WASHINGTON – The Economic and Revenue Forecast Council met on September 23 to adopt the latest state revenue forecast. The meeting highlighted several economic challenges affecting Washington’s financial outlook.
The state’s Chief Economist, Dr. Dave Reich, presented the updated revenue forecast, revealing that the U.S. and Washington economies are experiencing slower growth. The forecast showed a decrease in the current biennium’s budget by about $412 million, or 0.6%, with similar reductions expected in the next biennium.
The presentation noted that while there was a rebound in GDP in the second quarter, driven by import decisions, overall economic growth remains slow. Dr. Reich emphasized concerns about ongoing tariffs and their impact on inflation and real economic growth.
“We continue to worry about the economic impacts of the tariffs,” Dr. Reich said, noting that higher prices and inflation are expected.
The labor market also showed signs of softening, with job ads significantly declining. This change influenced the Federal Reserve’s decision to reduce interest rates as a risk management measure.
“We’re starting to see the very kind of front edge of it,” Dr. Reich said, referring to inflation impacts from tariffs.
The forecast included assumptions about interest rates, federal employment, and tariffs. While some revenue growth was observed earlier this year, Reich says it is likely tariff-related, and future growth is expected to be slow.
The council discussed the potential impact of litigation costs and settlement liabilities on the budget. Representative Travis Couture raised concerns about the negative ending balance and the need for legislative action.
Director Katherine Chapman-See discussed the ongoing efforts to build the governor’s budget proposals, taking into account inflation, caseload changes, and federal policy shifts. “We’re digging into this on a daily basis,” Chapman-See said.
The council concluded the meeting by adopting the economic and revenue forecast, acknowledging the challenges ahead and the need for careful financial planning.
