Three months after lawmakers raised taxes to balance this year's supplemental budget, the revenue those taxes were supposed to deliver is already coming in short.
The Economic and Revenue Forecast Council's June update shows major General Fund-State collections for the May 11 to June 10 period came in $103.6 million, or 2.4%, below the February forecast. Since February, collections are now $135.4 million, or 1.2%, behind what the Legislature relied on when it finalized this year's supplemental budget.
The shortfall is not confined to one tax. Revenue Act collections, which include the sales tax and the business and occupation tax, fell $28.7 million short for the period and are $106.8 million behind since February. Real estate excise tax collections missed by $21.7 million, or 19.2%, for the month as high-value transactions thinned out. Property tax and other tracked revenues also came in under forecast.
Fewer jobs, higher prices
The weak collections track a labor market that is losing ground. Employment actually fell 3,800 over the four months since the February forecast, against a projected gain of 3,600. Combined with downward revisions to past data, that leaves the level of employment 21,900 below what the February forecast expected. The state unemployment rate rose to 5.2% in April, up from a recent low of 4.3% in December 2023, and the labor force participation rate continues to slide.
Seattle-area inflation is climbing. Prices rose 4.9% over the year through April, well above the 3.8% national figure, with energy costs up 23.7%.
Everyone who watched this last session saw this coming. Lawmakers again raised taxes to close a budget gap they created with years of expenditure that outran expected revenues. Now the new taxes are coming in short, the economy is slowing, and the Office of Financial Management has already directed agencies to prepare for significant shortfalls in the 2027-29 biennium.
This June release is a monthly tracking report, not the official quarterly forecast the Council will issue later this month. But it points to a quarterly forecast that will likely revise revenue downward. The budget the Legislature passed assumed money that is not showing up, and a weaker economy leaves the state with less resources to close the gap ahead.
