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June Revenue Forecast Predicts Slight Growth

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Earlier today, the Economic and Revenue Forecast Council (ERFC) released its June revenue forecast, which increased projected General Fund-State (GF-S) collections by $81 million for the current 2015-17 biennium and by $87 million for the upcoming 2017-19 biennium. These increases are on top of the more significant increases projected in the March revenue forecast.

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

  • $38.308 billion for the 2015-17 biennium, 13.8 percent more than the 2013-15 biennium
  • $40.903 billion for the 2017-19 biennium, 6.8 percent more than the 2015-17 biennium
  • $43.875 billion for the 2019-21 biennium, 7.3 percent more than the 2017-19 biennium

Behind the numbers:

  • The forecast is similar to the March forecast, but with slightly higher revenue projections.
  • The forecast attributes these changes to slightly lower personal income growth but slightly higher residential building permits.
  • Similar to the March forecast, concerns cited in this forecast include slow U.S. economic growth, weak labor productivity growth, and international trade concerns.

This is the final revenue forecast before the end of the biennium. The legislature will soon enter the third special session of the year, and budget negotiators in the Senate and House will use this updated forecast of 2017-19 revenues as a baseline for their final budget compromise.

If state lawmakers are unable to pass an operating budget by June 30, the state government will enter a shutdown. The University of Washington is preparing for this possibility and has been in touch with the Governor’s Office of Financial Management (OFM) regarding contingency planning and possible implications for university operations. All agency contingency plans, including the UW’s, are available on the OFM website here.

Stay tuned to the OPBlog for updates on the final budget compromise when that is available.

 

March Revenue Forecast Shows Positive Growth

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Earlier today, the Economic and Revenue Forecast Council (ERFC) released its March revenue forecast, which increased projected General Fund-State (GF-S) collections by $247 million for the current 2015-17 biennium and by $303 million for the upcoming 2017-19 biennium. These increases are on top of the increases projected in the November revenue forecast.

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

  • $38.227 billion for the 2015-17 biennium, 13.5 percent more than the 2013-15 biennium
  • $40.817 billion for the 2017-19 biennium, 6.8 percent more than the 2015-17 biennium
  • $43.842 billion for the 2019-21 biennium, 7.4 percent more than the 2017-19 biennium

Behind the numbers:

  • The forecast largely attributes the higher projections to increases in retail sales tax and Real Estate Excise Tax (REET) collections.
  • The forecast includes slightly stronger personal income and employment growth than were projected in November
  • Concerns cited in the forecast include slow global and U.S. Economic Growth, weak labor productivity growth and uncertainty regarding fiscal and trade policy.

Any excess revenue collected in the 2015-17 biennium will contribute to reserves that will be available as one-time funds to spend in the 2017-19 biennium. Budget writers in the Senate and House will use this updated forecast of fund balance and projected 2017-19 revenues as a baseline for their budget proposals, which are expected to be released within the next couple weeks. During today’s meeting of the Economic & Revenue Forecast Council, Senator Braun and Representative Ormbsy (chairs of the Senate Ways & Means Committee and House Appropriations Committee, respectively) discussed that overall, this revenue forecast is positive news and will be used to make final adjustments to each of their budget proposals.

The state continues to face significant budgetary challenges, largely due to required investments in K-12 education. Governor Inslee’s operating budget proposal, released in December, included over $4.4 billion in new revenue to help invest in K-12 education. Stay tuned to the OPBlog for updates on budget proposals as they are released by leadership in the House and Senate.

 

November Revenue Forecast Estimates Continued Growth

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On Wednesday, the Washington state Economic and Revenue Forecast Council released its November revenue forecast, which projected a slight increase to General Fund-State (GF-S) collections over the September revenue forecast. The GF-S revenue forecast increased by $215 million for the current 2015-17 biennium and $137 million for the 2017-19 biennium.

  • Final GF-S revenue collections for the 2013-15 biennium were $33.666 billion.
  • Total projected GF-S revenue for the 2015-17 biennium is now $37.980 billion, 12.8 percent more than the 2013-15 biennium.
  • Total projected GF-S revenue for the 2017-19 biennium is now $40.514 billion, 6.7 percent more than the 2015-17 biennium.
  • Total projected GF-S revenue for the 2019-21 biennium is now $43.656 billion, 7.8 percent more than the 2017-19 biennium.

Behind the numbers:

  • The forecast attributes the higher projections due mainly to increases in retail sales tax and Real Estate Excise Tax (REET) collections.
  • The forecast includes slightly stronger personal income and employment but lower housing permits.
  • Concerns cited in the forecast include slow global and U.S. Economic Growth, weak labor productivity growth and uncertainty regarding fiscal and trade policy.
  • Washington state employment is up by 13,500 net new jobs in September and October.

According to an article in the Tacoma News Tribune, this additional tax revenue will contribute to a 2017-19 state budget that is expected to be more than $40 billion. David Schumacher, Director of the Governor’s Office of Financial Management, stated that this increase in revenue “always helps, but it doesn’t solve the huge problems we’re facing.” One of the biggest problems Schumacher referred to is the Washington state Supreme Court’s mandate to increase K-12 education spending (McCleary v. State of Washington). While there is current debate about the estimated cost of complying with McCleary, the most commonly cited estimate is approximately $3.5 billion, and in Schumacher’s opinion “there’s broad agreement that we’re that neighborhood.”

Governor Jay Inslee will use this revenue forecast and estimates for complying with McCleary when crafting his state budget proposal, which will be released in mid-December in advance of the 2017 legislative session. Stay tuned to the OPBlog for updates on the Governor’s budget proposal when it is released.

September Revenue Forecast Anticipates Continued Moderate Growth

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Yesterday, the Economic and Revenue Forecast Council (ERFC) released its September revenue forecast, which increased projected General Fund-State (GF-S) collections by $334 million for the current 2015-17 biennium and by $125 million for the upcoming 2017-19 biennium. As a reminder, there will be one more revenue forecast in November before Governor Inslee releases his proposed 2017-19 biennial budget in anticipation of the 2017 legislative session.

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

  • $37.765 billion for the 2015-17 biennium, 12.2 percent more than 2013-15
  • $40.377 billion for the 2017-19 biennium, 6.9 percent more than 2015-17
  • $43.630 billion for the 2019-21 biennium, 8.1 percent more than 2017-19

Behind the numbers:

  • Revenue collections from June to September were $225 million higher than forecasted in June, but over half of that increase was attributed to several large (and one-time) audit-related payments of past-due taxes.
  • This forecast noted slightly stronger personal income and employment compared to the June forecast.
  • Strong retail sales, housing construction, and real estate excise tax (REET) collections continue to create positive revenue trends.
  • Risks to the revenue forecast include weak labor productivity and slow economic growth (both in the U.S. and globally).

Any excess revenue collected in the 2015-17 biennium will contribute to reserves (est. $1.8 Billion) that will be available to spend in the 2017-19 biennium, however, the state continues to face significant budgetary challenges in complying with the State Supreme Court’s orders to fully fund K-12 education.

Stay tuned to the OPBlog for updates on revenue forecasts and the upcoming 2017 legislative session.

June Revenue Forecast Increases Projections for the 2015-17 and 2017-19 Biennia

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Last week, the Economic and Revenue Forecast Council (ERFC) released its June revenue forecast, which increased projected General Fund-State (GF-S) collections by $294 million for the current 2015-17 biennium and by $126 million for the upcoming 2017-19 biennium. This is an improvement over the February forecast, which had predicted slower revenue growth in both biennia (see our blog post here). As a reminder, there will be at least three more revenue forecasts between now and when the legislature sets the 2017-19 budget.

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

  • $37.431 billion for the 2015-17 biennium, 11.2 percent more than 2013-15.
  • $40.252 billion for the 2017-19 biennium, 7.5 percent more than 2015-17.
  • $43.575 billion for the 2019-21 biennium, 8.3 percent more than 2017-19.

Behind the numbers:

  • The forecast attributed the increase to strong sales of large commercial properties and rising home prices.
  • Other positives included growth in housing permits and increases in inflation, which typically result in greater retail sales, business taxes, and property taxes.
  • Slight decreases in U.S. and Washington state personal income forecasts continue to have a negative effect on the revenue forecast.

According to a press release from the Governor’s Office of Financial Management, “With the latest forecast, the state is now projected to have nearly $1.5 billion in total reserves at the end of the current biennium and more than $1.4 billion at the end of the 2017–19 biennium. Those reserve figures, however, do not take into account the multibillion obligation the state faces in the next biennium to meet its constitutional obligation to fully fund basic education.”

As a result, state agencies, including the UW, have received instructions to severely limit requests for new programs or policy initiatives in their requests for state funding in the 2017-19 biennium.

Stay tuned to the OPBlog for updates on revenue forecasts.

February Revenue Forecast Reduces Projections for 2015-17 and 2017-19 Biennia

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On Wednesday, the Economic and Revenue Forecast Council (ERFC) released its February revenue forecast, which reduced projected General Fund-State (GF-S) collections compared to the November revenue forecast (see our blog post here). The GF-S revenue forecast decreased by $67 million for the current 2015-17 biennium and by $442 million for the 2017-19 biennium. While the revision to the 2017-19 outlook is not inconsequential, there will be at least four more revenue forecasts between now and when the legislature will set a 2017-19 biennial budget – plenty of time for the outlook to change.

  • Total projected GF-S revenue for the 2015-17 biennium is now $37.137 billion, 10.3 percent more than the 2013-15 biennium.
  • Total projected GF-S revenue for the 2017-19 biennium is now $40.125 billion, 8 percent more than the 2015-17 biennium.
  • The forecast included an initial forecast of GF-S revenue for the 2019-21 biennium of $43.441 billion, 8.3 percent more than the 2017-19 biennium.

Behind the numbers:

  • The forecast attributes decreases in projected revenues to slower than expected growth in the U.S. and Washington state economies.
  • Washington exports declined for the first time since 2009.
  • Other negative factors cited in the forecast include lower forecasted personal income growth, reductions in housing permits and property tax growth, and lower tax receipts due to low oil and gas prices.
  • Some positives include slightly higher than expected tax receipts since the November forecast, increases in hourly wages, and the fact that lower oil and gasoline prices are a positive for consumers.

The Governor’s Council of Economic Advisors, which advises the Governor on the state of financial matters, offered a slightly more pessimistic revenue prediction based on the ERFC February Forecast, predicting additional decreases in forecasted GF-S revenue of $55 million in 2015-17 and $202 million in 2017-19.

Budget writers in the House of Representatives and the Senate will use the February Revenue Forecast to set expenditure levels for their 2016 supplemental budget proposals. House and Senate budget proposals are expected to be released the week of February 22. The last day of the regular session is March 10.

Stay tuned to the OPBlog for updates on budget proposals from the House and Senate when those are released.

November Revenue Forecast Predicts Moderate Growth

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On Wednesday, the Economic and Revenue Forecast Council released its November revenue forecast, which projected a slight increase to General Fund-State (GF-S) collections over the September revenue forecast. The GF-S revenue forecast increased by $113 million for the current 2015-17 biennium and $30 million for the 2017-19 biennium.

  • Final GF-S revenue collections for the 2013-15 biennium were $33.666 billion.
  • Total projected GF-S revenue for the 2015-17 biennium is now $37.204 billion, 10.5 percent more than the 2013-15 biennium.
  • Total projected GF-S revenue for the 2017-19 biennium is now $40.567 billion, 9 percent more than the 2015-17 biennium.

Behind the numbers:

  • The forecast attributes the higher projections to strong performance in auto sales and service-providing industries.
  • Cannabis revenue from Clark County fell after Oregon legalized marijuana, but statewide revenues have continued to grow.
  • Concerns cited in the forecast include weaker-than-expected job growth, a dip in exports, and a manufacturing decline in the United States and Washington state.
  • The forecast assumes that the Federal Reserve will gradually increase interest rates starting in December.

According to a Spokesman Review article, expenditures in the 2015-17 biennium are expected to exceed the $37.204 billion in expected revenue. Further complications include a costly wildfire season, the $100,000 per-day fine that the state Supreme Court levied on the Legislature for failing to come up with a plan to boost public school funding, and voter approval of Initiative 1366, which will reduce state sales tax by 1 percent if the Legislature doesn’t approve a constitutional amendment to require a two-thirds vote for tax increases.  David Schumacher, director of the Office of Financial Management (OFM) is quoted in the Spokesman Review article as saying, “What this means, of course, is that there will be very little room for new spending in this year’s supplemental budget.”

Governor Jay Inslee will use the November revenue forecast to craft his 2015-17 supplemental budget proposal, which is expected to be released in December. Stay tuned to the OPBlog for updates on the Governor’s budget proposal when it is released.

June State Revenue Forecast – Early Release:

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Today’s Economic and Revenue forecast was released a month ahead of schedule to help lawmakers reach agreement on the 2015–17 operating, capital and transportation budgets.

General Fund-State (GF-S) revenue forecast has been increased by $106 million for the 2013-2015 biennium and by $309 million for 2015-2017.

  • GF-S revenue for the 2013-2015 biennium is now $33.653 billion (9.8% higher than collections in the 2011-13 biennium), and
  • The forecasted GF-S revenue for the 2015-2017 biennium is now $36.758 billion (9.2% higher than collections in the 2013-15 biennium).

Revenue collections through May 10th were $61 M (1.8%) higher than forecasted. The surplus was entirely due to a $69 M surplus in real estate excise tax collections (large sale of commercial property). The surplus was offset by a $21 M shortfall in property tax collections.

A few additional highlights from the update:

  • Oil Prices are higher, and 2015 and 2016 GDP growth are weaker than in the February forecast.
  • Receipts from Revenue Act sources are $12 M (0.4%) higher than forecasted.
  • 17,200 new jobs have been added in the three months since the February forecast.

February 2015 State Revenue Forecast Update

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General Fund-State (GF-S) revenue forecast has been increased by $107 million for the 2013-2015 biennium and by $129 million for 2015-2017.

  • GF-S revenue for the 2013-2015 biennium is now $33.547 billion (9.4% higher than collections in the 2011-13 biennium) and
  • The forecasted GF-S revenue for the 2015-2017 biennium is now $36.449 billion (8.7% higher than collections in the 2013-15 biennium)

Revenue collections through February 10th were $69 M (1.5%) higher than forecasted. Of this amount, $52 M came from Revenue Act Sources (retail sales, business and occupation, public utility and tobacco products taxes).

A few additional highlights from the update:

  • Oil Prices have declined further since November forecast.
  • Sales tax growth is strong and is driven by sales in construction, autos and building materials.
  • Real estate excise tax since November forecast came in $11 M higher than forecasted.
  • Average monthly increase of 7,000 net new jobs in Washington. Seattle area employment is growing much faster than the rest of the state.

Note: Caseload forecast Council will release their report this afternoon at 1.30PM

 

Slight Decline in State Revenue Forecast

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Today’s release of the November general fund state revenue forecast indicates that current biennial revenue is slightly down from September’s projection. The decline is largely due to a technical adjustment which resulted in a $41 million decrease of available funding this biennium, though collections for the current biennium are $16 million over prior projections. The net decrease in November’s revenue forecast is $24 million less than the September revenue forecast.

In other words, new revenue and an offsetting technical adjustment give Governor Inslee a $32.98 million general fund target for his supplemental operating budget, expected in December.

This forecast, once again, does not contemplate any tax revenue associated with the impending sale of cannabis.