-27 biennium and $420 million for the 2027-29 biennium compared to the September forecast.

In November, we highlighted that the ERFC expected revenue to decline slightly compared to previous projections for the current and upcoming biennia. This was driven by declines in the State’s sales and business and occupation (B&O) taxes as well as declines in lottery revenue. These declines were partially offset by gains in other areas. The March 2025 forecast continues to identify decreasing sales and B&O tax revenue as a significant concern, as well as decreased interest revenue from state reserves.

On the positive side, the March 2025 forecast notes that inflation is slowing. The Seattle-area consumer price inflation (CPI) rose less than the national average, with the seasonally adjusted CPI rising 2.5% compared to the 2.8% increase in the U.S. City Average index. However, uncertainty regarding tariffs, federal workforce reductions and budget cuts, high interest rates, and the ongoing conflicts in Ukraine and the Middle East all pose risks to the economy. Given these factors, ERFC believes the Federal Reserve will act cautiously, with only a single interest rate cut expected in 2025.

General Fund-State Revenue

Below is the total preliminary and projected General Fund-State (GF-S) revenue for each biennium:

  • $66.45 billion for the 2023-25 biennium, 0.1% above the previous forecast.
  • $70.95 billion for the 2025-27 biennium, 0.7% below the previous forecast.
  • $76.43 billion for the 2027-29 biennium, 0.5% below the previous forecast.

Below is the total preliminary and projected GF-S revenue for accounts from which the University receives dedicated funding:

  • Forecasted revenue dedicated to the Workforce Education Investment Account (WEIA) has increased by $32.9 million for the 2023-25 biennium but decreased slightly by $2.1 million for the 2025-27 biennium and $4.5 million for the 2027-29 biennium. Forecasted WEIA revenue is now $914.6 million for the 2023-25 biennium, $942.6 million for the 2025-27 biennium, and $1.01 billion for the 2027-29 biennium.
  • The forecast for Education Legacy Trust Account (ELTA) revenue has increased by $29.9 million in the 2023-25 biennium, $181.3 million in the 2025-27 biennium, and $166.7 million in the 2027-29 biennium. Forecasted ELTA revenue is now $2.12 billion for the 2023-25 biennium, $2.48 billion for the 2025-27 biennium, and $2.71 billion for the 2027-29 biennium.

2025-27 State Operating Budget

The March revenue forecast will inform the 2025-27 biennial operating, capital, and transportation budgets. Proposed budgets are expected to be released by House and Senate leadership the week of March 24.

The revenue projections further strain Washington’s operating budget, which faces a projected deficit of over $12 billion. This 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 will likely rely on a mix of budget cuts, revenue increases, and reserve drawdowns to balance the budget.

Stay tuned for updates on budget proposals, as well as the final compromise budgets, which are expected to be adopted before the end of the legislative session on April 27.

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

November Revenue Forecast Predicts Slower, But Increasing Growth

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The Economic and Revenue Forecast Council (ERFC) released their November revenue forecast. The projected Near General Fund-State (GF-S) revenue forecast for the 2017-19 biennium increased by $163.4 million. Projected revenue collections for the 2019-21 biennium increased by $195.5 million. The report projects higher personal income than the September revenue forecast, but slower growth.

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

  • $45.799 billion for the 2017-19 biennium, 17.3 percent more than the 2015-17 biennium
  • $50.002 billion for the 2019-21 biennium, 9.2 percent more than the 2017-19 biennium
  • $53.795 billion for the 2021-23 biennium, 7.6 percent more than the 2019-21 biennium

Some context behind the numbers:

  • Washington’s unemployment declined to 4.3 percent in October, an all-time low in the series that extends back to 1976.
  • The forecast expects 2.7 percent Washington employment growth this year compared to 2.9 percent in the September forecast. The forecast expects growth to decelerate gradually as the recovery matures and for employment growth to average 1.3 percent per year in 2019 through 2023.
  • The forecast estimates that Washington personal income in the second quarter of 2018 is $10.4 billion (2.4 percent) higher than the September forecast.
  • Cumulative GF-S revenue collections from September 11 through November 10, 2018 were $22 million (0.7 percent) higher than forecasted in September. The slower growth was primarily attributed to Revenue Act taxes, which make up the bulk of GF-S revenue and include sales taxes, business and occupation taxes, and certain tobacco products, coming in $25 million (0.9 percent) lower than forecasted in September.

Governor Jay Inslee will use revenue estimates from this forecast when crafting his proposed 2019-21 biennial budgets, which will be released in December. The Governor’s budget release is the first step in the budget process for the upcoming 2019 legislative session, which begins in January.

Stay tuned to the OPBlog for updates on 2019-21 budget proposals and the legislative session!

September Revenue Forecast Shows Increased Revenue

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The Economic and Revenue Forecast Council (ERFC) released their September revenue forecast. The projected Near General Fund-State (GF-S) revenue forecast for the 2017-19 biennium increased by $348 million. Projected revenue collections for the 2019-21 biennium increased by $443 million. The forecast expects higher personal income and employment than the June revenue forecast.

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

  • $45.636 billion for the 2017-19 biennium, 16.9 percent more than the 2015-17 biennium
  • $49.806 billion for the 2019-21 biennium, 9.1 percent more than the 2017-19 biennium
  • $53.585 billion for the 2021-23 biennium, 7.6 percent more than the 2019-21 biennium

Some context behind the numbers:

  • Cumulative GF-S revenue collections from June 11 through September 10, 2018 were $147 million (3.0 percent) higher than forecasted in June.
  • Revenue Act taxes, which make up the bulk of GF-S revenue and include sales taxes, business and occupation taxes, and certain tobacco products, came in $137 million (3.3 percent) higher than forecasted.
  • The forecast expects Washington employment to grow 2.9 percent this year compared to 2.5 percent in the June forecast. The increase is primarily attributed to growing private services-providing sectors. Partially due to employment growth, personal income is also projected to be higher than the June forecast.

There will be one more revenue forecast this year, which will be released in November. The Governor will use the November forecast revenue estimates when crafting his proposed 2019-21 biennial budgets, which will be released in December.

Stay tuned to the OPBlog for updates on revenue forecasts and the upcoming 2019 legislative session!

July Economic & Revenue Update Indicates Continued Growth in Washington

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Last month the Washington state Economic and Revenue Forecast Council (ERFC) released their June revenue forecast. Cumulative major General Fund-State (GF-S) revenue collections were $189 million higher than the February revenue forecast.

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

  • $45.288 billion, for the 2017-19 biennium, 16.0% more than the 2015-17 biennium
  • $49.363 billion, for the 2019-21 biennium, 9.0% more than the 2017-19 biennium
  • $53.170 billion, for the 2021-23 biennium, 7.7% more than the 2019-21 biennium

Some context behind the numbers:

  • Cumulative real estate excise taxes (REET) were $25 million (8.0%) higher than forecasted.
  • Revenue Act taxes, which consist of sales, use, business and occupation (B&O), utility and non-cigarette tobacco products, make up the bulk of the GF-S revenue. Collections were $131 million (2.7%) higher than forecasted.

In July the ERFC released an economic & revenue update that showed a further increase in GF-S revenue collections. Here is how this update compares:

  • GF-S revenue collections for June 11 through July 10 were $41.1 million (2.4%) above the June forecast.
  • Revenue Act tax collections for the current period were $39.3 million (3.0%) higher than the June forecast.

Washington continues to lead the country in personal income growth. The U.S. Department of Commerce, Bureau of Economic Analysis (BEA) released state personal income estimates for the first quarter of 2018. These estimates showed Washington personal income rose to $434. 1 billion in the first quarter 2018 compared to $426.5 billion in the fourth quarter of 2017. With 7.4% growth rate, Washington was the highest among the states and the District of Columbia.

Check back with the OPBlog in September for future updates on revenue forecasts.

Update: Supreme Court Decision on Fisher v. University of Texas

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On Thursday, the U.S. Supreme Court upheld University of Texas at Austin’s race-conscious admissions policy in its second consideration of a Fisher v. University of Texas appeal. As a reminder, the case stemmed from a lawsuit by Abigail Fisher, a white applicant to UT Austin who claimed she was unfairly rejected due to the university’s affirmative action admissions program. Since our last update, when the Supreme Court ordered the U.S. Court of Appeals for the Fifth Circuit to reconsider the case, the appellate court affirmed their decision in favor of UT, and Fisher again appealed that court’s decision to the Supreme Court. For additional background on this case, please see our previous two posts, found here and here.

The case was decided by an unusual 4-3 margin due to Justice Kagan’s recusal and the recent death of Justice Scalia. According to the NY Times, Justice Kennedy, who had never before voted to uphold an affirmative action plan, wrote for the majority that “…it remains an enduring challenge to our nation’s education system to reconcile the pursuit of diversity with the constitutional promise of equal treatment and dignity.”

This decision marks the end of the Fisher case, but the debate over affirmative action in higher education carries on.

Stay tuned to the OPBlog for updates.

New OPB Brief on Income Share Agreements (ISAs)

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Over the past few months, income share agreements (ISAs) have received significant attention from political candidates, higher education advocates, and news sources. A new OPB brief takes a closer look at ISAs by:

  • Exploring differences between and the history of privately funded ISAs and publicly funded ISAs (such as Pay It Forward).
  • Comparing ISAs to federal income-based repayment (IBR) plans in terms of overall structure, years to repayment, monthly payments, and total cost over time.
  • Identifying remaining issues regarding ISAs and their implementation.
  • Offering alternatives like improving federal loan repayment options.

Please contact Jed Bradley if you have any questions.

Obama administration announces plan to expand Pell Grant program

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The Obama administration has introduced a plan to bring back year-round Pell Grants and to create a $300 bonus for Pell recipients taking at least 15 credits a semester. Both elements of the plan are designed to incentivize students to graduate faster and accrue less debt in school. The plan would cost $2 billion over the next year, according to the Department of Education.

The year-round Pell Grant program was initially put in place by President Bush in 2008 but was cut in 2011 as a budget-saving measure. While the effort to reinstate the program will likely face significant Congressional opposition, there is some bipartisan support. Senator Lamar Alexander (R-LA), Chair of the Senate education committee, and Democratic Senator Michael Bennet of Colorado are cosponsoring legislation to reintroduce year-round Pell Grants. “We have long supported providing students a more flexible Pell Grant program and hope this is one of many areas Congress and the administration can work together to strengthen higher education,” a Republican education committee spokesman was quoted as saying in Inside Higher Ed. Even with this bipartisan support, however, the administration faces a difficult task in getting the legislation through a very budget-conscious Congress.

The $300 bonus, dubbed “15 to finish” by education non-profits, is also somewhat controversial, though the division is between a different set of stakeholders than the Pell Grant expansion. Many college completion non-profits support 15 to finish, saying that encouraging 15 credit semesters is an important tool in incentivizing Pell recipients to graduate on time. The plan has drawn criticism, however, from community college leaders and adult student advocates, who contend that 15 credits is too many for students who are busy working or who have come into higher education unprepared for college-level work.

See the UW Federal Relations department post for further information on the Pell Grant proposal.

Perkins Loan Program Temporarily Revived

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Last week, Congress passed a bipartisan bill to extend the Federal Perkins Loan Program, which had expired in September.

The bill authorizes new undergraduate applicants to join the program through September 2017, but only if they have exhausted all other federal borrowing options first.  New graduate students will not be able to join the program, but those who already have Perkins loans can continue to receive them through September 2016.

In the current academic year, over 3,200 University of Washington students have received approximately $12 million in Perkins loans.  These low-income, high-need students, rely on Perkins loans to cover any financial gap that remains after grants and scholarships have been applied to their tuition.

More information on the Perkins extension is available at Inside Higher Ed and The Chronicle.

DOJ reaches largest-ever settlement with for-profit higher education provider

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U.S. Attorney General Loretta Lynch announced on Monday that the Department of Justice (DOJ) has reached a settlement in its false claims case against the Education Management Corporation (EDMC), an operator of for-profit colleges and universities. The $95.5 million settlement is the largest ever in a higher education false claims case. EDMC will also forgive a total of $102.8 million in loans to over 80,000 students who attended its schools, which include Argosy University, the Art Institutes, Brown Mackie College, and South University, between 2006 and 2014.

The lawsuit was originally filed in 2007 by whistle-blowers within EDMC, who alleged that the organization was offering extra incentives to their admissions officers based on the number of students they enroll, a violation of the Incentive Compensation Ban in the Higher Education Act. Said Attorney General Lynch in her statement, “EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law.”

Reactions to the settlement have been mixed. While it is encouraging to see the DOJ take action against illegal and unethical practices at for-profit institutions, many student and consumer advocates have criticized the settlement for providing too little relief for students who accrued thousands of dollars of federal student loan debt at EDMC institutions.

Secretary of Education Arne Duncan has indicated that his Department is willing to listen to claims from students who believe that EDMC mislead them when if offered loans, but critics of the deal say listening is not enough. “I am disappointed that the department’s only plan for EDMC students is to hear their complaints,” said Robyn Smith, a lawyer at the National Consumer Law Center, who was quoted in The Chronicle. 

Others have criticized the language of the settlement, which did not force EDMC to admit wrongdoing for its actions. Stephen Burd, a senior policy analyst at New America, laments the continued lack of accountability of for-profit institutions.

“Too many of these cases are settled without finding fault,” he said in the same Chronicle article, “and the for-profit industry has been able to say, ‘Oh, nothing is proven.’”

Despite its issues, this settlement is another step in the Federal Government’s continuing efforts to rein in the questionable behavior of for-profit colleges and universities. Last year, the Department of Education formed an interagency task force to more rigorously oversee for-profit institutions of higher learning. The Department of Defense also suspended all tuition assistance to the University of Phoenix, which targets veterans in its recruiting efforts.