This week the Washington Office of Financial Management (OFM) released a new state budget outlook that puts the state in the red by June 2015.

According to OFM, the Washington state budget would experience a $1 billion shortfall for 2013-15. This doesn’t include the estimated $1.1 billion increase for the McCleary K-12 decision (HB 2776) or leaving any reserves other than the constitutional budget stabilization fund.

OFM identifies the major budget costs that would drive a budget shortfall as:

• $366 million for actuarially recommended pension payment changes
• $292 million for K-12 pay increases based on I-732
• $242 million for increased debt service
• $171 million to restore the 3% temporary salary cut for state workers
• $166 million to restore K-12 salary reduction
• $30 million for federal health care reform
• $14 million for the “new” paid family leave benefit

The Outlook assumes state tax revenues will grow by $1.5 billion in the next biennium, from $31.2 billion to $32.7 billion.  This expected revenue increase is based on the state’s June Revenue forecast which was adopted with the caution that there is a 40% chance that this increase could be wiped-out depending on economic developments in Europe and actions (or lack thereof) in Congress. It also incorporates the spending-cut decisions made by lawmakers this year and assumes restoration of temporary measures included in the current budget

While OFM has consistently conducted budget outlooks for the state, this year the Office is required to show how the state’s future budgets could be balanced with available resources as a result of legislation passed in the 2012 supplemental budget requiring a balanced four-year budget outlook instead of a two-year forecast.