The state’s looming budget shortfall got bigger Friday after the release of a new report by the state’s Economic and Revenue Forecast Council showed declines fueled by slowing economic activity of $427 million for the two-year budget cycle that ends next June and $450 million for the one that begins next July. That’s out of a two-year revenue base of about $80 billion.
Technically, revenues are higher than last projected in February, but that’s due to tax increases approved by the Legislature in the month that followed. Those revenues have already been accounted for.
This was the first revenue forecast to assume revenue from the state’s recently enacted individual income tax, and various other revenue generating actions, including an elimination of a tax exemption on data centers and changes to prescription drugs and insurer taxes.
The forecast also provided insight into the state’s broader economic picture, with investment in artificial intelligence infrastructure driving growth in the state’s gross domestic product output, while employment growth has weakened and inflation has rebounded. The report is more pessimistic than optimistic about the future of the state’s economy, with the war in Iran fueling notable uncertainty, but it does not forecast a recession.
Another revenue forecast will be released on September 25 and again on November 16th, ahead of the governor’s budget proposal to the Legislature for the 2027-29 biennium.