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State revenue forecast up $298 million but trade war threat looms

Jason Mercier is the Director of the Center for Government Reform at Washington Policy Center.  He wrote the following commentary on the Office of Financial Management’s recently released state revenue forecast.


Washington’s economy continues to outperform the nation, but the threat of a trade war puts a damper on the good news from today’s state revenue forecast. According to the state’s economist:

  • “total Near GF-S revenue is forecasted to increase by $298 million in the current biennium, $287 million in the 2019-21 biennium and $380 million in the 2021-23 biennium;”
  • “Forecasted Near GF-S revenue for the 2017-19 biennium is now $45.288 billion, 16.0% more than that of the 2015-17 biennium. Forecasted Near GF-S revenue for the 2019-21 biennium is now $49.363 billion, 9.0% higher than expected 2017-19 biennial revenue;”
  • “Risks to the baseline include concerns about international trade, geopolitical risks and a maturing economic expansion;” and
  • “The level of uncertainty in the baseline remains elevated, with downside risks outweighing upside risks.”

The good news is that state taxpayers continue to provide record revenue via a robust economy, but geopolitical and trade risks are growing. As noted by the Wall Street Journal today:

“Tariffs Start to Ripple Their Way Through the U.S. Economy – Effects are like a tax increase, very small at this point, but reducing real GDP and eroding real wages. In recent weeks, several major rounds of tariffs have moved from proposals to realities, and major new tariffs have been threatened—shifting the stakes for President Donald Trump’s trade actions on the U.S. economy.”

Discussing the direct impact a trade war may have on Washington state, the Everett Herald wrote today:

“In Washington state, whose largest trading partner is China, the trade war will hit hard, said Lori Punke Otto, the president of the Washington Council on International Trade, the Seattle-based trade policy organization.

“The administration’s decision to impose tariffs on Chinese imports will harm key Washington state industries, including aerospace, agriculture products like apples, cherries, pears and wine, and also transportation carriers like our ports and railroads,’ Punke Otto said in a release Friday.”

Hopefully cooler heads will prevail on the trade front to avoid sabotaging our state’s strong economy. As for today’s revenue forecast, there was an interesting comment from the Office of Financial Management worth monitoring:

“As the state phased in McCleary funding over the past six years, demand grew for new and expanded programs in other areas. With so many pent-up needs, competition will be fierce for 2019-21 and 2021-23 resources in virtually every part of the budget. Meanwhile, with the next round of collective bargaining underway, the extent to which state employee compensation increases will compete for limited resources is unknown.”

As a reminder, those state employee compensation talks are being conducted behind closed doors without access to any details for the public, press or lawmakers ultimately charged with funding the agreements.

The bottom line for today’s forecast: revenue up, trade war threat looms and the result of secret employee compensation talks may significantly impact the Governor’s 2019-21 budget proposal.


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