Lawmakers will have nearly $1 billion more to spend in the current budget, according to the latest analysis from the state’s chief economist.
A new forecast released Tuesday projects state revenues will reach $66.7 billion for the two-year budget cycle that began July 1, an increase of $663 million from what chief economist Steve Lerch predicted in June.
He said the state also hauled in an additional $265 million in the last budget that was not in his June report. It came from tax collections that arrived after the forecast was prepared and before the fiscal year ended June 30, Lerch said.
Added up, that’s $928 million more than when lawmakers adopted the current state spending plan in April. And if the trend continues, the amount will grow in November when the next revenue report is published.
Leaders of the Senate and House budget-writing panels can expect members of both parties to have suggestions on how to spend the windfall.
“We need to take a look at where we have put dollars, how those are being used and what gaps need to be filled,” Sen. June Robinson, D-Everett, the incoming chair of the Senate Ways & Means Committee, said on Wednesday.
Lerch told the state Economic and Revenue Forecast Council on Tuesday that personal income and retail spending are up and unemployment in Washington was at an all-time low in August.
But, as he noted in June, there are ongoing signs of slower growth, with tax collections rising at a rate far below the double-digit increases recorded in the 2021 and 2022 fiscal years.
Higher interest rates, rising gas prices and general inflation are contributing factors, he said.
A federal government shutdown, which could begin Sunday, doesn’t pose much risk if it is a few days, he said.
If it goes longer, like the one that lasted five weeks from December 2018 to January 2019, there could be a slight dip in revenues if furloughed federal workers dial back spending, Lerch said. He also said the fallout could be greater if, for example, a shutdown were to also trigger air travel disruptions.
“I’m grateful that our economy in the state continues to be very strong,” Robinson said. “But there are those potential headwinds that we have to be mindful of.”
Sen. Lynda Wilson, R-Vancouver, also urged caution.
“I’m inclined to take a wait-and-see attitude,” she said in a statement issued Tuesday. “There’s one more forecast before the next legislative session, and it will tell us much more about opportunities in 2024 to address the affordability crisis that continues to weigh heavily on so many families around our state.”
Revenue forecasts, which are released quarterly, do not include money raised from the auction of carbon allowances under the state’s new cap-and-trade program. Washington has raised $1.28 billion from the auctions thus far, which is earmarked for spending in the state’s operating, capital and transportation budgets.