Office of Planning & Budgeting

June 28, 2023

June Revenue Forecast Projections Revised Slightly Upward for Upcoming Biennium, Despite Slowing Growth

The Washington State Economic and Revenue Forecast Council (ERFC) released its June revenue forecast on Tuesday, June 27, 2023. Revenue projections have been revised slightly upward for the current biennium as well as for the 2023-25 and 2025-27 biennia.

In March, we highlighted that experts expected revenue to decrease over previous projections for the 2023-25 and 2025-27 biennia. This prediction was based on continued high inflation and interest rates, recent bank failures and tech sector layoffs, uncertainty about the federal debt ceiling, and the war in Ukraine.

The June forecast notes that the Seattle-area consumer price inflation continued to exceed the national average, with the seasonally adjusted CPI rising 7.0% compared to the 5.0% increase in the U.S. City Average index. Given the continued high rate of inflation, the forecast assumes the Federal Reserve will raise interest rates to a range of 5.25% – 5.5% by July 2023. However, there is some uncertainty regarding this assumption, as the Federal Reserve chose not to raise interest rates at its June meeting. Additionally, technology sector layoffs, concerns about bank instability, and the Ukraine-Russia conflict continue to pose risks to the economy.

Despite these challenges, the forecast projects that state revenue growth will increase by $341 million in the 2021-23 biennium over the March forecast. Revenue is then expected to increase by $327 million in the 2023-25 biennium and increase by $147 million for the 2025-27 biennium. While these numbers represent an improvement over the previous forecast, they are still lower than what had been predicted last November.

The changes from the March forecast are driven by stronger than expected capital gains tax collections. Construction activity and sales and use tax collections were also slightly stronger than anticipated. In addition, other positive economic trends included the growing job market as well as Washington car and truck sales, which reached a two-year high in May.

More background on the state revenue forecasts can be accessed on our website.

Near General Fund-State

Below is a summary of the total preliminary and projected Near General Fund-State (GF-S) revenue for each biennium.

  • $64.49 billion for the 2021-23 biennium, 21.4% over the 2019-21 biennium.
  • $66.03 billion for the 2023-25 biennium, 2.4% over the expected 2021-23 biennium.
  • $70.49 billion for the 2025-27 biennium, 6.8% over the expected 2023-25 biennium.

Some context behind the numbers for Near GF-S accounts from which the University receives funding:

  • Forecasted revenue dedicated to the Workforce Education Investment Account (WEIA) has increased by $17 million in the 2021-23 biennium, $25 million in the 2023-25 biennium, and $11 million in the 2025-27 biennium. Forecasted WEIA revenue is now $766 million for the 2021-23 biennium, $809 million for the 2023-25 biennium, and $844 million for the 2025-27 biennium.
  • The forecast of Education Legacy Trust Account (ELTA) revenue was increased by $311 million in the 2021-23 biennium. Forecasted ELTA revenue is now over $2.43 billion for the 2021-23 biennium, $2.12 billion for the 2023-25 biennium, and $2.31 billion for the 2025-27 biennium.

The next state revenue forecast will be released in September. Stay tuned to the OPBlog for updates as we close out the 2021-23 biennium and begin planning for the 2024 legislative session.