The Washington State Economic and Revenue Forecast Council released the state’s first quarterly revenue forecast for 2025 yesterday, showing a decrease of $845 million in revenue collections over the next four years compared to the November 2024 forecast. By law, the state must maintain a balanced four-year budget, which is why projections are through 2029.
The forecast projects a $479 million decrease in revenue collections for the 2025-27 biennium compared to November, and a $420 million decline for the 2027-29 biennium. The drop in revenue is largely attributed to lower sales tax and business and occupation tax collections, as well as reduced interest income for the state. Property tax collections have also slowed. However, capital gains and estate taxes are performing better than anticipated.
Next week, the House and Senate are expected to release their draft operating budget proposals, using this forecast to inform any final adjustments. Washington state is facing a sizeable budget deficit due to slowed revenue collections and rising caseloads for state programs and agencies. As a result, the final operating budget, which both chambers will negotiate after introducing their proposals, is expected to include a combination of spending cuts and revenue options to close the gap. The legislative session is scheduled to adjourn on April 27.
For a more detailed overview of the forecast, visit the UW Finance, Planning & Budgeting blog in the coming days.