The November revenue forecast increased the estimates of revenues from funds subject to the outlook (NGFO) compared to the September revenue forecast, as Kriss reported.

Compared to the Feb. 2022 forecast, on which the current operating budget is based, NGFO revenues are now expected to be up $3.078 billion over 2021–23 and 2023–25. The 2023–25 biennial budget will have to balance through 2025–27. Over the three-biennia period, the November forecast is $3.936 billion higher than anticipated in February.

Revenues are expected to increase by 3.5% in 2023–25. Adjusted for inflation, however, 2023–25 revenues are estimated to decrease by 2.6%.

Inflation will also increase state costs. At the Economic and Revenue Forecast Council meeting, David Schumacher, the director of the Office of Financial Management, said that inflationary costs just in K–12 will add $1.5–$2 billion in spending. He said, “inflation is not only giving us more money, but it’s giving us more costs. . . . as we’re working through the governor’s budget here, things are, I think, considerably tighter than simply looking at the revenue might make you think.”

Below is our estimated balance sheet. It is based on the adopted outlook, but adjusted to account for the November revenue forecast. It includes the estimated costs of the caseload forecast and collective bargaining agreements with employees. (It includes 2021–23 and 2023–25, but the budget will have to balance through 2025–27.)

With the increased revenue forecast, the unrestricted NGFO ending balance is an estimated $1.278 billion in 2023–25. However, the balance sheet does not include the K–12 inflation costs that Schumacher mentioned. He didn’t specify a time frame for those costs, so I’m not sure how much would apply to each biennium. But if the bulk of the costs accrue to 2023–25, that would put the NGFO in deficit. Additionally, the balance sheet does not include the more than $10 billion in new spending that has been requested by state agencies.

The governor will base his proposed budget on the November forecast, but the Legislature will wait until the March revenue forecast to make its proposals.