Challenges for revenue forecasters and state budgets

By: Emily Makings
12:59 pm
March 18, 2020

Bill Lucia has a good story in Route Fifty on how the coronavirus outbreak could affect state budgets, with a heavy focus on Washington and some insights into Washington’s revenue forecasting and spending process.

David Schumacher, director of Washington’s Office of Financial Management, said that when he looks at the public health crisis in his state strictly from a budgeting perspective, he is more concerned about lost revenues than the additional costs.

“We may end up spending a few hundred million dollars addressing the public health problem,” he said. “But we could lose a few billion.”

“That’s the bigger budget crisis,” Schumacher said, “the revenues dropping through the floor.” For now, though, he added: “We just have no idea what this is going to mean to the economy. Is this going to last two weeks, two months, six months?” . . .

For the Office of Financial Management, Schumacher said that during the next week or so, the priority would be getting the newly appropriated coronavirus money into the hands of agencies that are at the center of the state’s response effort.

After that, he said, the office’s staff would begin to examine different budget scenarios that the coronavirus outbreak could lead to, and would develop ideas for navigating them.

Lucia also talked to Stephen Lerch, executive director of the Economic and Revenue Forecast Council. Lerch echoes what Kriss said yesterday about when the effect of COVID-19 will show up in collections:

Lerch explained that he and his colleagues don’t have much data yet to assess how bad the hit will be to that revenue stream. Medium and large retailers pay their taxes on a monthly basis, typically on the 25th of the month after a sale occurs.

Staff for the Economic and Revenue Forecast Council see the data on those collections about 10 days later, meaning that it won’t be until May that they have figures for the time period that’s been affected by widespread business closures and other fallout from the coronavirus.

Weekly data on initial unemployment insurance claims could offer a somewhat timely sense of what’s happening in the near term with layoffs within Washington’s economy, Lerch said.

But the fast-changing and unpredictable circumstances surrounding the coronavirus promise to pose challenges for revenue forecasters. “The data streams that we rely on for modeling are not really adequate for something like this,” he said.

Categories: Budget , Categories , Economy.