The state’s Economic and Revenue Forecast Council adopted an updated revenue outlook last Tuesday, which projects an increase of $341 million to the state’s 2021-23 biennial budget and an increase of $327 million to the 2023-25 biennial budget. The underlying budget for the 2023-25 biennium is now projected to be $66 billion.
The increase is being driven in part by stronger than expected capital gains and sales tax collections, as well as growth in home construction. However, uncertainty remains around how much the state will actually collect from capital gains.
“The economic forecast really has not changed very much from March,” shared state economist Steve Lerch during his presentation on the outlook. Lerch noted an increase in jobs and vehicle sales as positive economic factors on the state economy, however noting the continued threat of inflation, the banking sector, and technology employer layoffs.
During the meeting to adopt the forecast, the Council took a notable step to modify the odds of the two alternative forecasts. These forecasts present a pessimistic and optimistic alternative to the adopted baseline forecast, historically weighted at 15 percent odds of likelihood. As a result of increasing inflation, a year ago the Council increased the odds for the pessimistic forecast to 25 percent. At this most recent meeting, the Council leveled the weight at 25 percent for both alternative forecasts, citing the United States not defaulting on its debts as the rationale for optimism.
State revenues have grown 21.4 percent between the 2019-21 and 2021-23 biennia and 2.4 percent between the 2021-23 and 2023-25 biennia, according to the presentation.