At its quarterly meeting today, the state Economic and Revenue Forecast Council (ERFC) updated its forecast of state revenues.

Budget reports from legislative fiscal committees typically roll-up three accounts; the general fund–state, the education legacy trust account and the Washington opportunity pathways account. EFRC refers to this three-account roll-up as the near general fund state; budgeteers refer to the roll-up as “funds subject to the outlook” (NGFO). Under the four-year balanced budget requirement, a positive ending balance is required for both the current and the following bienniums.

For the NGFO, the final tally of revenue for the recently completed 2017–19 biennium is $46,080.9 million; this is $4.7 million less than had been estimated in September, when the ERFC last met. The forecast for the 2019–21 biennium increased by $298.9 million to $51,733.4 million. Finally, the forecast for the 2021–23 biennium increased by $181.5 million, to $55,154.0 million. From 2017–19 to 2019–21, the forecasted NGFO growth is 12.3 percent; from 2019–21 to 2021–23, the forecasted growth is 6.6 percent.

As always, the ERFC also adopted optimistic and pessimistic alternative forecasts. Under the optimistic scenario, revenue exceeds the baseline forecast by $1,560 million in 2019–21 and by $3,849 during 2021–23. Under the pessimistic scenario, revenue falls short of the baseline forecast by $1,836 million during 2019–21 and by $4,778 million during 2021–23; under this scenario 2021–23 revenue would be less than 2019-21 revenue. The ERFC assigns a 15 percent probability to the optimistic scenario and a 35 percent probability to the pessimistic scenario.

The forecast issued today will be used by the governor as he prepares his supplemental budget recommendations for the 2020 legislative session. With the new forecast and the adopted budget, the projected NGFO balance at the current biennium is $1,981.2 $1,319.6 million, with an additional $1,618.4 $2,174.9 million in the budget stabilization account (the “rainy day fund”). Given the substantial probability the ERFC places on the pessimistic scenario, the governor should propose a budget that preserves a healthy four-year reserve.

The ERFC press release is here; slides from the meeting are here.