OLYMPIA — Ahead of the next Legislature's budget writing year, Washington's tax collections are again higher than expected.
Despite concerns that revenues were slowing with a possible recession, the state revenue projections for the budget cycle ending in 2023 has increased by nearly $762 million, according to the Washington State Economic and Revenue Forecast Council.
The Legislature will come back in 2023 and write a budget for the next two years. This forecast suggests they'll have about $66.2 billion to work with.
"Revenue collections exceeded expectations since the last forecast, suggesting that the anticipated slowdown has not occurred yet," said Steve Lerch, executive director of the Economic and Revenue Forecast Council. "Uncertainties remain, but current data indicate an upward revision to the revenue forecast."
The last two-year operating budget, which was written in 2021, spent nearly $59 billion plus federal COVID-19 relief funding. As revenue grew even more for the state, the budget grew, too, giving legislators more than $5 billion to adjust the budget the following session.
Now, legislators will again have about $4.5 billion more than last year to spend.
The largest reason for the surprise increase was stronger-than-expected business and occupation tax collections, large estate tax payments and an increase in auto sales.
Still, the forecast warns of possible risks ahead, including a recession, technology sector layoffs, inflation and the Ukraine and Russia conflict.
It's a better-than-expected forecast for many legislators, but some are still cautious.
Senate Republican budget leader Lynda Wilson said she anticipates 2023 will bring "a reality check."
"While inflation was hitting a 40-year high this year, our Democratic colleagues were increasing state spending at a rate not seen in 30 years," Wilson said. "Maintaining all those programs and services will cost even more going forward, and that's before you factor in a projected $705 million increase in the caseloads and the end of the windfall of federal pandemic money."
She said the September numbers are "a bit of a rebound but aren't cause for celebration," pointing to layoffs and continuing costs of gas, heat, food and housing.
"Our state could be just one negative forecast away from a collision course with a financial iceberg," she said.
Democrats had different feelings.
Appropriations Chair Rep. Timm Ormsby, D-Spokane, said the forecast shows there are volatile risks on the horizon, but that Washington's revenues are currently forecasted to be "in good shape for the upcoming biennium."
Ormsby said Democrats will continue to focus on prioritizing local communities by supporting schools, investing in workforce and boosting funds for housing and homelessness needs.
"There is a lot of work to be done," he said.
Following his re-election to Senate Majority Leader, Spokane Democrat Andy Billig said in a statement Democrats will continue to focus on housing, the economy, reproductive rights and defending democracy in the upcoming session.
Republicans likely will continue to push for tax relief, though Wilson said the window for meaningful tax relief likely is closing. She said a shortfall could mean spending cuts, tax increases or both.
She said Democrats would not hesitate to raise taxes to head off a deficit.
"Republicans recognize how families are struggling financially, yet Democrats rejected every one of our proposals to let Washingtonians keep more of their own money," she said in a statement.
In the coming weeks, Gov. Jay Inslee will release his budget proposals. Office of Financial Management Director David Schumacher, who will help Inslee write his proposed budget, said the budget will still face challenges due to "dramatically increased costs related to inflation and other factors."