Rachel La Corte of the AP reports that Economic and Revenue Forecast Council (ERFC) staff provided the ERFC an unofficial revenue forecast last week. (There was no mention of this at the budget outlook adoption meeting.) The estimate is very preliminary, but it provides an early indication of the sorts of numbers we could see in the official June forecast.

Revenues are estimated to decline by $3.8 billion in 2019–21 (about 7 percent) and by $3.3 billion in 2021–23 (about 6 percent). The 7 percent revenue reduction estimate would be larger than any single forecast reduction during the Great Recession. However, as I’ve noted, the revenue reductions back then came in a long, slow drip. Ultimately, economic changes reduced 2009–11 revenues by about 20 percent.

By my very back-of-the-envelope calculation, if this revenue estimate holds, it would mean an unrestricted ending balance of about -$2.5 billion in 2019–21. If the Legislature uses all of the rainy day fund in 2019–21 (currently estimated to be $1.979 billion), there would still be a roughly $500 million hole. For 2021–23, the unrestricted ending balance would be about -$5.4 billion, and there would be about $600 million in the rainy day fund.

How will the Legislature address such reductions? According to the AP,

Democratic Sen. Christine Rolfes, the Senate’s chief budget writer and a member of the Economic and Revenue Forecast Council, said that after lawmakers tap their reserves, “everything is on the table” when it comes to the rest. That includes potential furloughs and pay freezes. She said more economic analysis needs to be done on potential taxes.

Additionally, Congress could still provide federal funds that state and local governments could use to address revenue shortfalls. And one of the enacted federal aid bills temporarily enhanced the federal match for Medicaid spending by 6.2 percentage points. One estimate put the value of that for Washington at $600 million.

It is important to stress the uncertainty in this unofficial forecast. Data on the initial economic impact of this downturn is still coming in. Indeed, the state does not yet have collections data for taxable activity that occurred in March. Much more will be known by the time of the June forecast.

But even that will be too early to know the full impact of the downturn, which will depend on how quickly the economy comes back. Because of that, uncertainty will likely be high even in the official June forecast. There should be less uncertainty by the November forecast. (By which point we will also have a better understanding of whether there will be a second wave of the disease.)