Since the June revenue forecast, many legislators and others have suggested that the state would need  to increase taxes to address the budget shortfall. Will the September revenue forecast change those discussions?

Revenues from our current tax structure are now forecast to increase by 9.3 percent from 2017–19 to 2019–21 and by 7.9 percent from 2019–21 to 2021–23. (In the February forecast, on which the budget was based, revenues were forecast to increase by 14.3 percent from 2017–19 to 2019–21 and by 6.9 percent from 2019–21 to 2021–23.)

As I wrote the other day, the budget outlook improved with the new forecast. I estimated that with some adjustments for new information on the spending side since the budget was enacted (and an enhanced federal Medicaid match), the budget shortfall could be down to about $548 million in 2021–23, if the rainy day fund is tapped. That assumes that the governor’s savings measures would save $200 million.

At the Economic and Revenue Forecast Council (ERFC) meeting, David Schumacher, the director of the Office of Financial Management, said that he now expects that the savings measures to yield $700 million or $800 million. Until we see more specifics on those savings from the state, it’s hard to say exactly where the budget stands.  

Regardless, the budget situation is much improved, as Schumacher said at the ERFC meeting. He noted that the budget is fully balanced in 2019–21 (assuming the rainy day fund is used), but “that does not mean that there’s not work to do for next biennium. This is really good news, but we’re not out of the woods by any means.” He also said that he expects the governor’s 2021 supplemental budget proposal to include “very limited cuts.”

The governor’s budget proposals will be released in December; it will be interesting to see an accounting of the savings that have been achieved this year and whether he believes new taxes are necessary. (Remember that unemployment insurance taxes will increase next year, unless the Legislature acts.)

And there’s still an outside chance that Congress will provide more relief funding to states.