Revenue Review notebook - Davenport Elementary School · The seasonally adjusted Case-Shiller 20-city home price index has now increased for eleven consecutive months through December

EMBA RGOED until March 20, 2013 12:00 pm PDT when it will be published at

www.erfc.wa.gov

Revenue Review Meeting

March 20, 2013

WASHINGTON STATE

ECONOMIC AND REVENUE FORECAST COUNCIL

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WASHINGTON STATE


AGENDA

REVENUE REVIEW MEETING

March 20, 2013 12:00 p.m.

Call to order

Approval of March 7, 2013 Economic Review Meeting Minutes

Revenue forecast

Adoption of the Official Forecast


STATE OF WASHINGTON


Capitol Plaza Building, PO Box 40912 Olympia, Washington 98504-0912 (360) 534-1560

Meeting Minutes Economic Review

March 7, 2013

John L. O’Brien, Hearing Room E

Economic and Revenue Forecast Council

Members Present

Staff Ross Hunter, House of Representatives, Chair

Andy Hill, Senate

Jim Hargrove, Senate

Terry Nealey, House of Representatives

Treasurer Jim McIntire

Carol Nelson, Department of Revenue

David Schumacher, Office of Financial Management

Steve Lerch, Executive Director,

ERFC

Call to Order The meeting was called to order by Representative Hunter at 12:03 pm.

Motion Treasurer McIntire made a motion to approve the meeting minutes from the

November 14, 2012 meeting, seconded by Representative Hunter. Council approved the motion, with one abstention from Director Nelson, at 12:04 pm.

Motion Treasurer McIntire made a motion to approve the meeting minutes from the

January 31, 2013 meeting, seconded by Representative Hunter. Council approved the motion, with one abstention from Director Nelson, at 12:04 pm.

Presentation on Economic Forecast Dr. Lerch presented information on the economic forecast. Dr. Lerch summarized

the forecast changes and provided background information on both the U.S. and Washington economies. Discussion ensued regarding the stock market and foreign debt and lack of economic growth.

Other Business

Representative Hunter welcomes Carol Nelson, Director of the Department of Revenue to the Economic and Revenue Forecast Council.

Economic and Revenue Forecast Council 1

Motion Senator Hargrove moves, seconded by Treasurer McIntire that the baseline forecast

include sensitivity analysis of the average monthly impact of sequestration. Council approved the motion at 12:51 pm.

Adjournment Meeting adjourned at 12:51 pm.


Economic & Revenue Forecast Council

State of Washington

Revenue Review: March 20, 2013

United States

Nonfarm payroll employment (private sector and government) in the U.S.

increased by 236,000 jobs in February and the unemployment rate decreased

to 7.7%. Notable employment gains occurred in professional and business

services (73,000), construction (48,000), health care (32,000), and retail

trade (24,000), while government employment declined by 10,000 jobs.

Monthly employment data for January was revised downward by 38,000 while

December employment was revised up by 23,000.

Across-the-board federal budget cuts (“sequester”) went into effect on March

1st. The revised economic forecast assumes the sequester will remain in

effect through June 30th and then be replaced by a mix of budget cuts to

entitlement and non-defense discretionary programs as well as tax increases.

This new deficit reduction package will take effect in September and achieve

the remainder of the $1.2 billion target mandated by the Budget Control Act

but over two additional years (by 2023 instead of 2021).

The University of Michigan consumer sentiment survey for March dropped 5.8

points to 71.8, apparently reflecting concerns about higher gasoline prices

and the sequester. Both the University of Michigan and Conference Board

consumer confidence measures had increased in February.

Consumer spending has continued to increase despite the recent payroll tax

increase and uncertainty regarding Federal fiscal policy. January retail sales

increased a revised 0.2% (SA) over December 2012 while February sales

increased by 1.1% (SA) over January. However, February’s strong growth is

in part due to higher gasoline prices; excluding gasoline stations, sales

increased by 0.6% (SA).

Growth in real U.S. Gross Domestic Product (GDP) for the fourth quarter of

2012 was revised up from -0.1% to +0.1% (seasonally adjusted annual rate,

SAAR). For the full year, real GDP increased by 2.2% in 2012, an

improvement over the 1.8% growth rate for 2011.

Real disposable personal income (DPI) decreased by 4.0% in January after

having increased by 2.7% in December. The January 1st increase in the

payroll tax as well as a shift in an estimated $720 million in dividend and

wage income into the fourth quarter of 2012 to avoid expected tax increases

were largely responsible for the decline in January DPI. Despite the decline in

DPI, real personal consumption expenditures increased by 0.1% in January.

Industrial production declined 0.1% (SA) in January, following a 0.4% (SA)

increase in December. The Institute for Supply Management’s manufacturing

Purchasing Managers Index for February increased 1.1 points to 54.2,

indicating expansion in the manufacturing sector for the third straight month.

Readings above 50 indicate growth. The non-manufacturing index increased

from 55.2 to 56.0 in February and has remained above 50 for 38 straight

months. Core capital goods orders (i.e. durables excluding aircraft and

military) which are a proxy for business investment, increased 6.3% (SA) in


Executive Summary March 20, 2013 Revenue Review

January, after decreasing 0.3% (SA) in December and increasing 3.3% (SA)

in November.

February light motor vehicle (LMV) sales were 15.3 million units (SAAR),

essentially unchanged from January sales. Vehicle sales have remained above

15 million units for four consecutive months, with sales incentives, improving

credit availability, and the need to replace aging vehicles appearing to

outweigh the impacts of the payroll tax increase or other consumer concerns.

Since reaching highs of $97 per barrel for West Texas Intermediate (WTI) and

almost $119 per barrel for Brent in February, spot oil prices declined to $92

(WTI) and $109 (Brent) as of March 11th. Retail gasoline prices also dropped

slightly from a late-February high of $3.78 per gallon (regular, all

formulations) to $3.71 per gallon for the week ending March 11th.

Eurozone economic growth has been negative for five consecutive quarters

through the end of 2012. While European Central Bank statements and

actions have been effective in reducing borrowing costs and stabilizing

budgetary problems, Europe still faces significant challenges. Weakness in

Eurozone economies means reduced demand for U.S exports as well as

continued difficulties in addressing their sovereign debt and banking crises.

As a result, Europe continues to pose a substantial risk to the U.S. economy.

Data from the housing market continue to be positive. Existing homes sales

in January were up 0.4% (SAAR) from the December level and were 9.1%

(SAAR) above the year-ago sales rate. January new home sales increased by

15.6% above December sales (SAAR) and 28.9% above the year-ago level.

The seasonally adjusted Case-Shiller 20-city home price index has now

increased for eleven consecutive months through December 2012 (see

figure). The index is now 6.9% above the year-ago level (SA), marking seven

straight months of year-over-year growth in house prices. Seasonally

adjusted housing starts in January were 8.5% below their December level but

23.6% above the January 2012 level. January housing permits were 1.8%

(SAAR) above December and 35.2% above their year-ago level.

Transportation indicators have turned positive. The American Trucking

Association’s truck tonnage index increased 2.9% (SA) in January after

having increased by a revised 2.4% in December. On a year-over-year basis,

the index was up 6.5% (SA), the best year-over-year result since December

2011. Rail carloads were 2.3% higher (SA) in February than in January, while

intermodal units (shipping containers or truck trailers) were 3.0% higher (SA)

in February than in January.

Washington

Recent developments at the state level have been mixed relative to our

November forecast. Washington employment has been very close to our

forecast but federal fiscal policy has been more restrictive than expected,

resulting in lower Washington disposable personal income, especially in 2013.

On the plus side, the Washington housing market is rebounding faster than

expected in the November forecast.

In the four months since the November forecast was adopted, total

Washington employment increased by 18,900 jobs which was slightly more

than 17,600 expected. However, revisions to historic data have reduced



employment levels, with the net effect being 7,800 (0.3%) fewer jobs in

February 2013 than expected in the November forecast. As expected in the

November forecast, manufacturing employment growth remains strong,

adding 3,200 jobs in the last three months (the forecast expected only 1,500

jobs). Construction employment growth has now turned positive. The

construction sector added 2,400 jobs in November, December, January, and

February (the forecast was for an increase of 1,400). Government

employment turned slightly positive with a gain of 1,100 jobs during the last

four months compared to the forecasted decline of 200. However, private

service providers added 12,000 jobs which was less than the forecast of

14,600 net new jobs.

Our forecast for Washington employment is very similar to the forecast

adopted in November. As in November, we expect flat aerospace employment

in the first half of this year with a gradual decline beginning in mid-2013. On

the other hand, construction employment growth is expected to accelerate

over the next three years, tapering off in 2016 and 2017. While we believe we

are at or near the trough in state and local government employment, we

expect federal government employment to continue to shrink throughout the

forecast.

The “fiscal cliff” deal reached in January and the ongoing sequestration are

expected to have a severe impact on Washington personal income. The higher

taxes beginning in January will lower Washington disposable personal income

in 2013 by an estimated $3.469 billion while the sequestration will cost

Washington residents another $0.501 billion (assuming it lasts only four

months). Also, the expectation of higher taxes in 2013 caused an estimated

$720 million in dividend and wage income to be shifted into the fourth quarter

of 2012 to take advantage of the lower tax rates in 2012. As a result, the

forecast for disposable personal income growth in 2013 revised down from

3.4% in the November forecast to 2.3% in the current forecast. Without these

fiscal policy impacts, the disposable personal income forecast for growth in

2013 would have increased from 3.4% to 4.0%.

Housing construction in Washington continues to strengthen. January housing

permits came in at a robust 36,700 seasonally adjusted annual rate

comprised of 19,000 single-family units and 17,600 multi-family units. This

follows a strong fourth quarter which averaged 31,000 (SAAR) building

permits, the highest total since the second quarter of 2008.

Regional home prices are continuing to rise. Seasonally adjusted Seattle area

home prices increased a strong 1.0% (not annualized) in December 2012,

following a 1.4% increase in November and a 0.5% increase in October.

Seattle home prices have risen in 9 of the last 10 months and are up 8.2%

over the previous December.

Washington new car sales slowed in February but remained strong. New

vehicle registrations in February were 267,600, down from January’s 274,200

but over 20% higher than in February 2012. Washington car sales have now

recovered nearly all the ground lost during the recession. The average rate so

far in 2013 is 63% over the average in 2009 and only 6.6% lower than sales

in 2006 which was the pre-recession peak. Consumers put off replacing



vehicles during the recession and pent-up demand is likely driving the

rebound in vehicle sales.

Export growth weakened but remained positive in 2012. Total Washington

exports rose 16.6% in 2012, down slightly from the 21.4% growth rate in

2011. The continued strong growth in exports was mostly due to acceleration

in exports of transportation equipment (mostly aircraft) from a 17.4% growth

rate in 2011 to 36.0% in 2012. Outside of transportation equipment, exports

struggled to maintain positive growth, slowing from 24.6% in 2011 to just

1.7% in 2012.

The manufacturing sector weakened in February but continues to indicate

growth. The Western Washington Institute of Supply Management composite

index declined to 56.3 in February from 60.2 in January (above 50 indicates

positive growth). The last time the Western Washington index was below 50

was in July 2009.

Revenue

Revenue collections have been coming in ahead of the November forecast.

Cumulative General Fund-State (GF-S) revenue collections through March

10th are $126 million (2.5%) higher than forecasted. Of this amount,

however, $52 million was from an end-of-the-year rush to complete real

estate transactions ahead of 2013 tax increases, and $41 million was from a

positive variance in February-March Revenue Act collections which stemmed

largely from payment timing issues that will reduce collections over the next

two months. Underlying economic activity is therefore following more closely

to the forecast than the positive variance might seem to indicate.

For the remainder of the 2011-13 biennium, the forecast of collections from

Department of Revenue (DOR) sources has been reduced by $53 million, and

forecasted revenue from non-DOR sources has been reduced by $14 million.

As these reductions were not enough to offset the positive variance in

collections, the net result is a $59 million increase from the November

forecast, with total GF-S revenue now forecasted at $30.536 billion.

Our March forecast assumes higher federal taxes and larger federal spending

cuts than the November forecast, along with weaker growth. Forecasted

housing permits and real estate excise tax receipts, however, have increased

since November. The gains from these sources are expected to offset much of

the losses from other sources, resulting in only small reductions to the

forecast for the next two biennia. The forecast for the 2013-15 biennium has

been reduced by $19 million and the forecast for the 2015-17 biennium has

been reduced by $49 million. Forecasted GF-S revenue is now $32.541 billion

for the 2013-15 biennium and $35.306 billion for the 2015-17 biennium.

Due to uncertainty about the response of the Federal Government to Initiative

502, the forecast assumes no additional revenue from taxation of the sale of

marijuana. This uncertainty was also reflected in the OFM fiscal impact

statement on the initiative, which had a lower bound of zero dollars in its

forecasted range of revenue that would result from its passage. If an

arrangement is reached in the future that allows taxed sales, it could be



included in future forecasts. Even with such an arrangement, however,

revenue would be realized no sooner than the middle of fiscal 2014.

Downside Risks:

Partisan gridlock continues in Washington, D.C. resulting in the sequester

extending through the end of 2013.

The European recession becomes more severe, interest rates rise for Spanish

and Italian bonds, and Greece exits the Eurozone.

A hard landing in China reduces global economic growth, reducing U.S.

exports and increasing unemployment.

Turmoil in oil-producing countries or along oil transit routes.

Unexpected events – natural disasters, political upheaval, etc.

Upside Risks:

Congress replaces the sequester in the second quarter of 2013 with a

credible, long-term deficit-reduction plan.

The housing market and overall construction activity improve faster than

anticipated.

Business and consumer confidence rise and underlying pent-up demand

continues to drive the recovery.

The labor market improves, with unemployment dropping to 7% in late 2013

and 6.5% in early 2014.

The Eurozone remains intact, taking decisive steps towards a banking and

fiscal union that stabilizes markets.

Chinese economic growth accelerates, driven by rising domestic consumer

demand.



WASHINGTON STATE


Revenue Review

Presented toThe Economic & Revenue Forecast Council

Steve LerchChief Economist & Executive Director

March 20, 2013Olympia, Washington


Revenue Review

March 20, 2013

Slide 1 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL

Summary

• The updated economic forecast is slightly weaker than the November forecast, with lower U.S. GDP and Washington personal income but higher Washington housing permits

• Uncertainty in the baseline remains very high, mostly due to on-going concerns about Europe, China, and Federal fiscal policy

• Given the uncertainty around implementation, no new revenue is associated with I-502 at this time

• This forecast increases expected GF–S revenue by $59 million in the current biennium but decreases it by $19 million in the 2013-15 biennium

9

Revenue Review

March 20, 2013


U.S. GDP Forecast Slightly Lower

12,500

13,000

13,500

14,000

14,500

15,000

15,500

16,000

2012 2013 2014 2015 2016 2017

Billio

ns o

f 2

00

5 D

ollars

Blue Chip Consensus Real GDP forecast

November March

Source: BEA, Blue Chip Economic Indicators March 2013; historical data through 2012

Revenue Review

March 20, 2013


Oil prices: higher than in November but expected to decline

25

50

75

100

125

2005 2007 2009 2011 2013 2015 2017

Do

llars p

er b

arrel

Average Price of Crude Oil

November March

Forecast

Source: DOE, ERFC March 2013 forecast; historical data through 2013Q1


Revenue Review

March 20, 2013


WA Personal Income Forecast Slightly Lower

240

250

260

270

280

290

300

310

320

330

2012 2013 2014 2015 2016 2017

Billio

ns o

f 2

00

5 D

ollars

Washington Real Personal Income

November March

Source: BEA, ERFC March 2013 Forecast; historical data through 2012

Revenue Review

March 20, 2013


Washington Housing Permits Forecast is Slightly Higher

0

5

10

15

20

25

30

35

40

45

2012 2013 2014 2015 2016 2017

Th

ou

san

ds

Washington Housing Permits

November March

Source: ERFC March 2013 forecast; historical data through 2012


Revenue Review

March 20, 2013


Household debt relative to income has declined

10%

11%

12%

13%

14%

15%

2000 2002 2004 2006 2008 2010 2012

Mortgage & debt payments as a percent of disposable

personal income

Source: Federal Reserve Board, data through 2012Q4

Revenue Review

March 20, 2013


Vehicle sales continue their upward trend

0

75

150

225

300

375

0

5

10

15

20

25

1990 1994 1998 2002 2006 2010

WA

New

Veh

icle

Reg

istr

ati

on

s,

Th

ou

san

ds,

SA

AR

Millio

ns,

SA

AR

U.S. Light Trucks U.S. Cars WA New Vehicle Registrations

Source: Autodata Corporation, WA DOL; data through February 2013

WA new vehicle registrations in February were up 20% year-over-year.


Revenue Review

March 20, 2013


0

50

100

150

200

250

1981 1986 1991 1996 2001 2006 2011

In

dex

Housing Affordability Index (SA)

U.S. Washington

Source: National Association of Realtors, Global Insight, Washington Center for Real Estate Research, ERFC; data through 2012 Q4

Home affordability remains in record territory

Affordability is 100 when the median income can just afford the median priced home. Above 100 means the median income can afford more than the median priced home

Revenue Review

March 20, 2013


Strong growth in existing home sales statewide

0%

5%

10%

15%

20%

25%

30%

Existing Home SalesYear over Year % Change**Counties

with 2% or more of existing home sales, 2012Q4

Source: WA Center for Real Estate Research, ERFC; 2012Q4 data


Revenue Review

March 20, 2013


Considerable variation in home price changes across state

0%

5%

10%

15%

20%

25%

Median Home PriceYear over Year % Change*

Source: WA Center for Real Estate Research, ERFC; 2012Q4 data

*Counties with 2% or more of existing home sales, 2012Q4

Revenue Review

March 20, 2013


Federal budget and tax changes

Tax increases effective January 1st

• Payroll tax: $1,000 more in taxes for family with $50,000 in wages

• Higher taxes on wages, capital gains for upper income ($450,000+) families

Deficit reduction

• Baseline assumes sequester through June

• $35 B in spending cuts for 2013

• Additional $912 B in taxes, spending cuts FFY 2014 -2023


Revenue Review

March 20, 2013


Consumer confidence remains fragile

0

25

50

75

100

125

150

1980 1985 1990 1995 2000 2005 2010

Index

Mich: 1966Q1 = 100, SA

Conf Board: 1985 =100, SA

U Mich Conf Board

Source: University of Michigan; Conference Board, data through March 2013

Revenue Review

March 20, 2013


WA export growth has slowed

-40

-20

0

20

40

60

80

1998 2000 2002 2004 2006 2008 2010 2012

Exports

Percent Change, year ago

Total Total excluding Transportation Equipment

Source: WISER Trade Data; data through 2012 Q4

Trans. Equip. exports are up 24% year-over-year in Q4

All other exports are up just 7% year-over-year in Q4


Revenue Review

March 20, 2013


Revenue collections have been weak compared to past recoveries

-15

-10

-5

0

5

10

15

20

25

30

35

0 2 4 6 8 10 12 14 16 18 20

Cu

mu

lati

ve G

ro

wth

(p

ercen

t)

Quarters

Revenue Act Collections after Business Cycle Peak

1990 2001 2007-09

Source: ERFC; data through 2012 Q4

Revenue Review

March 20, 2013


Revenue Act collections are still on an upward trend

Source: DOR and ERFC; monthly data through estimated January 2013 activity

* Adjusted for large one-time transactions, amnesty payments and reporting frequency change, current definition of Revenue Act

600

700

800

900

1000

2002 2004 2006 2008 2010 2012

$millions SA

Revenue Act Revenue 3-Month Moving Average

Collections were up 5.0% year-over-year for fourth quarter 2012 activity (November 11, 2012–February 10, 2013 collections)


Revenue Review

March 20, 2013


WA sales tax growth improved in the fourth quarter of 2012

450

500

550

600

650

700

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$Millions, SA

Washington Retail Sales Tax Receipts

Retail Sales Tax 3-Month Moving Average

Source: ERFC; Monthly data through January 2013 preliminary activity

Adjusted for large payments/refunds, amnesty payments and taxpayer reporting frequency change

Sales tax collections were up 5.9% year-over-year for fourth quarter 2012 activity (November 11, 2012–February 10, 2013 collections)

Collections for third quarter activity were up 4.7% year-over-year

Revenue Review

March 20, 2013


B&O tax growth also improved in the fourth quarter of 2012

160

180

200

220

240

260

280

300

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$Millions, SAWashington B&O Tax Receipts

B&O Tax 3-Mo. Moving Average Without Service Tax Increase

Adjusted for taxpayer frequency shift, amnesty payments, and recent large refunds

Source: ERFC; Monthly data through January 2013 preliminary activity

B&O tax collections were up 7.6% year-over-year for fourth quarter 2012 activity (November 11, 2012–February 10, 2013 collections)

Collections for third quarter activity were up 4.9% year-over-year


Revenue Review

March 20, 2013


REET activity returning to prior trend after end-of-year rush

0

1

2

3

4

5

6

7

8

9

10

1996 1998 2000 2002 2004 2006 2008 2010 2012

$Billions

Seasonally Adjusted Taxable Real Estate Excise

Activity

Source: ERFC; Monthly data through February 2013 preliminary

2012 real estate sales were elevated due to the incentive to claim capital gains before taxes increased in 2013.

There was a rush in sales at the end of the year, particularly in commercial real estate and high-end residential properties.

Revenue Review

March 20, 2013


Revenue for liquor sales has been volatile recently

14

16

18

20

22

24

26

2007 2008 2009 2010 2011 2012 2013

Liquor Sales and Liter Taxes, SA

Actual November Forecast Pre-Privitization Trend

Millio

ns o

f d

ollars

Source: DOR, ERFC; data through February 2013

Revenue was $3.6 million (3.9%) above the November forecast


Revenue Review

March 20, 2013


Forecast changes: General Fund State, 2011-2013 Biennium

March Forecast

Collection Experience

Forecast Change Forecast

Total Change*

Dept. of Revenue

$126 ($53) $28,925 $73

All other agencies

($0) ($14) $1,611 ($14)

Total GF-S $125 ($67) $30,536 $59

* Detail may not add to total due to rounding

November Forecast:

$30,477 million

USD millions

Revenue Review

March 20, 2013


Forecast revisions to the 2011-13 biennium

27,000

29,000

31,000

33,000

35,000

Feb-10 Sep-10 Mar-11 Sep-11 Feb-12 Sep-12 Mar-13

32,224

30,536

1,858

669

809

698 183

1,413122

96156 29 8 59

USD, millions

Source: ERFC March 2013 forecast

GF-S

New Definition


Revenue Review

March 20, 2013



March Forecast

Non-economic Change


Total Change*

Dept. of Revenue

$0 ($38) $30,963 ($38)

All other agencies

$0 $18 $1,578 $18

Total GF-S $0 ($19) $32,541 ($19)


November Forecast:

$32,561 million

USD millions

Revenue Review

March 20, 2013


Forecast revisions to the 2013-15 biennium

27,000

29,000

31,000

33,000

35,000

Feb-12 Jun-12 Sep-12 Nov-12 Mar-13 Forecast

32,428 32,541197 23

88 19

USD, millions

Source: ERFC March 2013 forecast

GF-S

New Definition


Revenue Review

March 20, 2013



March Forecast

Non-economic Change


Total Change*

Dept. of Revenue

$0 ($92) $33,814 ($92)

All other agencies

$0 $44 $1,492 $44

Total GF-S $0 ($49) $35,306 ($49)


November Forecast:

$35,355 million

USD millions

Revenue Review

March 20, 2013


10

11

12

13

14

15

16

17

18

19

20

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

$billions

Forecast

8.0% 1.2%

General Fund* forecast by fiscal year

(9.6%)(4.1 %)

7.9%

*General Fund & Related Funds for FY 07-09, General Fund – new definition for FY 10-17Source: ERFC forecast, March 2013

1.5%

5.3%

General Fund-State RevenueFY 2011 revenues were boosted by the tax amnesty program and one-time transfers of non-GF-S funds into the GF-S

1.5%

4.8%3.7%

4.4%


Revenue Review

March 20, 2013


Real Per Capita General Fund*-State Revenue

$1,000

$1,500

$2,000

$2,500

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Per Capita GF-S*, $2005

Forecast3.8%

(11.7%)

(6.1%)

4.8%

Source: ERFC forecast, March 2013

(1.9%)

2.8%

(3.2%)

* General Fund & Related Funds for FY 2007-2009, General Fund – new definition, for FY 2010-2017

1.9%

(1.0%)

1.0% 1.7%

Revenue Review

March 20, 2013


2011-13 Biennium alternative forecasts – cash basis

2011-13

Biennium

Difference From the baseline

March 2013 Baseline (50%) $30,536

March 2013 Alternative Forecasts

Optimistic (15%) $30,833 $296

Pessimistic (35%) $30,228 ($308)

Probability Weighted Average $30,473 ($63)

$Millions


Revenue Review

March 20, 2013


2013-15 Biennium alternative forecasts – cash basis

2013-15

Biennium

Difference From the baseline

March 2013 Baseline (50%) $32,541


Optimistic (15%) $35,267 $2,726

Pessimistic (35%) $29,755 ($2,787)


$Millions

Revenue Review

March 20, 2013


Conclusion

• The forecast for the 2011-13 Biennium is $59 million higher than in November

• The forecast for the 2013-15 Biennium is $19 million lower than in November

• Revenues are expected to grow 8.2% between the 2009-11 and 2011-13 biennium and 6.6% between the 2011-13 and 2013-15 biennium

• We continue to forecast slow economic and job growth for both the national and state economies

• The level of uncertainty in the baseline remains extremely high, and downside risks outweigh upside risks


Revenue Review

March 20, 2013


Questions

Economic & Revenue Forecast Council1025 E. Union Avenue, Suite 544Olympia WA 98504-0912

www.erfc.wa.gov360-534-1560



Changes to the General Fund-State Cash Forecast-by AgencyComparison of the March 2013 to the November 2012 Forecast2011-13 BienniumMillions of Dollars

November 2012 Collection Non-economic Forecast March 2013 Total

Forecast* Experience Changes Change Forecast Change#

Department of Revenue $28,852.3 $125.8 $0.0 ($52.6) $28,925.5 $73.2

All other Agencies $1,625.2 ($0.3) $0.0 ($14.1) $1,610.8 ($14.4)

Total General Fund-State $30,477.5 $125.5 $0.0 ($66.7) $30,536.2 $58.8

*Forecast for GF-S for the 2011-13 biennium adopted November 2012#Details may not add due to rounding



November 2012 Non-economic Forecast March 2013 Total

Forecast* Changes Change Forecast Change#

Department of Revenue $31,001.0 $0.0 ($37.7) $30,963.3 ($37.7)

All other Agencies $1,559.7 $0.0 $18.4 $1,578.1 $18.4

Total General Fund-State $32,560.7 $0.0 ($19.3) $32,541.4 ($19.3)

*Forecast for GF-S for the 2013-15 biennium adopted November 2012#Details may not add due to rounding



November 2012 Non-economic Forecast March 2013 Total

Forecast Changes Change Forecast Change#

Department of Revenue $33,906.1 $0.0 ($92.3) $33,813.8 ($92.3)

All other Agencies $1,448.9 $0.0 $43.6 $1,492.5 $43.6


#Details may not add due to rounding


Track Record for the 2011-13 General Fund-State Cash Forecast

February 2010 through March 2013

Cash Basis - Millions of Dollars

Total

Non- General

Department Other Economic Total Fund-State

Date of Forecast of Revenue* Agencies Subtotal* Changes** Change Cash Basis

February 2010#

$30,658 $1,566 $32,224

Changes to Forecast

June 2010 219 (21) 197 1,661#1

1,858 34,083

September 2010 (610) (48) (659) (10)#2

(669) 33,414

November 2010 (584) (7) (591) (218)#3

(809) 32,605

March 2011 (640) (29) (668) (30)#4

(698) 31,907

June 2011 (217) (6) (223) 40#5

(183) 31,724

September 2011 (1403) (24) (1,427) 14#6

(1,413) 30,311

November 2011 (159) (1) (160) 38#7

(122) 30,188

February 2012 27 6 32 63#8

96 30,284

June 2012 (27) 11 (16) 172#9

156 30,440

September 2012 44 (15) 29 0 29 30,469

November 2012 29 (21) 8 0 8 30,477

March 2013 73 (14) 59 0 59 30,536

Total change***:

From February 2008 (3,250) (169) (3,419) 1,730 (1,688)

Percent change (10.6) (10.8) (10.6) 5.4 (5.2)

Track Record for the 2013-15 General Fund-State Cash Forecast

February 2012 through March 2013

Cash Basis - Millions of Dollars

Total

Non- General

Department Other Economic Total Fund-State

Date of Forecast of Revenue* Agencies Subtotal* Changes** Change Cash Basis

February 2012##

$31,110 $1,319 $32,428

Changes to Forecast

June 2010 (120) (13) (133) 330#9

197 32,626

September 2012 39 (15) 23 0 23 32,649

November 2012 (113) 25 (88) 0 (88) 32,561

March 2013 (38) 18 (19) 0 (19) 32,541

Total change***:

From February 2008 (232) 15 (217) 330 113

Percent change (0.7) 1.1 (0.7) 1.0 0.3

* Excludes legislative, judicial, statutorily required or other major non-economic changes.

** Includes legislative, judicial, statutorily required or other major non-economic changes.

*** Detail may not add to total due to rounding.#

First official forecast for the 2011-13 biennium.

## First official forecast for the 2013-15 biennium.

#1 Impact of 2010 legislation and budget driven revenue.

#2 Reversal of DOR RTA administrative fee

#3 Effects of Initiative 1107

#4 Effects of legislation from December 2010 session

#5 Effects of 2011 legislative and budget-driven revenue change, DOR fee change, and reduced future revenue due to 2011 amnesty program

#6 Expiration of local sales and use tax credit upon retirement of Safeco Field bonds

#7 Effects of initiative 1183 minus large DOR refund

#8 Effects of SHB 2169 plus large expected audit payment and expansion of leasehold excise tax roll

#9 Effects of legislation from 2012 special sessions subsequent to February forecast


March 2013 Cash Basis

Alternative Forecasts

Millions of Dollars

2011-13 Biennium

2011-13 Difference From the

Biennium March 2013 Baseline

March 2013 Baseline (50%) $30,536


Optimistic (15%) $30,833 $296

Pessimistic (35%) $30,228 ($308)


2013-15 Biennium

2013-15 Difference From the

Biennium March 2013 Baseline

March 2013 Baseline (50%) $32,541


Optimistic (15%) $35,267 $2,726

Pessimistic (35%) $29,755 ($2,787)



Analysis for the Major Sources Based on Taxable ActivityRevenue Act SourcesMarch 2013 Baseline Forecast

Percentage Change Personal Income

Source/Fiscal Year Tax Base Adjusted* Personal Income1

Elasticity**

I. Retail Sales

1996 3.0 6.0 0.51997 6.7 8.6 0.81998 8.0 8.4 0.91999 7.1 8.0 0.92000 8.0 8.9 0.92001 2.8 4.3 0.62002 (1.4) 1.6 (0.9)2003 2.1 2.4 0.92004 4.6 4.4 1.12005 7.9 5.4 1.52006 10.1 8.2 1.22007 7.9 8.5 0.92008 2.7 8.3 0.32009 (10.4) 0.3 (38.4)2010 (6.0) (2.2) 2.82011 1.8 4.8 0.42012 4.1 5.1 0.82013 5.4 3.7 1.42014 4.5 4.5 1.02015 5.1 5.2 1.02016 4.8 5.0 0.92017 4.7 5.2 0.9

Average 1996-2012: 3.4 5.3 0.6

II. Business & Occupation

1996 4.3 6.0 0.71997 9.4 8.6 1.11998 7.3 8.4 0.91999 6.6 8.0 0.82000 5.6 8.9 0.62001 3.0 4.3 0.72002 (3.5) 1.6 (2.2)2003 (1.6) 2.4 (0.7)2004 6.8 4.4 1.62005 9.7 5.4 1.82006 11.2 8.2 1.42007 8.3 8.5 1.02008 6.9 8.3 0.82009 (8.8) 0.3 (32.6)2010 (2.9) (2.2) 1.32011 4.6 4.8 1.02012 8.0 5.1 1.62013 5.5 3.7 1.52014 5.1 4.5 1.12015 4.7 5.2 0.92016 4.2 5.0 0.82017 4.6 5.2 0.9

Average 1996-2012: 4.3 5.3 0.8

* Based on constant base taxable data.

** Percent changes in taxable activity divided by percent change in personal income.1 Income adjusted to exclude special dividend payment in fy 05.


Analysis for the Major Sources Based on Taxable ActivityRevenue Act SourcesMarch 2013 Baseline Forecast

Percentage Change Personal Income

Source/Fiscal Year Tax Base Adjusted* Personal Income1

Elasticity**

III. Use

1996 (1.9) 6.0 (0.3)1997 (0.7) 8.6 (0.1)1998 4.4 8.4 0.51999 (0.1) 8.0 (0.0)2000 14.4 8.9 1.62001 8.4 4.3 1.92002 (5.8) 1.6 (3.6)2003 (1.4) 2.4 (0.6)2004 5.6 4.4 1.32005 14.0 5.4 2.62006 2.3 8.2 0.32007 9.0 8.5 1.12008 2.1 8.3 0.32009 (13.0) 0.3 (48.3)2010 (5.9) (2.2) 2.72011 11.4 4.8 2.42012 1.9 5.1 0.42013 6.4 3.7 1.72014 4.2 4.5 0.92015 6.1 5.2 1.22016 5.2 5.0 1.02017 4.3 5.2 0.8

Average 1996-2012: 2.6 5.3 0.5

Total Revenue Act Receipts

March 2013 Baseline Forecast

Percentage Change Personal Income Source/Fiscal Year Tax Receipts

#Personal Income

1 Elasticity

##

Revenue Act 1996 1.8 6.0 0.31997 5.3 8.6 0.61998 6.3 8.4 0.71999 4.2 8.0 0.52000 7.4 8.9 0.82001 3.9 4.3 0.92002 (1.7) 1.6 (1.0)2003 1.0 2.4 0.42004 4.8 4.4 1.12005 7.6 5.4 1.42006 10.6 8.2 1.32007 8.3 8.5 1.02008 4.2 8.3 0.52009 (9.5) 0.3 (35.2)2010 (5.3) (2.2) 2.52011 8.1 4.8 1.72012 1.3 5.1 0.32013 5.1 3.7 1.42014 3.1 4.5 0.72015 5.1 5.2 1.02016 4.9 5.0 1.02017 5.0 5.2 1.0

Average 1996-2012: 3.4 5.3 0.6

* Based on constant base taxable data.

** Percent changes in taxable activity divided by percent change in personal income.#

Post-ESSB 5073 definition of Revenue Act##

Percent changes in tax receipts divided by percent change in personal income.1 Income adjusted to exclude special dividend payment in fy 05.


General Fund-State: History and Forecast of Components

History and Forecast by Fiscal Year (Cash basis)

March 2013 - Millions of Dollars

Level % Chg. Level % Chg. Level % Chg. Level % Chg. Level % Chg.

History:

FY 1995 $8,551 $248 $8,799 $8,799

FY 1996 $8,581 0.3% $353 42.6% $8,934 1.5% $8,934 1.5%

FY 1997 $9,057 5.5% $392 11.1% $9,449 5.8% $9,449 5.8%

FY 1998 $9,641 6.5% $416 6.1% $10,057 6.4% $10,057 6.4%

FY 1999 $9,979 3.5% $435 4.5% $10,414 3.6% $10,414 3.6%

FY 2000 $10,433 4.5% $634 45.9% $11,068 6.3% $11,068 6.3%

FY 2001 $10,829 3.8% $731 15.2% $11,560 4.4% $11,560 4.4%

FY 2002 $10,451 -3.5% $1,182 61.6% $11,632 0.6% $11,632 0.6%

FY 2003 $10,690 2.3% $1,031 -12.7% $11,721 0.8% $11,721 0.8%

FY 2004 $11,321 5.9% $1,037 0.6% $12,358 5.4% $12,358 5.4%

FY 2005 $12,067 6.6% $969 -6.6% $13,036 5.5% $13,036 5.5%

FY 2006 $13,329 10.5% $989 2.0% $14,318 9.8% $115 $14,432 10.7%

FY 2007 $14,443 8.4% $1,024 3.6% $15,467 8.0% $266 132.2% $15,734 9.0%

FY 2008 $14,614 1.2% $1,045 2.0% $15,659 1.2% $213 -20.1% $15,872 0.9%

FY 2009 $13,089 -10.4% $1,069 2.3% $14,158 -9.6% $224 5.4% $14,382 -9.4%

FY 2010 $13,571 3.7% $0 -100.0% $13,571 -4.1% $157 -29.9% $13,728 -4.6%

FY 2011 $14,648 7.9% $0 0.0% $14,648 7.9% $112 -29.0% $14,759 7.5%

FY 2012 $14,874 1.5% $0 0.0% $14,874 1.5% $114 2.3% $14,988 1.6%

Forecast:

FY 2013 $15,662 5.3% $0 0.0% $15,662 5.3% $122 7.1% $15,784 5.3%

FY 2014 $15,891 1.5% $0 0.0% $15,891 1.5% $8 -93.2% $15,900 0.7%

FY 2015 $16,650 4.8% $0 0.0% $16,650 4.8% $92 1002% $16,742 5.3%

FY 2016 $17,272 3.7% $0 0.0% $17,272 3.7% $92 0.3% $17,365 3.7%

FY 2017 $18,034 4.4% $0 0.0% $18,034 4.4% $96 3.4% $18,130 4.4%

Biennial Totals

03-05 Biennium $23,389 10.6% $2,006 -9.3% $25,395 8.7% $0 NA $25,395 8.7%

05-07 Biennium $27,772 18.7% $2,013 0.3% $29,785 17.3% $381 NA $30,166 18.8%

07-09 Biennium $27,703 -0.2% $2,114 5.0% $29,817 0.1% $437 14.8% $30,254 0.3%

09-11 Biennium $28,218 1.9% $0 -100.0% $28,218 -5.4% $269 -38.5% $28,487 -5.8%

11-13 Biennium $30,536 8.2% $0 0.0% $30,536 8.2% $236 -12.0% $30,773 8.0%

13-15 Biennium $32,541 6.6% $0 0.0% $32,541 6.6% $101 -57.5% $32,642 6.1%

15-17 Biennium $35,306 8.5% $0 0.0% $35,306 8.5% $188 87.0% $35,494 8.7%

*Education legacy trust fund (plus pension stabilization fund interest FY 08, 09)

General Fund-State

Total Near

General Fund

plus Related Fund Other Near

General Fund-State Related Fund (current defintion of GF-S) General Fund*


November 2012 Non-Economic Forecast March 2013 TotalSource/Agency Baseline Changes Changes Baseline Changes

Department of Licensing $33.5 $0.0 $0.2 $33.7 $0.2

Insurance Commissioner Insurance Premiums $857.9 $0.0 ($10.4) $847.5 ($10.4)

Liquor Control Board Liquor Profits and Fees $205.5 $0.0 ($10.4) $195.1 ($10.4) Beer and Wine Surtax $154.6 $0.0 ($0.5) $154.1 ($0.5)

Lottery Commission Lottery Revenue $0.0 $0.0 $0.0 $0.0 $0.0

State Treasurer Interest Earnings ($20.7) $0.0 $1.6 ($19.1) $1.6

Office of Financial Management Other Agencies $204.7 $0.0 $7.8 $212.6 $7.8

Administrative Office of the Courts Fines and Forfeitures $189.7 $0.0 ($2.7) $186.9 ($2.7)


November 2012 Non-Economic Forecast March 2013 Total

Source/Agency Baseline Changes Changes Baseline Changes


Insurance Commissioner

Insurance Premiums $857.9 $0.0 ($10.4) $847.5 ($10.4)

Liquor Control Board

Liquor Profits and Fees $205.5 $0.0 ($10.4) $195.1 ($10.4)

Beer and Wine Surtax $154.6 $0.0 ($0.5) $154.1 ($0.5)

Lottery Commission

Lottery Revenue $0.0 $0.0 $0.0 $0.0 $0.0

State Treasurer

Interest Earnings ($21.8) $0.0 $1.9 ($19.9) $1.9

Office of Financial Management

Other Agencies $204.7 $0.0 $7.8 $212.6 $7.8

Administrative Office of the Courts

Fines and Forfeitures $189.7 $0.0 ($2.7) $186.9 ($2.7)


Comparison of the March 2013 Baseline to Alternative Forecasts2011-13 Biennium(Amounts in Millions)

General Fund-State Cash Estimates - Other AgenciesComparison of the March 2013 Baseline to Alternative Forecasts2011-13 Biennium(Amounts in Millions)

General Fund-State GAAP Estimates - Other Agencies

* Detail may not total due to rounding.




Insurance Commissioner Insurance Premiums $948.9 $0.0 $14.5 $963.4 $14.5

Liquor Control Board Liquor Profits and Fees $135.2 $0.0 $10.7 $145.9 $10.7 Beer and Wine Surtax $55.2 $0.0 ($0.3) $54.9 ($0.3)


State Treasurer Interest Earnings ($14.8) $0.0 $1.6 ($13.2) $1.6

Office of Financial Management Other Agencies $209.3 $0.0 $1.5 $210.8 $1.5


Total General Fund-State $1,559.7 $0.0 $18.4 $1,578.1 $18.4





Insurance Premiums $948.9 $0.0 $14.5 $963.4 $14.5


Liquor Profits and Fees $135.2 $0.0 $10.7 $145.9 $10.7


Lottery Commission

Lottery Revenue $0.0 $0.0 $0.0 $0.0 $0.0

State Treasurer

Interest Earnings ($14.5) $0.0 $1.5 ($12.9) $1.5


Other Agencies $209.3 $0.0 $1.5 $210.8 $1.5




Comparison of the March 2013 Baseline to Alternative Forecasts2013-15 Biennium(Amounts in Millions)

General Fund-State Cash Estimates - Other AgenciesComparison of the March 2013 Baseline to Alternative Forecasts2013-15 Biennium(Amounts in Millions)






Insurance Commissioner Insurance Premiums $1,044.3 $0.0 $30.9 $1,075.3 $30.9

Liquor Control Board Liquor Profits and Fees $125.3 $0.0 $14.4 $139.7 $14.4 Beer and Wine Surtax $55.8 $0.0 ($0.3) $55.5 ($0.3)


State Treasurer Interest Earnings ($7.6) $0.0 ($1.2) ($8.8) ($1.2)

Office of Financial Management Other Agencies ($4.7) $0.0 $7.4 $2.7 $7.4







Insurance Premiums $1,044.3 $0.0 $30.9 $1,075.3 $30.9


Liquor Profits and Fees $125.3 $0.0 $14.4 $139.7 $14.4


Lottery Commission

Lottery Revenue $0.0 $0.0 $0.0 $0.0 $0.0

State Treasurer

Interest Earnings ($7.0) $0.0 ($1.6) ($8.5) ($1.6)


Other Agencies ($4.7) $0.0 $7.4 $2.7 $7.4




Comparison of March 2013 to March 2013 Forecast2015-17 Biennium(Amounts in Millions)

General Fund-State Cash Estimates - Other AgenciesComparison of March 2013 to September 2012 Forecast2015-17 Biennium(Amounts in Millions)




Lottery transfers by fund

(Cash basis, millions of dollars)

Exhibition School Problem Economic Opportunity Veteran's

Lottery: General Mariners Center & Construction Gambling Development Pathways VIPTotal Transfers:* Fund Stadium Stadium Account Account Account Account Account

2006 125.1 1.9 4.4 7.9 107.8 0.2 3.0 0.0 0.0

2007 120.6 7.6 4.5 8.2 97.0 0.3 3.0 0.0 0.0

2005-07 Biennium 245.7 9.5 8.9 16.1 204.8 0.4 6.0 0.0 0.0

2008 124.1 0.0 4.7 8.5 106.9 0.3 3.7 0.0 0.0

2009 122.2 11.1 4.9 8.9 94.4 0.2 2.7 0.0 0.0

2007-09 Biennium 246.4 11.1 9.6 17.4 201.3 0.5 6.4 0.0 0.0

2010 126.4 12.9 5.1 9.2 95.6 0.3 3.3 0.0 0.0

2011 137.2 8.6 5.3 9.6 9.4 0.3 4.5 99.5 0.0

2009-11 Biennium 263.6 21.5 10.4 18.8 105.0 0.5 7.9 99.5 0.0

2012 135.2 0.0 2.7 10.0 0.0 0.3 3.3 118.7 0.2

2013 128.1 0.0 0.0 10.4 0.0 0.3 2.8 114.7 0.0

2011-13 Biennium 263.3 0.0 2.7 20.4 0.0 0.6 6.1 233.3 0.2

2014 125.8 0.0 0.0 10.8 0.0 0.3 3.4 111.0 0.3

2015 127.1 0.0 0.0 11.2 0.0 0.3 3.5 111.8 0.3

2013-15 Biennium 252.9 0.0 0.0 22.0 0.0 0.6 6.9 222.8 0.6

2016 128.9 0.0 0.0 10.8 0.0 0.3 3.5 114.0 0.3

2017 132.1 0.0 0.0 11.2 0.0 0.3 3.5 116.8 0.3

2015-17 Biennium 261.0 0.0 0.0 22.0 0.0 0.6 6.9 230.8 0.6

* Total Transfers are equal to total sales less total expenses (prizes, cost of sales, administration etc.)


Lottery transfers by fund

(GAAP basis, millions of dollars)

Exhibition School Problem Economic Opportunity Veteran's

Lottery: General Mariners Center & Construction Gambling Development Pathways VIPTotal Transfers:* Fund Stadium Stadium Account Account Account Account Account

2006 125.1 1.9 4.4 7.9 107.8 0.2 3.0 0.0 0.0

2007 120.6 7.6 4.5 8.2 97.0 0.3 3.0 0.0 0.0

2005-07 Biennium 245.7 9.5 8.9 16.1 204.8 0.4 6.0 0.0 0.0

2008 124.1 0.0 4.7 8.5 106.9 0.3 3.7 0.0 0.0

2009 122.2 11.1 4.9 8.9 94.4 0.2 2.7 0.0 0.0

2007-09 Biennium 246.4 11.1 9.6 17.4 201.3 0.5 6.4 0.0 0.0

2010 129.4 12.9 5.1 9.2 97.4 0.3 4.6 0.0 0.0

2011 138.2 7.0 5.3 9.6 0.0 0.3 3.7 112.3 0.0

2009-11 Biennium 267.6 19.9 10.4 18.8 97.4 0.5 8.3 112.3 0.0

2012 138.2 0.0 2.7 10.0 0.0 0.3 2.9 122.0 0.2

2013 121.5 0.0 0.0 10.4 0.0 0.3 3.1 107.7 0.0

2011-13 Biennium 259.7 0.0 2.7 20.4 0.0 0.6 6.1 229.7 0.2

2014 126.2 0.0 0.0 10.8 0.0 0.3 3.5 111.3 0.3

2015 127.2 0.0 0.0 11.2 0.0 0.3 3.5 111.9 0.3

2013-15 Biennium 253.3 0.0 0.0 22.0 0.0 0.6 6.9 223.2 0.6

2016 129.1 0.0 0.0 10.8 0.0 0.3 3.5 114.3 0.3

2017 132.3 0.0 0.0 11.2 0.0 0.3 3.5 117.0 0.3

2015-17 Biennium 261.5 0.0 0.0 22.0 0.0 0.6 6.9 231.3 0.6

* Total Transfers are equal to total sales less total expenses (prizes, cost of sales, administration etc.)


U.S.

(000) % Chg. % Chg.

Total 58.2 2.0% 1.5%

Aerospace Product and Parts Manufacturing 5.0 5.5% NA

Construction 6.7 4.9% 2.9%

Manufacturing Excluding Aerospace 6.3 3.4% NA

Retail Trade 9.8 3.1% 1.8%

Professional and Business Services 9.1 2.6% 2.8%

Transportation, Warehousing and Utilities 2.2 2.4% 1.9%

State and Local Gov Education 4.4 1.9% -0.5%

Other Services 2.1 1.9% 1.3%

Wholesale Trade 2.2 1.8% 1.8%

Leisure and Hospitality 4.8 1.8% 2.5%

Financial Activities 2.0 1.4% 1.4%

Software Publishers 0.7 1.4% NA

Education and Health Services 4.3 1.1% 1.7%

Mining and Logging 0.1 1.0% 2.4%

Information Excluding Software -0.2 -0.4% NA

State and Local Gov Non-Education -1.7 -0.8% -0.1%

Information 0.5 0.5% 0.9%

Manufacturing 11.3 4.1% 1.0%

Source: WA State ERFC Kalman filtered data, U.S. Bureau of Labor Statistics

Year-Over-Year Employment Growth by Industry

(February 2012 to February 2013)

Washington vs. U.S.Washington


U.S. Forecast Comparison

2012Q4 2013Q1 2013Q2 2013Q3 2011 2012 2013 2014 2015 2016 2017

Real GDP (2005 USD billions)March Forecast, Final 13,657 13,729 13,797 13,883 13,299 13,591 13,846 14,218 14,659 15,084 15,506 Percent Change 0.1% 2.1% 2.0% 2.5% 1.8% 2.2% 1.9% 2.7% 3.1% 2.9% 2.8%March Forecast, Preliminary 13,648 13,721 13,800 13,892 13,299 13,589 13,850 14,233 14,674 15,099 15,522 Percent Change -0.1% 2.2% 2.3% 2.7% 1.8% 2.2% 1.9% 2.8% 3.1% 2.9% 2.8%

Real Consumption (2005 USD billions)March Forecast, Final 9,670 9,708 9,751 9,806 9,429 9,605 9,783 10,024 10,294 10,571 10,845 Percent Change 2.1% 1.6% 1.8% 2.3% 2.5% 1.9% 1.9% 2.5% 2.7% 2.7% 2.6%March Forecast, Preliminary 9,672 9,706 9,753 9,812 9,429 9,605 9,787 10,038 10,309 10,588 10,863 Percent Change 2.2% 1.4% 1.9% 2.4% 2.5% 1.9% 1.9% 2.6% 2.7% 2.7% 2.6%

Implicit Price Deflator, PCE (2005=1.00)March Forecast, Final 1.164 1.166 1.170 1.175 1.138 1.158 1.172 1.192 1.211 1.231 1.250 Percent Change 1.5% 0.9% 1.1% 1.7% 2.4% 1.8% 1.3% 1.7% 1.6% 1.6% 1.6%March Forecast, Preliminary 1.163 1.165 1.169 1.174 1.138 1.158 1.172 1.191 1.209 1.227 1.245 Percent Change 1.2% 0.7% 1.4% 1.7% 2.4% 1.7% 1.2% 1.6% 1.6% 1.5% 1.4%

Real Personal Income (2005 USD billions)March Forecast, Final 11,739 11,609 11,730 11,840 11,378 11,578 11,780 12,185 12,560 12,963 13,393 Percent Change 6.3% -4.4% 4.3% 3.8% 2.6% 1.8% 1.7% 3.4% 3.1% 3.2% 3.3%March Forecast, Preliminary 11,741 11,576 11,695 11,784 11,378 11,577 11,733 12,154 12,551 12,974 13,388 Percent Change 6.5% -5.5% 4.2% 3.1% 2.6% 1.7% 1.3% 3.6% 3.3% 3.4% 3.2%

Nonfarm Payroll Employment (Millions)March Forecast, Final 134.5 135.0 135.6 136.0 131.5 133.7 135.8 138.0 140.5 143.0 144.9 Percent Change 1.6% 1.7% 1.6% 1.3% 1.2% 1.7% 1.6% 1.6% 1.8% 1.8% 1.4%March Forecast, Preliminary 134.5 135.0 135.5 136.0 131.5 133.7 135.8 138.1 140.6 143.2 145.2 Percent Change 1.6% 1.6% 1.5% 1.3% 1.2% 1.7% 1.5% 1.7% 1.9% 1.8% 1.4%

Unemployment Rate (Percent of Labor Force)March Forecast, Final 7.8 7.7 7.7 7.6 8.9 8.1 7.6 7.2 6.7 6.2 5.9 March Forecast, Preliminary 7.8 7.8 7.8 7.7 8.9 8.1 7.7 7.3 6.7 6.3 5.9

30 Year Fixed Mortgage Rate (Percent, average)March Forecast, Final 3.4 3.5 3.5 3.6 4.5 3.7 3.5 4.0 4.7 5.7 6.5 March Forecast, Preliminary 3.4 3.4 3.5 3.5 4.5 3.7 3.5 4.0 4.7 5.7 6.5

3 Month T-Bill Rate (Percent, average)March Forecast, Final 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 1.7 3.4 March Forecast, Preliminary 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 1.7 3.4


U.S. Forecast Comparison

2012Q4 2013Q1 2013Q2 2013Q3 2011 2012 2013 2014 2015 2016 2017

Real GDP (2005 USD billions)

March Forecast, Final 13,657 13,729 13,797 13,883 13,299 13,591 13,846 14,218 14,659 15,084 15,506 Percent Change 0.1% 2.1% 2.0% 2.5% 1.8% 2.2% 1.9% 2.7% 3.1% 2.9% 2.8%

November Forecast 13,676 13,732 13,808 13,898 13,299 13,587 13,859 14,247 14,689 15,115 15,538 Percent Change 1.8% 1.7% 2.2% 2.6% 1.8% 2.2% 2.0% 2.8% 3.1% 2.9% 2.8%

Real Consumption (2005 USD billions)

March Forecast, Final 9,670 9,708 9,751 9,806 9,429 9,605 9,783 10,024 10,294 10,571 10,845 Percent Change 2.1% 1.6% 1.8% 2.3% 2.5% 1.9% 1.9% 2.5% 2.7% 2.7% 2.6%


Implicit Price Deflator, PCE (2005=1.00)

March Forecast, Final 1.164 1.166 1.170 1.175 1.138 1.158 1.172 1.192 1.211 1.231 1.250 Percent Change 1.5% 0.9% 1.1% 1.7% 2.4% 1.8% 1.3% 1.7% 1.6% 1.6% 1.6%

November Forecast 1.164 1.168 1.171 1.176 1.138 1.158 1.174 1.193 1.214 1.234 1.254 Percent Change 1.5% 1.2% 1.2% 1.6% 2.4% 1.8% 1.4% 1.6% 1.7% 1.7% 1.6%

Real Personal Income (2005 USD billions)

March Forecast, Final 11,739 11,609 11,730 11,840 11,378 11,578 11,780 12,185 12,560 12,963 13,393 Percent Change 6.3% -4.4% 4.3% 3.8% 2.6% 1.8% 1.7% 3.4% 3.1% 3.2% 3.3%


Nonfarm Payroll Employment (Millions)

March Forecast, Final 134.5 135.0 135.6 136.0 131.5 133.7 135.8 138.0 140.5 143.0 144.9 Percent Change 1.6% 1.7% 1.6% 1.3% 1.2% 1.7% 1.6% 1.6% 1.8% 1.8% 1.4%November Forecast 134.0 134.5 135.1 135.7 131.4 133.3 135.4 137.8 140.3 142.7 144.7 Percent Change 1.7% 1.5% 1.8% 1.9% 1.2% 1.5% 1.6% 1.8% 1.8% 1.7% 1.4%

Unemployment Rate (Percent of Labor Force)March Forecast, Final 7.8 7.7 7.7 7.6 8.9 8.1 7.6 7.2 6.7 6.2 5.9 November Forecast 7.9 7.8 7.7 7.7 9.0 8.1 7.7 7.3 6.7 6.3 6.0

30 Year Fixed Mortgage Rate (Percent, average)March Forecast, Final 3.4 3.5 3.5 3.6 4.5 3.7 3.5 4.0 4.7 5.7 6.5 November Forecast 3.4 3.4 3.4 3.5 4.5 3.7 3.5 4.1 5.2 6.1 6.6

3 Month T-Bill Rate (Percent, average)

March Forecast, Final 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 1.7 3.4 November Forecast 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.7 2.7 3.7


Washington Forecast Comparison

2012Q4 2013Q1 2013Q2 2013Q3 2011 2012 2013 2014 2015 2016 2017


March Forecast, Final 274.7 270.7 274.7 277.4 263.4 271.3 275.7 286.0 295.6 305.8 316.9

Percent Change 4.7% -5.7% 6.1% 3.9% 3.2% 3.0% 1.6% 3.8% 3.4% 3.5% 3.6%

November Forecast 272.6 274.0 277.3 279.8 263.4 271.0 278.3 288.9 298.6 308.8 317.8

Percent Change 0.5% 2.1% 4.9% 3.7% 3.2% 2.9% 2.7% 3.8% 3.4% 3.4% 2.9%

Personal Income (USD billions)


Percent Change 6.3% -4.9% 7.2% 5.7% 5.8% 4.8% 2.9% 5.5% 5.0% 5.1% 5.3%


Percent Change 2.0% 3.3% 6.1% 5.3% 5.8% 4.7% 4.1% 5.5% 5.2% 5.1% 4.6%

Nonfarm Payroll Employment (Thousands)

March Forecast, Final 2891 2905 2918 2929 2825 2871 2924 2978 3038 3095 3140

Percent Change 1.5% 2.1% 1.8% 1.4% 1.3% 1.6% 1.8% 1.9% 2.0% 1.9% 1.5%

November Forecast 2900 2913 2928 2943 2823 2875 2935 2995 3057 3112 3157

Percent Change 2.0% 1.8% 2.1% 2.1% 1.3% 1.8% 2.1% 2.0% 2.1% 1.8% 1.4%

Unemployment Rate (Percent of Labor Force)



Manufacturing Employment (Thousands)


Percent Change 2.7% 2.7% 2.2% 1.4% 4.1% 4.4% 2.8% 1.6% 1.6% 1.3% 0.8%


Percent Change 2.8% 1.7% 2.4% 1.4% 4.1% 4.4% 2.6% 1.9% 1.6% 1.2% 1.1%

Construction Employment (Thousands)


Percent Change 5.4% 5.1% 4.1% 4.8% -3.1% 1.5% 4.7% 6.0% 8.0% 6.4% 3.7%


Percent Change 5.0% 2.9% 3.1% 4.4% -2.4% 2.3% 4.0% 6.5% 8.0% 5.5% 3.4%

Housing Permits (Thousands)


Percent Change 49.5% 39.0% -20.0% 4.7% 0.8% 34.7% 15.9% 7.2% 12.5% 6.5% 1.2%


Percent Change -1.8% 9.3% 1.7% 3.7% 0.8% 34.8% 4.0% 9.5% 13.2% 6.0% 3.2%


Washington Forecast Comparison

2012Q4 2013Q1 2013Q2 2013Q3 2011 2012 2013 2014 2015 2016 2017


March Forecast, Preliminary 275.0 270.4 274.3 276.5 263.4 271.4 275.0 285.6 295.6 306.3 316.8

Percent Change 5.1% -6.5% 5.9% 3.2% 3.2% 3.0% 1.3% 3.8% 3.5% 3.6% 3.5%


Percent Change 0.5% 2.1% 4.9% 3.7% 3.2% 2.9% 2.7% 3.8% 3.4% 3.4% 2.9%

Personal Income (USD billions)


Percent Change 6.4% -5.8% 7.4% 5.0% 5.8% 4.8% 2.6% 5.5% 5.1% 5.1% 4.9%


Percent Change 2.0% 3.3% 6.1% 5.3% 5.8% 4.7% 4.1% 5.5% 5.2% 5.1% 4.6%

Nonfarm Payroll Employment (Thousands)

March Forecast, Preliminary 2891 2908 2920 2931 2825 2871 2926 2982 3044 3101 3147

Percent Change 1.5% 2.3% 1.7% 1.5% 1.3% 1.6% 1.9% 1.9% 2.1% 1.9% 1.5%

November Forecast 2900 2913 2928 2943 2823 2875 2935 2995 3057 3112 3157

Percent Change 2.0% 1.8% 2.1% 2.1% 1.3% 1.8% 2.1% 2.0% 2.1% 1.8% 1.4%

Unemployment Rate (Percent of Labor Force)



Manufacturing Employment (Thousands)


Percent Change 2.7% 2.8% 2.3% 1.0% 4.1% 4.4% 2.8% 1.7% 1.9% 1.3% 0.9%


Percent Change 2.8% 1.7% 2.4% 1.4% 4.1% 4.4% 2.6% 1.9% 1.6% 1.2% 1.1%

Construction Employment (Thousands)


Percent Change 5.3% 8.1% 4.1% 4.2% -3.1% 1.5% 5.3% 6.0% 8.2% 6.4% 3.8%


Percent Change 5.0% 2.9% 3.1% 4.4% -2.4% 2.3% 4.0% 6.5% 8.0% 5.5% 3.4%

Housing Permits (Thousands)


Percent Change 49.5% 9.1% 5.2% 0.3% 0.8% 34.7% 14.3% 9.3% 12.3% 6.2% 1.0%


Percent Change -1.8% 9.3% 1.7% 3.7% 0.8% 34.8% 4.0% 9.5% 13.2% 6.0% 3.2%


Beginning Fund Balance (92.0)

November 2012 Forecast 30,477.5

March 2013 Update 58.8

Current Revenue Totals 30,536.2

Transfer to Budget Stabilization Account (267.0)

Other Enacted Fund Transfers 378.6

Alignment to the Comprehensive Financial Statements 1.5

Adjustment to Working Capital (HB 2822) 238.0

Total Resources (including beginning fund balance) 30,795.4

2011-13 Enacted Budgets

Enacted 2011-13 Budget (including supplementals) 30,796.4

Actual Reversions in Fiscal Year 2012 (105.9)

Assumed Reversions in Fiscal Year 2013 (60.0)

Total Expenditures 30,630.5

Projected General Fund Ending Balance 164.8

Budget Stabilization Account Beginning Balance 0.6

Transfer from General Fund and Interest Earnings 267.1

Projected Budget Stabilization Account Ending Balance 267.7

Total Reserves (General Fund plus Budget Stabilization) 432.5

RESERVES

2011-13 Enacted Budget Balance SheetIncluding 2012 Supplemental Budget

General Fund-State (and Budget Stabilization Account)

Dollars in Millions

RESOURCES

EXPENDITURES

House and Senate Fiscal Committees and the Office of Financial Management

March 2013


Documents

Revenue Review notebook - Davenport Elementary School · The seasonally adjusted Case-Shiller 20-city home price index has now increased for eleven consecutive months through December