Economic outlook improves slightly as governor prepares first budget proposal

OLYMPIA – A new prediction gave Washington lawmakers a little good news on Tuesday.

The latest estimate released by the Washington State Economic and Revenue Forecast Council shows the state will bring in $74.5 billion in tax revenue through 2027. The new forecast is a $105 million increase in revenue over the next two years from the last projection, which was released in September.

While revenue forecasts have increased modestly since then, the state still projects to collect about $390 million less over the next two years than lawmakers initially thought when they adopted their budget this spring.

Over the next four years, projected revenue is down $66 million from the last revenue forecast.

The latest projection will help shape the supplemental budget plan by Gov. Bob Ferguson, which is expected to be released next month. The proposal also gives lawmakers a clearer picture of how much money may need to be cut from the budget, or how much they will need to raise in taxes to account for the lower-than-anticipated revenue.

In a statement Tuesday, Ferguson said Washington “continues to face significant budget challenges, and this latest forecast does not change that.”

“That said, this forecast was not as bad as we feared it might be,” Ferguson said. “This forecast does not change the scale of the problem that my team and I have been working on as we develop my first budget.”

Ferguson added that crafting his budget will involve “many difficult decisions.” The governor plans to release his budget concept in mid-December, a proposal he said will be a balanced approach that “preserves core services but still makes investments in important areas.”

Dave Reich, forecast council executive director, said Tuesday that the uptick in revenue is partly tied to higher revenue from the state’s revenue forecast and funding from legal settlements with tobacco companies.

Reich said Tuesday that the national economic outlook is “slightly stronger” than the last revenue forecast. Reich added that there is “lots of uncertainty” due to the ongoing federal tariffs and fiscal policy.

K.D. Chapman-See, director of the Office of Financial Management, said Tuesday that the latest forecast is a “relatively small adjustment to our expected revenues, given the broader uncertainty in the economy.”

State Sen. Chris Gildon, R-Puyallup, the Republicans’ budget leader, said Tuesday that the attention will now turn to Ferguson as the lawmakers await his first budget proposal.

“Will we see the governor who showed fortitude by acknowledging in his inaugural speech that living in Washington is unaffordable for many families, or the governor who only several months later signed off on the largest package of tax increases in state history?” Gildon said in a statement.

Gildon acknowledged that the new forecast will not force the governor to “change course” and added that “we will see in a matter of weeks whether he is on the side of taking even more money for government or standing with the families of our state, who have to live within their means.”