To promote state government financial stability by producing an accurate forecast of economic activity and General Fund revenue for the legislature and the governor to be used as the basis of the state budget.
In February 1984 Engrossed Substitute House Bill No. 1083 was passed by the Senate and House of Representatives of the Washington State Legislature. In March of that year the bill was approved by Governor Spellman and became Chapter 138, Laws of 1984. This law established a new process for producing official economic and revenue forecasts for the State of Washington, and created the Economic and Revenue Forecast Council.
The Council consists of two members appointed by the Governor and four members from the Legislature. One legislative member is appointed by the chairman of each of the two largest political caucuses in the Senate and House of Representatives. The chair of the council is selected from among the four caucus appointees. The chair alternates between the Senate and the House and is held by the majority party. The Economic and Revenue Forecast Council was established to oversee the preparation of and approve the official state economic and revenue forecasts. The Council is authorized to employ an economic and revenue forecast supervisor. The supervisor, Washington State’s Chief Economist & Executive Director, is given authority to hire staff to produce forecasts.
The Economic and Revenue Forecast Council is an independent agency; it is not a part of the Executive or Legislative branches. This allows for a nonpartisan professional economic and revenue forecast that is acceptable to both the Legislature and Executive, as well as the two largest political parties. This makes the State of Washington unique in its revenue forecasting process.
Four times each year the supervisor must prepare an official state economic and revenue forecast, an unofficial state economic and revenue forecast based on optimistic economic and revenue projections, and an unofficial state economic and revenue forecast based on pessimistic economic and revenue projections. The forecasts are submitted to the Governor and Legislature on or before November 20th, February 20th in even numbered years, March 20th in odd numbered years, June 20th and September 20th. The Economic and Revenue Forecast Council must approve the official forecast by an affirmative vote of at least four members. If the council is unable to approve a forecast before a required date the supervisor will submit the forecast without approval and the forecast will have the same effect as if approved by the council.
Forecast Council Work Group
The economic and revenue forecast work group exists to promote the free flow of information from executive agencies and to promote legislative input in the preparation of forecasts. The work group also provides technical support to the Economic and Revenue Forecast Council. The work group consists of one staff member from the Department of Revenue, Office of Financial Management, legislative budget committee, Legislative Evaluation and Accountability Program committee, Ways and Means committee of the Senate, and Finance committee of the House of Representatives.
Governor's Council of Economic Advisors
At the same time that the Economic and Revenue Forecast Council and work group was formed, the Governor’s Council of Economic Advisor’s was formally created by Executive Order 84-02. The purpose of the Governor’s Council is to advise the Governor on a broad range of economic and fiscal matters. The Governor’s Council also meets to review the Forecast Council’s preliminary economic forecast. The Governor’s Council was reauthorized and re-established by Executive Order 99-01. The Office of Financial Management provides administrative support to the council.
During a typical forecast cycle, the Chief Economist and staff of the Forecast Council (ERFC) meet with the forecast work group to discuss the preliminary U.S. and state economic forecasts. The preliminary forecasts are then reviewed and discussed by the Governor’s Council of Economic Advisors (GCEA) in the presence of the Governor and members of the Economic and Revenue Forecast Council.
Once the final economic forecasts for the U.S. and the state are completed, work begins on the General Fund-State revenue forecast. The economic forecasts are completed first because data from the economic forecasts are used to produce the revenue forecasts. Some components of the revenue forecast are prepared by other agencies, but ERFC has the responsibility of general oversight and approval of these component forecasts. Meetings are held between the responsible agencies and the staff of ERFC to review and refine these component forecasts. Forecasts of the major taxes, including the sales and use tax, the Business & Occupation tax, the state portion of the property tax, the real estate excise tax, cigarette tax, and timber excise tax, are prepared directly by the ERFC staff.
Once all the components of the revenue forecast are prepared, the members of the Economic and Revenue Forecast Council meet with the Chief Economist to discuss and approve the revenue forecast. In the process of forecast preparation, optimistic and pessimistic scenarios for both the economic and revenue forecast are prepared. Economic and revenue forecasts based on a survey of the GCEA are also prepared. In the past, additional scenarios requested by members of the Economic and Revenue Forecast Council, have also been prepared.
Once approved, the revenue forecast becomes the official General Fund-State Revenue forecast for Washington State.
Under RCW 82.33, the agency is also tasked with the state employment growth forecast, based on the total nonfarm payroll data series. If the employment growth forecast for any fiscal year is estimated to be less than one percent, then for that fiscal year moneys may be withdrawn and appropriated from the budget stabilization account by the favorable vote of a majority of the members elected to each house of the legislature.
Chief Economist and Executive Director
In order to accomplish the task of producing quarterly economic and revenue forecasts, the Economic and Revenue Forecast Council is authorized to employ a forecast “supervisor” to oversee the preparation of all official economic and revenue forecasts. Approval of the supervisor by an affirmative vote of five of the members of the Economic and Revenue Forecast Council is necessary to his or her employment. The supervisor is appointed to a three year term. The three year term can be renewed each year. The supervisor’s title is the Washington State Chief Economist & Executive Director of the Economic and Revenue Forecast Council.
See how the Forecast Council is providing value to tax payers by clicking HERE.