Under the four-year balanced budget statute, the projected maintenance level of the budget cannot exceed available fiscal resources in the ensuing biennium (RCW 43.88.055). “Available fiscal resources” is defined as the greater of the official forecast of revenues to funds subject to the outlook (NGFO) or NGFO revenues increased by 4.5% each year.

Thus, when the revenue forecast expects slower than 4.5% growth, the budget is allowed to balance in the second biennium using phantom revenues. Doing so was one of the causes of the shortfall Washington faced last year and continues to face this year. In 2024, for example, the provision allowed legislators to assume that they had an additional $1.121 billion in resources in 2025–27, over and above officially-forecasted revenues.

The budget adopted in 2021 did not assume the 4.5% growth, even though it could have booked $1.443 billion in phantom revenues. At the time, then-Senator Rolfes said the Legislature did not assume this money “as a way to not get trapped into overspending.” Similarly, the budget adopted last year did not assume the 4.5% growth, leaving a phantom $995 million on the table.

The February 2026 revenue forecast estimates that NGFO revenues will grow by 2.2% in FY 2028 and 4.0% in FY 2029. Consequently, under the four-year balanced budget statute, the state could add $2.027 billion in phantom revenues for 2027–29, on top of the actual revenue forecast. Neither the Senate- nor House-passed 2026 supplementals would do so. This is a sustainable choice.

Yesterday, HB 2747 and its identical companion SB 6357 were introduced. For the purposes of the four-year balanced budget requirement, the bills would redefine “available fiscal resources” for two biennia. Ostensibly, the changes would require the Legislature to balance the second biennium within the official revenue forecast (and not assume 4.5% growth). This would be a good change, but it would strangely be limited to budgets enacted for 2027–29 and 2029–31. This means the Legislature could still assume 4.5% growth for the budget adopted this year. Then, beginning with the 2031–33 budget, it could return to assuming phantom revenues.

Additionally, there are a few apparent drafting errors. First, current statute specifies that resources include any fiscal resources estimated for the NGFO, “adjusted for enacted legislation.” (Emphasis added.) Under the new bills, resources would include any fiscal resources estimated for the NGFO, “adjusted for revenue legislation.” (Emphasis added.) I think this means that, for example, the 2027 Legislature (in adopting a 2027–29 budget) could assume, in the outlook, some new tax to take effect in FY 2031—even if they haven’t enacted that tax.

Second, the new bills would require the balance to be within “the official general fund revenue forecast,” not the “general fund and related funds” (NGFO) forecast. In 2027–29, for example, the revenue forecast for the general fund is $74.872 billion, while the revenue forecast for the NGFO is $80.381 billion.