Office of Planning & Budgeting

October 4, 2023

September Revenue Forecast Revised Upward for Current Biennium, Returning to Previously Projected Levels Despite Slowing Growth

The Washington State Economic and Revenue Forecast Council (ERFC) released its September revenue forecast on Tuesday, September 26, 2023. Revenue projections were again revised upward for the 2023-25 and 2025-27 biennia, as well as for the 2021-23 biennium that ended on June 30.

In June, we highlighted that experts expected revenue to increase slightly over the March projection for the 2023-25 and 2025-27 biennia, though the forecast was still lower than what had been predicted last November. This change upward was driven by stronger than expected capital gains tax collections, slightly higher construction activity and sales and use tax collections, and the continued strength of the job market.

The September forecast notes that the Seattle-area consumer price inflation continued to exceed the national average, with the seasonally adjusted CPI rising 5.4% compared to the 3.7% 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 5.5% – 5.75% in November, before starting to reduce rates sometime in 2024. Additionally, the potential for a federal government shutdown, instability in the banking and commercial real estate sectors, the resumption of student loan repayments, and the ongoing conflict in Ukraine continue to pose risks to the economy.

Despite these challenges, the forecast projects that state revenue growth is expected to increase by $663 million in the 2023-25 biennium and increase by $437 million for the 2025-27 biennium compared to the June forecast. Additionally, revenue for the just concluded 2021-23 biennium increased by $265 million.

As noted, these numbers represent an improvement over the previous forecast. While growth is slowing, the projected increases are driven by the continued strength of the job market, both nationally and at the state level. Washington’s unemployment rate for August remained at 3.6%, an all-time low.

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. These numbers are now similar to those projected last November before the decline forecasted in March.

  • $64.75 billion for the 2021-23 biennium, 21.9% over the 2019-21 biennium.
  • $66.69 billion for the 2023-25 biennium, 3.0% over the expected 2021-23 biennium.
  • $70.93 billion for the 2025-27 biennium, 6.3% 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 $13 million in the 2021-23 biennium, $28 million in the 2023-25 biennium, and $31 million in the 2025-27 biennium. Forecasted WEIA revenue is now $779 million for the 2021-23 biennium, $838 million for the 2023-25 biennium, and $874 million for the 2025-27 biennium.
  • The forecast of Education Legacy Trust Account (ELTA) revenue was increased by $141 million in the 2021-23 biennium. Forecasted ELTA revenue is now over $2.57 billion for the 2021-23 biennium, $2.14 billion for the 2023-25 biennium, and $2.31 billion for the 2025-27 biennium.

The next state revenue forecast will be released in November, which the Governor will use as a basis for his proposed 2024 supplemental budgets. Stay tuned to the OPBlog for updates as we prepare for the 2024 legislative session.