Thursday, June 17, 2010

Revenue forecast shows we're down $207 million

Last week, our state's Economic and Revenue Forecast Council (ERFC) released a revenue update showing us that revenue is starting to pick up but we're still billions below where we were pre-recession. This is a problem for nearly every state in the nation with state legislatures nationwide about $52 billion below 2008 levels.

This morning the ERFC gathered to hear Chief Economist Arun Raha's predictions for what will happen moving forward. Raha's forecasts help legislators gauge how we're doing with both our current 2009-11 budget and gives them a sense of what we're up against for the next 2011-13 biennium.

For the current biennium, General Fund-State (GF-S) revenues are expected to decline by $206.8 million. (GF-S revenue does not include any federal money, which usually comes with plenty of strings and is dedicated to specific programs. GF-S is the pot of money over which the Legislature has the most control.)

For next biennium, forecasted GF-S revenues will increase by $197.4 million.

Dr. Arun Raha, the Executive Director of the council, attributes these changes to a number of factors.
  • Since the February 2010 revenue forecast, actual GF-S collections are $38.5 million lower than forecast.
  • The most recent announcement of job creation in the nation have been very bleak.
  • Washington state’s retail sales were actually lower last month than the month before – indicating a lack of consumer confidence.
  • Car sales have not been very optimistic – consumers are not replacing vehicles.
With this drop in revenue, the state’s current projected GF-S ending fund balance is $247.3 million. In addition, there will be $5.8 million in the Budget Stabilization Account (Rainy Day), bringing the total reserves to $253.1 million.

What is still unresolved is whether the U.S. Congress will approve the extension of enhanced Medicaid funding (called FMAP). The 2010 supplemental budget assumed Washington State would receive an additional $480 million beginning in January 2011. If this funding is not forthcoming, the state will face a budget shortfall in the current biennium. The U.S. Senate is expected to vote today on a revised amendment to H.R. 4213 that retains the six months of additional FMAP assistance for states.

Resources: Council handouts:

Council press release: