As Kriss noted earlier, today’s revenue forecast added back some of the revenues that were lost in the June forecast. However, the revenue estimate is still well below the February forecast (on which the current state budget is based). The chart shows how the forecast has changed. Revenues from funds subject to the outlook are now expected to increase by 9.3 percent from 2017–19 to 2019–21 and by 7.9 percent from 2019–21 to 2021–23.

The positive revenue news improves the budget outlook. In June, the Office of Program Research produced an unofficial outlook estimating that with the June forecast, the unrestricted ending balance would be negative $3.403 billion in 2019–21 and negative $8.465 billion in 2021–23.

Today’s revenue forecast includes an updated balance sheet for 2019–21. It estimates that the unrestricted ending balance will be negative $1.165 billion in 2019–21. That shortfall could be covered by the rainy day fund, which is estimated to have $1.923 billion.

But the Legislature will have to act to tap those funds. And, as we’ve noted, they would be a one-time only solution. Under the four-year balanced budget requirement, the Legislature must also consider 2021–23. My back-of-the-envelope estimate is that, with today’s forecast, the unrestricted ending balance will be about negative $3.8 billion in 2021–23. If the rainy day fund is used, there would still be a shortfall of about $1.4 billion in 2021–23.

The budget outlook estimates above do not take into account new information on the spending side of the ledger since the legislative session. For example, the June caseload forecast is estimated to increase 2019–21 spending by about $161 million. The savings measures implemented by the governor are estimated to save between $150 million and $200 million. Finally, the enhanced federal match for Medicaid (adopted in one of the federal coronavirus relief bills) is expected to save the state about $786 million, if it remains in effect through the end of fiscal year 2021. If all these items are included in the outlook, I estimate that the unrestricted ending balance would be about negative $341 million in 2019–21 and about negative $3.0 billion in 2021–23. (If the rainy day fund is tapped, total reserves would be about negative $548 million in 2021–23 in this estimate.)