On June 22, Washington’s Economic and Revenue Forecast Council (ERFC) unveiled its quarterly economic and revenue forecast. The ERFC quarterly forecasts provide the data that the Legislature and Governor must use in budgeting and managing Washington’s finances.
The EFRC November and February forecasts usually draw more attention because they coincide with the development of state budgets and legislative action. The June forecast, however, is a strong indicator of what to expect in the future. Some key information contained in this recent forecast includes:
State Tax Revenues:
- State tax collections have exceeded February forecasts by more than $590 million. The ERFC now predicts that state tax revenues in the current biennium (2021-2023) will exceed budget levels by $1.45 billion.
- Revenue to support the state budget is now expected to grow by 11.6% from 2021 to 2022.
- Between 2022 and 2023, state revenues are expected to continue growing by just 0.5%. Modest growth is forecast beyond 2023.
- The ERFC’s forecast included inflationary pressure, rising interest rates, and rising fuel prices. Their forecast does not predict a recession; however, it points out that interest rates, inflationary pressure, rising fuel prices, and the Russia-Ukraine crisis all heighten the risk of a recession in the future.
Inflation — The ERFC data also show the dramatic increase in prices over the past year. Their data illustrates that in May 2022, prices increased at the fastest pace since December 1981. The forecast predicts that the rate of inflation will decline after 2022.
“These new forecasts add nearly $2.3 billion to the amounts available over the remainder of the current biennium and the next two biennia, wrote Kriss Sjoblom in a Washington Research Council post. “These gains, however, are totally erased by increases in the forecast for inflation. When adjusted for inflation, the apparent $2.3 $billion gain becomes a real $1.2 billion loss.”
Employment — Washington is expected to continue adding jobs into the future. The June forecast predicts a lower rate of growth than projected in February. It was noted during the presentation that advertisements for job vacancies continue at unprecedented levels.
Finally, the ERFC showed interesting data that show people believe that economic conditions are declining at the local and national levels. Yet, at the same time, people generally have a favorable view of their personal finances.