OLYMPIA – With a strong labor market and rising consumer confidence, Washington can expect to bring in nearly $600 million in increased tax revenues over the next three years, the state economist said Tuesday.
“What we’re seeing here is a lot of strong economic activity,” Steve Lerch told the Economic and Revenue Forecast Council.
Personal income and housing permits are up, and commercial property sales remain strong.
But there are a few possible clouds on the horizon, Lerch warned.
International trade policy is up in the air because of new tariffs, particularly involving Canada and China, the state’s two biggest trading partners. Gas prices jumped in recent months, although they seem to be moderating now. The Federal Reserve is raising interest rates.
And the state is in the 10th year of an economic expansion, which typically averages between eight and 10 years. Layoff announcements are up compared to this time last year, with growth and productivity below average.
But the good news outweighs the bad, and Washington’s tax collections through the end of June 2019 are likely to be $298 million more than the figure projected in February, which the Legislature used to adjust the current 2017-19 state operating budget. The state also can expect another $287 million above the projection lawmakers saw for the 2019-21 biennium.
A new Legislature will write the budget for that two-year period starting in January.
Although housing prices continue to rise, Rep. Ed Orcutt, R-Kalama, said he is concerned about a recession like the state experienced in 2008-10, when a housing bubble burst and revenue the state received from home sales dropped.
Lerch said conditions are different than 2008, because the state still has a supply problem for housing, lending standards to qualify for a mortgage have been tightened and banks aren’t lending more than the value of the home.
But a national panel of economists recently released a consensus view that forecast a national recession in 2020. Washington typically lags behind the nation when a recession starts, and when it ends, he added.
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