State revenue forecast turns upward

$96 million improvement seen over last forecast

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OLYMPIA – The February revenue forecast for Washington state government shows projected General Fund revenue for the 2011–13 biennium up by $96 million, compared to the previous quarterly forecast in November. The figures were released today by the Washington State Economic and Revenue Forecast Council.

“This forecast reflects the modest change we’ve seen in recent indicators,” said Steve Lerch, the state’s interim chief economist. “There are some significant uncertainties right now in the world economy, but the underlying trend for the U.S. and Washington economies is still slow growth.”

The new forecast increases total projected General Fund revenue for the biennium to about $30.3 billion. The current two-year budget went into effect July 1, 2011.

The council also adopted its first forecast for the 2013–15 biennium. It projects revenue collections will grow about 6.6 percent to $32.3 billion for the next two-year budget cycle, which ends June 30, 2015.

While today’s forecast shows only a modest revenue increase (0.3 percent) in the current biennium, it’s the first positive forecast the state has seen for the current biennium since June 2010. Over the previous six quarterly forecasts — starting in September 2010 — state General Fund revenue projections for the previous and current biennia declined by a combined $5 billion.

Last spring, the Legislature and Gov. Chris Gregoire agreed on a 2011–13 budget that included about $4.6 billion in cuts. Under that budget, the state was initially projected to end the biennium with more than $700 million in reserve. But after three consecutive downward revenue forecasts — from June to November 2011 — the state was faced with a $1.4 billion shortfall for the biennium.

During a special session called by Gregoire in December, the Legislature addressed a portion of the shortfall with $478 million in spending cuts, fund transfers and new revenue. Those actions, combined with today’s forecast, leave the state with a projected shortfall of $855 million in its latest balance sheet.

The governor’s proposed supplemental budget released in November 2011 calls for leaving $600 million in reserves at the end of the biennium.

“While it’s nice to finally see a glimmer of good news in our economy and revenue picture, we still have a very big problem to handle,” said Marty Brown, director of the state Office of Financial Management. “We look forward to working the Legislature over these next few weeks to find a balanced solution to our budget shortfall.”