From NYBA lobbyist Jim Hedrick,

"June Revenue Forecast

The Washington State Economic and Revenue Forecast Council (ERFC) released its updated (quarterly) state revenue forecast on June 26. The changes from the February forecast consist of two distinct components: 

1. Changes in revenue resulting from updated economic conditions, and
2. Additional revenue generated by tax and policy changes enacted by the 2026 legislature.

It is important to distinguish between these two components when evaluating the state's fiscal outlook. For the current 2025–27 biennium the economic forecast reduces expected revenue by $427 million compared to the February forecast. Total projected GF-S revenue declined $384.8 million, to $70.028 billion. Legislative actions enacted during the 2026 session are projected to generate an additional $1.3 billion in revenue. A significant portion of this increase is attributable to higher-than-anticipated collections and revised projections for the state's capital gains tax. 

For the following 2027–29 biennium, for which Governor Ferguson and the 2027 legislature will write their next budget, the economic forecast reduces expected revenue by $450 million from the February forecast. Legislative changes are projected to generate approximately $2.2 billion in additional revenue, with the largest share resulting from the newly enacted millionaires tax.

The takeaways from this forecast are as policymakers, stakeholders, and the public review these figures, it is essential to distinguish between economic forecast changes and new revenue resulting from legislative policy decisions. It is likely there will be a tendency to combine the two components and report net revenue increases of approximately $961 million for the 2025–27 biennium, and $1.78 billion for the 2027–29 biennium. 

While these are mathematically accurate net changes, relying solely on these larger figures can create a misleading impression of the state's underlying fiscal condition.

The economic forecast itself indicates that expected revenue growth has weakened in the current and next biennium. The positive net totals are only achieved because of taxes enacted by the Legislature during the 2026 session and not because the state's economy is generating additional revenue above previous expectations.

This distinction is critical for future budget deliberations. Budget planning should recognize that the state's fiscal outlook has softened, and the improved revenue picture is driven primarily by legislative tax increases rather than stronger economic performance.

Businesses should expect continued attention to revenue generation during future legislative sessions if economic growth remains sluggish. Additional proposals affecting business taxation remain possible, particularly if projected revenues weaken further.

 Washington's economy continues to cool. Major indicators include:

·      Sales tax growth is expected to moderate, potentially slowing local revenue growth.

·      Employment growth has slowed considerably.

·      Payroll employment is nearly 22,000 jobs below assumptions made in February.

·      The statewide unemployment rate has increased to 5.2%.

·      Personal income growth has softened.

·      Housing activity remains below expectations despite modest improvements in multifamily construction.

·      Consumer confidence remains weak while inflation, particularly energy costs, remains elevated.

Although Washington avoids recession in the forecast, economic growth is expected to remain modest over the next several years. This June 2026 forecast reflects two competing realities. Washington's economy has softened enough to reduce baseline revenues, yet the Legislature's tax package more than offsets much of that decline over the long term. Policymakers have stabilized the state's budget for now, but slower economic growth, continued inflationary pressures, and uncertainty surrounding federal fiscal policy suggest that budget and tax issues will remain central topics entering the 2027 legislative session.

The next official revenue forecast will be September 25 and should provide an important indication of whether the current slowdown is temporary or the beginning of a more sustained period of slower growth."