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MRSC FOCUS › State Revenue Forecast Update - November 2001
 
State Revenue Forecast Update - November 2001

State Revenue Forecast Update

Washington State Association of Counties
November 20, 2001

THE FORECAST IS DOWN BY $813 MILLION

  • This is a reduction of 3.7%.
  • Dr. Sohn, the state's forecaster, estimates that about $500 million of this reduction is a result of September 11. The remainder would have been forecast as a result of the Economic slow down already underway before September 11.
  • The Council gave the forecast a 50% probability of being correct.
  • The pessimistic forecast, which would reduce revenues by an additional $695 million was given a 20% probability.
  • The optimistic forecast which would add back $629 million was given a 30% probability.
  • Dr. Sohn said that because of the overall uncertainty about the long range course of the war and other issues, people should pay close attention to the pessimistic and optimistic forecasts.

HOW DOES THIS COMPARE TO PAST SLOW DOWNS?

  • This is the first time since 1981-83, that the revenue forecast for one biennium is actually less than that for the prior biennium.
  • When a Washington recession includes a Boeing downturn it lasts 10 months longer than the average national recession of 26 months. (This measurement is from the start of the downturn until the Economy returns to the level of activity at the start of the downturn.)

WHAT DOES THIS MEAN FOR THE BUDGET?

  • The budget problem totals $1.25 billion, including:
    • $813 million of revenue losses forecast on 11/20/01
    • $194 million in public school enrollment and other caseload increases
    • $125 million in shortfalls in other funds including ferries, multi-modal, and tort claims revolving funds
    • $121 million in other mandatory costs including fires, and increases in the Seattle Consumer Price Index, which drive voter mandated pay increases for teachers.
  • The Emergency Reserve Fund now totals only $384 million, so substantial cuts will be needed. Those cuts will have significant implications for local government.
  • The Governor and number of legislators continue to talk about elimination of county, city and public health I-695 backfills for calendar year 2003.