On Friday, the Economic and Revenue Forecast Council (ERFC) met for the quarterly economic review, which will inform the upcoming revenue forecast. Additionally, the ERFC approved the growth factors that will be used to estimate the maintenance level (ML) for the second biennium (the outlook) of budgets adopted for the 2027–29 biennium.

In 2024, the budget outlook workgroup produced a report on the accuracy of its maintenance level projections. This exercise compared the maintenance levels estimated for the outlook of the mid-biennium supplemental budget to the actual maintenance level in the next biennium’s enacted biennial budget. The workgroup found that the maintenance levels estimated in the outlooks turned out to be very close to the actual maintenance levels. The largest underestimate was 1.5% in 2014, and the largest overestimate was 2.0% in 2020.

During the meeting on Friday, the workgroup updated this analysis to include the 2024 supplemental. The 2025–27 ML was significantly underestimated, by 2.7% ($1.984 billion). For budget sustainability purposes, underestimating the ML is a bigger problem than overestimating it. It means that when legislators write the next budget, existing services will cost more than had been expected when they wrote the prior budget.

Part of the problem was that the growth factors adopted in 2020 (which were used through the 2024 supplemental) assumed that appropriations for the Department of Children, Youth, and Families (DCYF) would grow by 0%. Growth factors adopted in 2024 increased the DCYF growth factor to 1.02%, which is assumed through the 2026 supplemental budget.

The ERFC agreed on Friday to increase the growth factor for DCYF to 4.88%. (This is based on Seattle CPI growth and the Working Connections Child Care utilization factor.) Growth factors for other budget areas will be adjusted as well. According to the workgroup, these changes will increase the estimated 2029–31 ML by $1.039 billion compared to what the estimate would be using the 2024 growth factors.

A few notes: First, because the 2026 outlook assumed a 1.02% growth factor for DCYF, I would not be surprised if the 2026 outlook also underestimated the ML for 2027–29.

Second, the Working Families Tax Credit—which will be expanded in 2029–31—is an entitlement program administered by the Department of Revenue (DOR). Nevertheless, for purposes of the outlook, DOR has the same growth factor as agencies with no entitlement spending. The 2026 growth factor for this group (including DOR) will be just 0.17%.