The June state revenue forecast published yesterday projects revenue collections for the 2023-25 budget will decrease by $477 million from the February forecast bringing the total projected budget to $66.5 billion. The forecast also estimates revenue for the 2025-27 budget will decrease by $189 million with the total budget for the biennium at $71.5 billion. The 2025-27 budget cycle begins July 1, 2025 and ends on June 30, 2027. The Washington State Legislature is required by law to enact an operating budget that is balanced over four years, which is why the state revenue forecasts have a four-year outlook.
The decrease in revenue is largely attributed to lower receipts of the capital gains tax, personal income, and home construction. Notably, capital gains tax collections are down $324 million from the February forecast and sales tax collections are down $224 million. Additionally, the forecast shows that Seattle-area inflation continues to outpace the national average.
On the flip side, real estate excise taxes (REET) and property taxes came in higher than expected. The revenue dedicated to the Workforce Education Investment Account, which funds many higher education priorities, also increased slightly.
The Governor and State Legislature use the February, June, September, and November state revenue forecasts to inform their budget proposals and this most recent forecast is likely to cause some worry given the downward trajectory of collections. The state has $2.4 billion in reserves so the reduction in revenue will not have any drastic impact on current state operations and services, but state officials will be watching to see if the downward trajectory becomes a trend.
In September, state agencies, including the University of Washington, must submit their 2025-27 budget requests to the Office of Financial Management for consideration for inclusion in Gov. Jay Inslee’s budget proposals to the legislature. With the next revenue forecast scheduled for Sept. 27, agencies will only have the February and June forecasts to inform their decisions and priorities. However, both the September and November forecasts will be released before Gov. Inslee unveils his budget proposals in December.
For more information about the June revenue forecast, click here. Visit the Washington State Economic and Revenue Forecast Council website to view past publications.