At its quarterly meeting today, the state Economic and Revenue Forecast Council (ERFC) updated its forecasts of state revenues. These new forecasts reduce the amount available over the current and next bienniums by a total of $289.4 million.

The economic forecasts upon which these revenue forecasts are based were prepared prior to the collapse of Silicon Valley Bank.

Budget reports from legislative fiscal committees typically roll up four accounts: the general fund–state, the education legacy trust account, the Washington opportunity pathways account and the workforce education investment account. Budgeteers refer to this roll-up as “funds subject to the outlook” (NGFO). Under the four-year balanced budget requirement, positive ending balances are required for both the current and the following bienniums for the NGFO overall.

For the NGFO, the forecast for the 2021–23 biennium increased by $194 million to $64,146 million. The forecast for the 2023–25 biennium decreased by $483 million to $65,702 million. The forecast for the 2025–2027 biennium decreased by $541 million to $70,342 million.

From 2019–21 to 2021–23, the forecasted NGFO growth rate is 20.7%. From 2021–23 to 2023–2025, the forecasted NGFO growth rate is 2.4%. From 2023–2025 to 2025–27, the forecasted NGFO growth rate is 7.1%.

As always, the ERFC also adopted optimistic and pessimistic alternative revenue forecasts for the general fund–state (which produces 95% of total NGFO revenue). Under the optimistic scenario, revenue exceeds the baseline forecast by $581 million in 2021–23 and by $4,033 million during 2023–25. Under the pessimistic scenario, revenue falls short of the baseline forecast by $672 million during 2021–23 and by $4,871 million during 2023–25. The ERFC assigns a 15 percent probability to the optimistic scenario and a 35 percent probability to the pessimistic scenario.

Legislators will use these updated forecasts to write the budget for the 2023–25 biennium, which begins in a bit more than three months.

As I noted above, these forecasts were prepared before the collapse of Silicon Valley Bank, the full consequences of which are unknowable at the present time. As a result, legislators this year face an unusually large amount of uncertainty with respect to future revenues. The appropriate response to this unusually large revenue uncertainty would be for legislators to write a budget that leaves an unusually large amount of money in reserve.

The handout from the meeting is here; TVW video of the meeting is here.