Last week, the Economic and Revenue Forecast Council (ERFC) released its June revenue forecast, which increased projected General Fund-State (GF-S) collections by $294 million for the current 2015-17 biennium and by $126 million for the upcoming 2017-19 biennium. This is an improvement over the February forecast, which had predicted slower revenue growth in both biennia (see our blog post here). As a reminder, there will be at least three more revenue forecasts between now and when the legislature sets the 2017-19 budget.
Here is a quick summary of the total projected GF-S revenue for each biennia:
- $37.431 billion for the 2015-17 biennium, 11.2 percent more than 2013-15.
- $40.252 billion for the 2017-19 biennium, 7.5 percent more than 2015-17.
- $43.575 billion for the 2019-21 biennium, 8.3 percent more than 2017-19.
Behind the numbers:
- The forecast attributed the increase to strong sales of large commercial properties and rising home prices.
- Other positives included growth in housing permits and increases in inflation, which typically result in greater retail sales, business taxes, and property taxes.
- Slight decreases in U.S. and Washington state personal income forecasts continue to have a negative effect on the revenue forecast.
According to a press release from the Governor’s Office of Financial Management, “With the latest forecast, the state is now projected to have nearly $1.5 billion in total reserves at the end of the current biennium and more than $1.4 billion at the end of the 2017–19 biennium. Those reserve figures, however, do not take into account the multibillion obligation the state faces in the next biennium to meet its constitutional obligation to fully fund basic education.”
As a result, state agencies, including the UW, have received instructions to severely limit requests for new programs or policy initiatives in their requests for state funding in the 2017-19 biennium.
Stay tuned to the OPBlog for updates on revenue forecasts.
This week, leadership in the House and Senate released their respective supplemental operating and capital budget proposals for the current biennium (FY16 & FY17), which follow the December release of Governor Jay Inslee’s proposals. As a reminder, the House and Senate proposals will be amended before they pass their respective chambers.
Please see the OPB brief for a detailed comparison of the House, Senate and Governor’s supplemental operating and capital budget proposals.
- The budget released by the leadership in the Senate Ways & Means Committee would provide the most funding overall, largely because it includes additional funding for the resident undergraduate tuition reduction backfill associated with 2ESB 5954.
- None of the three capital budgets provide additional funding for the UW beyond the original 2015-17 capital budget.
Legislators will have until March 10, the last day of session, to complete and pass a compromise budget.
See the table below for a quick comparison of the budget proposals:
On Wednesday, the Economic and Revenue Forecast Council (ERFC) released its February revenue forecast, which reduced projected General Fund-State (GF-S) collections compared to the November revenue forecast (see our blog post here). The GF-S revenue forecast decreased by $67 million for the current 2015-17 biennium and by $442 million for the 2017-19 biennium. While the revision to the 2017-19 outlook is not inconsequential, there will be at least four more revenue forecasts between now and when the legislature will set a 2017-19 biennial budget – plenty of time for the outlook to change.
- Total projected GF-S revenue for the 2015-17 biennium is now $37.137 billion, 10.3 percent more than the 2013-15 biennium.
- Total projected GF-S revenue for the 2017-19 biennium is now $40.125 billion, 8 percent more than the 2015-17 biennium.
- The forecast included an initial forecast of GF-S revenue for the 2019-21 biennium of $43.441 billion, 8.3 percent more than the 2017-19 biennium.
Behind the numbers:
- The forecast attributes decreases in projected revenues to slower than expected growth in the U.S. and Washington state economies.
- Washington exports declined for the first time since 2009.
- Other negative factors cited in the forecast include lower forecasted personal income growth, reductions in housing permits and property tax growth, and lower tax receipts due to low oil and gas prices.
- Some positives include slightly higher than expected tax receipts since the November forecast, increases in hourly wages, and the fact that lower oil and gasoline prices are a positive for consumers.
The Governor’s Council of Economic Advisors, which advises the Governor on the state of financial matters, offered a slightly more pessimistic revenue prediction based on the ERFC February Forecast, predicting additional decreases in forecasted GF-S revenue of $55 million in 2015-17 and $202 million in 2017-19.
Budget writers in the House of Representatives and the Senate will use the February Revenue Forecast to set expenditure levels for their 2016 supplemental budget proposals. House and Senate budget proposals are expected to be released the week of February 22. The last day of the regular session is March 10.
Stay tuned to the OPBlog for updates on budget proposals from the House and Senate when those are released.
Governor Jay Inslee released his supplemental operating and capital budget proposals on Thursday, both of which include technical corrections and minor appropriation changes to the current 2015-17 biennial budgets (fiscal years 2016 and 2017). This budget release marks the first step of the 2016 legislative session – set to begin on Monday, January 11, 2016. As a reminder, the House and the Senate will propose their own supplemental budgets throughout this short 60-day session as they work toward a compromise budget.
As predicted, Governor Inslee’s proposal offers very few changes to ongoing appropriations. In response to the UW’s request, the proposal provides increased expenditure authority for ongoing shellfish biotoxin monitoring work by the UW’s Olympia Regional Harmful Algal Bloom Program, beginning in FY17. If this budget prevailed, the University would also receive $250,000 in additional ongoing funding for the Mathematics, Engineering, and Science Achievement program beginning in FY17. The proposal does not make changes to the compensation and benefits assumptions of the 2015-17 operating budget.
For more information, please see our brief on Governor Inslee’s 2016 Supplemental Operating and Capital Budgets.
On Wednesday, the Economic and Revenue Forecast Council released its November revenue forecast, which projected a slight increase to General Fund-State (GF-S) collections over the September revenue forecast. The GF-S revenue forecast increased by $113 million for the current 2015-17 biennium and $30 million for the 2017-19 biennium.
- Final GF-S revenue collections for the 2013-15 biennium were $33.666 billion.
- Total projected GF-S revenue for the 2015-17 biennium is now $37.204 billion, 10.5 percent more than the 2013-15 biennium.
- Total projected GF-S revenue for the 2017-19 biennium is now $40.567 billion, 9 percent more than the 2015-17 biennium.
Behind the numbers:
- The forecast attributes the higher projections to strong performance in auto sales and service-providing industries.
- Cannabis revenue from Clark County fell after Oregon legalized marijuana, but statewide revenues have continued to grow.
- Concerns cited in the forecast include weaker-than-expected job growth, a dip in exports, and a manufacturing decline in the United States and Washington state.
- The forecast assumes that the Federal Reserve will gradually increase interest rates starting in December.
According to a Spokesman Review article, expenditures in the 2015-17 biennium are expected to exceed the $37.204 billion in expected revenue. Further complications include a costly wildfire season, the $100,000 per-day fine that the state Supreme Court levied on the Legislature for failing to come up with a plan to boost public school funding, and voter approval of Initiative 1366, which will reduce state sales tax by 1 percent if the Legislature doesn’t approve a constitutional amendment to require a two-thirds vote for tax increases. David Schumacher, director of the Office of Financial Management (OFM) is quoted in the Spokesman Review article as saying, “What this means, of course, is that there will be very little room for new spending in this year’s supplemental budget.”
Governor Jay Inslee will use the November revenue forecast to craft his 2015-17 supplemental budget proposal, which is expected to be released in December. Stay tuned to the OPBlog for updates on the Governor’s budget proposal when it is released.
Today’s Economic and Revenue forecast was released a month ahead of schedule to help lawmakers reach agreement on the 2015–17 operating, capital and transportation budgets.
General Fund-State (GF-S) revenue forecast has been increased by $106 million for the 2013-2015 biennium and by $309 million for 2015-2017.
- GF-S revenue for the 2013-2015 biennium is now $33.653 billion (9.8% higher than collections in the 2011-13 biennium), and
- The forecasted GF-S revenue for the 2015-2017 biennium is now $36.758 billion (9.2% higher than collections in the 2013-15 biennium).
Revenue collections through May 10th were $61 M (1.8%) higher than forecasted. The surplus was entirely due to a $69 M surplus in real estate excise tax collections (large sale of commercial property). The surplus was offset by a $21 M shortfall in property tax collections.
A few additional highlights from the update:
- Oil Prices are higher, and 2015 and 2016 GDP growth are weaker than in the February forecast.
- Receipts from Revenue Act sources are $12 M (0.4%) higher than forecasted.
- 17,200 new jobs have been added in the three months since the February forecast.
The Governor released operating and capital budgets yesterday morning. Though the UW fared well in the capital budget, we believe the operating budget, as currently proposed, presents challenges. Please note that the Governor’s budgets will be taken up by the Legislature in January; we are many months away from a final legislative compromise. As usual, we will be sending out budget briefing documents throughout legislative session to keep you updated.
For an analysis and summary of the operating and capital budgets, please review the OPB brief.
We have updated the OPB brief we posted on February 27th, to reflect additional information regarding the employee health insurance related agency reductions. Both the House and Senate budget would decrease agency contributions for employee health benefits. The House budget cuts state funding by $7.6 million and the Senate budget cuts state funding by $4.4 million. However, both of these reductions are offset by lower per employee spending “limits” on benefits. The House budget would reduce monthly employer funding to $658 per eligible employee. The Senate budget would reduce monthly employer funding to $703 per eligible employee.
Leadership in both the House and Senate fiscal committees released supplemental operating and capital budgets this week, proposing technical corrections and appropriation changes to the current 2013-15 biennial budgets (primarily applicable to FY15). Please see the full OPB brief for information on each proposal.
As a reminder, both budgets will be amended in respective committees, and possibly on each chamber floor, before negotiations begin towards a compromise budget.
The University of Washington (UW) plans to convert a small section of the UDistrict into a “startup hub” that will help connect UW research activity with the entrepreneurial talent who can help commercialize it. The effort will begin with just one floor of Condon Hall – the old law school, which currently houses departments displaced by other campus construction – but will expand if there is demand. The ground floor will be transformed into an open meeting area, or “mixing chamber,” where University-based entrepreneurs can connect and collaborate with the startup community, including startups that don’t necessarily have a connection to the UW. The third floor may eventually be converted into space for startups. So far, TechStars, Founder’s Co-op, and UP Global (formerly Startup Weekend) are considering taking space on the second floor starting next July.
The Office of Planning & Budgeting and the Office of the University Architect are working on this and other UDistrict planning efforts. To read more about this project, see the article by GeekWire. For more information about UDistrict planning as a whole, see the recent Seattle Times article and visit the U District Livability Partnership website.
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