Washington’s Economic and Revenue Forecast Council released its quarterly economic and state revenue forecast. The September forecast initiates the budget writing process for the 2024 session by providing legislators and the Governor with the basic data they need to prepare 2024 budget proposals. Earlier in the year, the Council forecast a mild downturn in the economy and employment that would be driven by interest rate hikes and uncertainty over the war in Ukraine.
Surprisingly, this forecast shows stronger-than-expected revenue collections and employment growth. For example, the forecast now predicts $663 million of additional revenue over the 2023-25 biennium and $437 million for the 2025-2027 biennium. Additionally, the data continues to show strong employment growth, with the unemployment rate now at an all-time low of 3.6%.
According to the forecast narrative, the growth in personal income has driven consumer spending—hence the continued growth in tax collections during this period.
The forecast does not include revenue generated from carbon auctions under the newly implemented Climate Commitment Act. Revenues from carbon auctions are distributed to several specific accounts, with half of the revenue dedicated to transportation. The 2023 budgets assumed about $2.2 billion of auction proceeds over the biennium; however, actual collections are more than double the predicted amount. If the trend continues, legislators will have more than $2 billion of unexpected revenues from carbon auctions alone in the 2024 session.
