Tag Archives: Economic Forecast

March Revenue Forecast Essentially Flat

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Yesterday the Washington Economic and Revenue Forecast Council released the March economic and revenue forecast.

The forecast is essentially flat. Which is good news these days. According to the report Washington is projected to take in an additional $59 million more than expected in the current fiscal year and $19 million less over the next biennium. Overall policymakers have approximately an additional $40 million to incorporate into their budget discussions.

This is good news given concerns expressed in the last few weeks about impacts on state revenue given the automatic federal budget cuts, known as sequestration, earlier this month.

Though this is a small break in what has been a stream of bad news over the last few years, it is important to note that policymakers still face a substantial budget challenge for the next two years. The Legislature must make up a shortfall of $1.3 billion and make some form of investment in basic education required by the McCleary ruling.

With the revenue forecast out, the next big step in Olympia will be the release of proposed biennial operating and capital budgets. The Senate is expected to come out with their proposed budget in the next two weeks, followed by the House. The Governor is expected to release budget priorities, not a full budget, next week sometime.

Washington Releases March Caseload Forecast

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This past week the March Caseload forecast was released providing a hit to the state’s budget of $301 million, despite nearly $60 million in savings because fewer people than expected received services from an array of state programs.

The additional $301 million to the state’s budget shortfall means legislators will need to close a budget gap of approximately $1.3 billion for the 2013-15 biennium to balance the budget and maintain current service costs. This does not include additional dollars necessary for basic education that is required by the McCleary decision.

The unanticipated shortfall is primarily the result of a miscalculation of Medicaid savings and some other factors.  The miscalculation is related to a decision by the Legislature in the last budgets to move approximately 90,000 blind and disabled people on Medicaid from a fee-for-service plan to a managed-care plan. Analysts shared that the Legislature had little data to go on when it projected how much money would be saved by switching patients to managed care and the estimates turned out to be wrong.

Washington Revene Forecast Stable

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The release of the state economic and revenue forecast today shows signs of stability.

The first official revenue forecast since the Legislature left Olympia shows a small net change in the current biennium’s forecast. Effectively flat, the forecast declined by $16.1 million for the 2011-13 biennium.  A decline also occurred for the 2013-15 biennium – $133 million.

The total increase in revenue for the current budget (2011-13) is an increase of $156 million. However this includes additional revenue that was already accountaed for in the budget passed this year. The forecast projects an increase from the February forecast of $197 million in the 2013-15 biennium.

Within this context, legislative fiscal leaders noted that changes related to funding basic education-this does not include changes in employee compensation-would cost the state approximatley $1 billion in 2013-15, $2.5 billion in 2105-17, and $3 billion in the 2017-19 biennium.

All in all state revenues appear to be flat at this time, though revenues have not recovered from pre-recession levels. Within Washington revenue continues to grow at a slow rate primarily due to a flat construction sector and declining state and local government employment. Looking forward there is a 40% chance of the pessimistic forecast occurring in both this and the next biennium compared to 10% for the optimistic forecast.

With that said, legislators believe that as long as this course forward holds another special session prior to the January regular session is unlikely.

Revenues Fall; Special Session Under Consideration

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This morning the September state economic and revenue forecast was released.  The forecast shows the state faces a projected shortfall of $1.4 billion for the 2011-13 biennium.  With approximately $163 million in reserves, this creates a $1.2 billion hole in the state budget.

Washington’s Chief Economist, Dr. Arun Raha set the context for the latest reduction in state revenues. According to Raha, consumer and business confidence continues to be low, uncertainty in the European economy remains high, and  job growth continues to be weak with a steady unemployment rate of 9.3%.

Forecast estimates show a decline in revenue of $500 million in FY12 with the remaining $900 million in FY13. In addition to the $1.4 billion, legislators are focused on rebuilding state reserves, which could make the reductions to the state budget closer to $2 billion.

So what is next. It appears that the Governor and budget writers in both chambers are coalescing around the idea that early action is needed and to accomplish this the best vehicle would be a special session prior to the 2012 supplemental session in January.  If a special session is called there appears to be agreement that it should be short and concise, with most of the decisions being made prior to convening the Legislature.  

Timing for a special session appears to be ranging from the end of October to after the November forecast.

State Economist Releases Revenue Report

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Last week the Washington Economic and Revenue Forecast Council released the August revenue report – a monthly report.

The report shows that new state tax-collections for Washington are $9.4 million less in the past month than was forecasted.  This brings the total shortfall since June to $30.8 million or 1.3 percent for the state’s general fund.

The state currently has a reserve of approximately $162 million through June 2013 without taking into account the September 15 forecast.

It is unclear whether or not Governor Gregoire will call the Legislature back to Olympia prior to the January supplemental session. If the Legislature is called back, budget writers have commented that if called back they would like to come up with a plan before returning to Olympia.

Revenue Collections Dip in June

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This week the latest revenue collections report was issued and shows state revenues dropped another $22.3 million since the June economic and revenue forecast.

The drop in state revenues is a combination of unanticipated tax refunds ($4.1 million) and a drop in economy-related activities ($18.2 million).

Despite the decline in revenue, the state remains in the black at this time for the remainder of the 2011-13 biennium.

June Forecast Down

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Yesterday the Governor signed the 2011-13 biennial budget which left $730 million in total reserves for the upcoming biennium. As a result of today’s revenue forecast, the total reserves have been reduced to $163.3 million for the next two years.

The June economic and revenue forecast shows a decline of approximately $570 million in revenue for the 2011-13 biennium. In addition the forecast showed a drop of $84 million in revenue for the current biennium.

State Economist, Dr. Arun Raha, echoed the comments he made earlier this month when the economic review was released, suggesting that while the economy is improving it is doing so at a slower pace.

Raha cited sustained high gas prices and disruptions to the manufacturing supply chain  due to power shortages in Japan as the culprits.  Despite these hiccups the recovery is continuing and may even pick up momentum in the second half of the year as oil prices stabilize and Japan starts to rebuild.

Economic Review Mixed

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A slowed economic recovery is on the horizon for Washington.

Last Friday, State Economist, Dr. Arun Raha, provided policymakers and others with an economic review that suggests while the economy is improving it is doing so at a slower pace.

Raha cites sustained high gas prices and disruptions to the manufacturing supply chain  due to power shortages in Japan as the culprits.  Despite these hiccups the recovery is continuing and may even pick up momentum in the second half of the year.

Policymakers in Olympia expect that revenues will be lower than projected when the revenue forcast is released on June 16, but believe the state has sufficient budget reserves to handle this.

State Loses Revenue But Does Not Hit $1 Billion Mark

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Washington’s state budget took a large hit this morning. The March Economic & Revenue Forecast, released today, shows an additional $777.8 million decline in revenue between now and 2013.

The Forecast will require Washington to further reduce the budget for the current fiscal year by $79.8 million and by $698 million in 2011-13.

The forecast widens the state’s budget shortfall from $3.6 billion to $5.5 billion. The shortfall is the difference between projected state revenues and what it would cost to continue state services at current levels, plus pay for wage and benefit increases, new programs and higher costs to keep up with inflation and population growth.

Washington’s State Chief Economist, Arun Raha stated that the revenue forecast is primarily down because the economy is not recovering as quickly as previously expected. In addition, Raha cited conflict in the Middle East and the subsequent hike in oil prices  as well as the economic impact to the state from the natural disasters in Japan as contributors.

The latest revenue projections are in line with what budget writers had been expecting. Though budget action has not been scheduled for next week, it is likely to take place soon so stay tuned.

Caseload Forecast Shows Some Optimism; Not Expected in the Revenue Forecast Out this Week

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On Friday the Washington Caseload Forecast Council released the March caseload forecast report but did not adopt the report due to a lack of a quorum. The forecast shows a reduction of $287 million in the cost of government through June 2013.

The forecast in effect  shows a reduction of $78 million to the state from costs for public schools, Medicaid, prisons and other programs through June and an additional $207 million for the next two-year budget cycle.

The reason for the reduction in costs is primarily federal health care reform. Reduced use of state-paid medical services by those on the case rolls is driving down the costs, accounting for $70 million of the avoided costs in the short term and about $117 million in the next cycle. 

In other news, the Economic and Revenue Forecast Council released its monthly tax collections report Friday, saying they are down by a cumulative $85 million through early March, compared with the November forecast.

The collections for the state general fund fell $39.9 million below the previous forecast over the past month alone. But the state’s economy is growing, and tax collections overall still are higher than in the previous year.

The revenue council makes its next quarterly report Thursday. Dr. Arun Raha will offer the latest revenue forecast on March 17 at noon in Olympia to legislative members of the Economic and Revenue Forecast Council. The announcement is expected to be carried live on TVW. 

Some legislators fear revenue could fall as much as $2 billion from November’s predictions. “Optimistic” projections pegged the revenue shortfall at $500 million more than originally projected. Lawmakers are expressing concerns that it will be even larger, which will make closing the current projected gap of $4.6 billion for the 2011-13 biennium even greater.

State revenue is tied in a major way to sales and business activity, and sales are linked to consumers’ sense of job security or job prospects. But the quarterly economic forecast issued a week ago said the state still is 180,000 jobs below the pre-recession peak, and full job recovery won’t occur until after the next biennium ends June 30, 2013.

About all that legislative leaders have agreed on at this point is to first try writing a budget without tax increases.