Lawmakers in Washington state received some good financial news Wednesday, with updated numbers showing an increase in state revenues over the past few months, cutting an earlier projection of revenues losses by more than half.
But officials warned there’s still a good deal of economic uncertainty due to the coronavirus pandemic.
In June, the Economic and Revenue Forecast Council showed that state revenues through mid-2023 were projected to be nearly $9 billion lower than previous projections had shown. On Wednesday, updated numbers increased revenues by $4.6 billion for that timeframe.
Improved revenues over the past three months came in part from increased consumer spending in areas like retail and food services as restrictions on businesses began to lift.
“Some of that big increase that we saw was as the economy was reopening, sort of pent-up demand,” said Steve Lerch, the chief economist and executive director of the council, though he noted that some of that activity has started to level out a bit.
Since June, the state saw collections of nearly $963 million higher than had been forecasted, with much of the taxable activity seen in July, which Lerch noted was the last month that the unemployed received a supplemental $600 per week from the federal government. Starting this week, those filing unemployment claims due to the coronavirus pandemic will receive an additional $300 weekly boost for a limited period of time.
The current projected ending balance for the state’s approximately $53 billion two-year budget that ends mid-2021 is now projected to be minus $1.2 billion, but if lawmakers tap the entirety of the state’s so-called “rainy day” fund, the state will have an ending balance of $759 million in reserves.
Republicans have been calling for lawmakers to return for a special session for months, but majority Democrats have held off, in part in hopes of improved revenues as well as a potential new influx of stimulus from Congress, though Congress has stalled on those efforts.
Republican Sen. John Braun, a member of the Economic and Revenue Forecast Council, said that while the recent forecast was positive, lawmakers still face a challenging economic environment.
“The sooner we get after this the less impact this will be to state investment and social services for our most vulnerable,” he said.
Democrats on the council said that they have been right to wait in order to have a more complete economic picture before taking action that could have led to steep budget cuts.
Democratic Sen. Christine Rolfes, the Senate’s chief budget writer and a member of the Economic and Revenue Forecast Council, said the new forecast “takes some of the urgency out of budget cuts off the table.” She said that whenever lawmakers do return, budget cuts as well as potential new revenue are all on the table.
“I think this has us be more thoughtful about our approach rather than rushing to have a Zoom special session to cut $2 billion from the social safety net,” she said.
She noted a variety of actions that have already been taken, including some vetoes by Gov. Jay Inslee earlier this year that reduced spending, as well as hiring freezes and the requirement for state employees to take furlough days.
Washington’s stay-at-home order was in place from March 23 until the evening of May 31, and the state’s 39 counties started the process of moving through a four-stage phase in for lifting of restrictions before being indefinitely paused in July after an increase in cases.
The state’s unemployment rate jumped to from 5.1% in March to 15.4% t in April after businesses closed or reduced operations. The most recent rate for August was 8.5%
“We still have lots of uncertainty about how Covid will play out, when there will be a vaccine, how it might interact with the fall flu season so there continues to a large degree of uncertainty in our forecast,” Lerch said.
The next revenue forecast is Nov. 18. Inslee will release his two-year budget proposal in December ahead of the 105-day legislative session that begins in January.