Updated revenue forecast brings mixed
news
The Economic and Revenue Forecast Council (ERFC) released an updated revenue
forecast today with both good news and bad news for the state budget.
The good news
The good news is that the revenue forecast for the current (2005-07) biennium has gone up by $144.3 million. This has been expected because of strong
revenue collections in the months since the last forecast was released. The strong revenue collections were primarily due to two factors: 1) consumer
and business spending that was higher than expected and 2) unexpected audit payments.
The bad news
The surge in revenue collections is not expected to continue because the ERFC expects the economy to slow down. This is attributed to the effects of
a weakening housing market.
In fact, the outlook for the economy is more negative that it was in November, again due to the housing market. The result is that the revenue
projection for the coming biennium is expected to be slightly lower (by $17.8 million) than was projected in the November forecast.
The structural deficit
The net effect of today's forecast is that there is $126 million more in revenue than the Governor had available when she developed her budget.
However, this forecast exacerbates the key underlying problem with the state budget--that the budget for the 2007-09 biennium is heavily reliant on
surplus from the 2005-07 budget. Revenue raised during the coming biennium is not expected to be sufficient to fund the priorities of government
during that period. Over the longer-term, the additional $126 million will barely make a dent in the projected deficit.
Previous analysis by the Budget & Policy
Center demonstrates that the spending in the governor's budget is very much in line with historical trends and is a "modest step towards the kind of
state Washingtonians want to live in." The minor spending variations expected in the House and Senate budgets are unlikely to alter this
analysis.
While spending trends are on track, today's forecast emphasizes the need for the
state to seriously consider our inadequate revenue structure.
Caseloads
Recent news has also added $239 million to the money available to the legislature in developing budgets. This is primarily because of lower than
projected health care assistance costs, partly due to per capita costs, but also due to falling caseloads.
Serious thought needs to be given to whether this money should be considered a positive cost savings. A high priority of the state in recent years
has been to expand health care insurance to the uninsured. If caseloads are falling because of administrative hurdles, lack of access, and lack of
outreach to the eligible, the program is not meeting its design. Thought should be given to using that money to further the goals of health care
access.
Contact: Jeff Chapman, Research Director, 206.262.0973*224.
