Economic and Revenue Forecast Council adopts updated state revenue forecast

The Economic and Revenue Forecast Council on June 26 voted to adopt an updated state economic and revenue forecast and its optimistic and pessimistic alternatives after a presentation by Executive Director Dave Reich.

Reich told the council staff had finalized an economic model and used its outputs as inputs to updated revenue models. "For the record, I'm Dave Reich, the executive director in chief of the state," he said, then walked members through drivers behind the revisions, including higher energy prices tied to the Iran war and a surge in capital‑gains receipts.

Why it matters: Reich said higher gas and oil prices have pushed up inflation and shifted household spending, which can reduce taxable retail sales. At the same time, legislative changes and unexpectedly strong capital‑gains collections are producing a large near‑term increase in revenue for the Education Legacy Trust Account (ELTA). "We're currently a little over $1,500,000,000 dollars for the capital gains tax," Reich said, quantifying the windfall that staffs now expect to remain in ELTA under recent legislation.

The adopted forecast calls for modest U.S. real GDP growth (about 2% annually in the baseline) and weaker near‑term Washington employment growth, with the office reporting an aggregate increase in forecasted funds of roughly $961 million for the current biennium and about $1.78 billion for the following biennium. Reich also presented alternative scenarios showing swings of roughly $2.7 billion between optimistic and pessimistic cases.

On tax components, Reich told the council that retail‑sales and B&O receipts have been weaker than earlier forecasts, while use tax has risen sharply in recent months, driven in part by growth in the information sector. Staff noted they lack project‑level evidence tying the use‑tax rise specifically to data‑center activity and described data‑center links as a working hypothesis.

Council members pressed staff on methodology and accounting: one asked whether fiscal‑note values were used as inputs; Reich confirmed the office includes fiscal‑note numbers in its revenue estimates. Members also asked whether enacted budget assumptions had already counted some capital‑gains revenue; Reich said the staff currently show the full amount on the balance sheet and agreed to check how the enacted outlook had treated the shift.

A motion to adopt the official baseline and the optimistic and pessimistic alternative forecasts carried; the council recorded the adoption and then took a few additional questions from the news media. Jerry Kornfield of the Washington State Standard asked whether the forecast assumes the new individual income tax and for the capital‑gains projections across years; Reich confirmed the legislative changes are included and provided staff projections that show capital‑gains receipts declining from the current biennium but remaining material in outer years as tax law and indexing interact.

The council adjourned after completing the vote. Members and staff said they will follow up on technical questions about balance‑sheet accounting for capital gains and on whether some capital‑gains amounts had been counted during budget negotiations.