Description of the Economic & Revenue Forecast Council

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 new law established a new process for producing official economic and revenue forecasts for the State of Washington. The law 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 Economic and Revenue Forecast Council was established to oversee the preparation of and approve the official state economic and revenue forecasts.

In order to accomplish the task of producing quarterly economic and revenue forecasts the Economic and Revenue Forecast Council is authorized to employ an economic and revenue forecast supervisor to supervise the preparation of all official economic and revenue forecasts. Approval of the supervisor by the 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 and can be renewed for additional three year terms. The supervisor is given the authority to employ staff sufficient to produce the mandated forecasts.

The new law further requires that forecasts be prepared four times each year. 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 to be submitted to the governor and legislature on of 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, optimistic and pessimistic forecasts 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 shall have the same effect as if approved by the council.

Initially, the Office of the Forecast Council, consisting of the forecast supervisor and staff, was included in the Research Division of the Department of Revenue. In November 1984 the Office of the Forecast Council became an independent unit from the Research Division and was put under the Director's Office. Chapter 229 (SSB 5206), Laws of 1990 separated the Office of the Forecast Council from the Department of Revenue and made it an independent entity.

An economic and revenue work group was also created to promote the free flow of information and to promote legislative input into the preparation of forecasts. The work group originally consisted 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 Ways and Means committee of the House of Representatives. The workgroup was also created to provide technical support to the economic and revenue forecast council.

At the same time that the Economic and Revenue Forecast Council and work group were formed, the Governor's Council of Economic Advisor's was created by Executive Order 8402. 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 reestablished by Executive Order 9005 in 1990.

In the chronology of a typical forecast the supervisor and staff of the Office of the Forecast Council meet with the work group to discuss the preliminary U.S. and state economic forecasts. The Office of the Forecast Council produces preliminary economic forecasts for the U.S. and Washington. These preliminary forecasts are then reviewed and discussed by the Governor's Council of Economic Advisors in the presence of the Governor and members of the Economic and Revenue Forecast Council. Shortly after this meeting the Economic and Revenue Forecast Council meets to review the comments made by the Governor's Council of Economic Advisors and make recommendations and give instructions to the forecast supervisor. The work group also meets a second time to discuss the recommendations and instructions given by the members of the Forecast Council and how they will be incorporated into the final economic forecasts. Once the final economic forecasts for the U.S. and the state are completed work begins on the General FundState revenue forecast. The economic forecasts are completed first because data from the economic forecasts are used in the models that are used to produce the revenue forecasts. Some components of the revenue forecast are prepared by other agencies, but the Office of the Forecast Council has the responsibility of general oversight and approval of these component forecasts. Meetings are held between the responsible agencies and the supervisor and staff of the Office of the Forecast Council to review and refine these forecasts from other agencies. Forecasts of the major taxes, including the sales and use tax, the Business and occupation tax, state portion of the property tax, the real estate excise tax, cigarette tax and timber excise tax, are prepared by the Office of the Forecast Council. Once all the components of the revenue forecast are prepared, the members of the Economic and Revenue Forecast Council meet with the forecast supervisor to discuss and approve the revenue forecast. In the process of forecast preparation optimistic and pessimistic scenarios for both the economic and revenue forecasts are prepared as required by law. Economic and revenues forecasts based on a poll of the Governor's Council of Economic Advisors is also prepared. In the past, additional scenarios, as requested by members of the Economic and Revenue Forecast Council, have also been prepared. Once approved, the revenue forecast becomes the official General FundState revenue forecast for Washington State.