What do we do?
The Economic and Revenue Forecast Council (ERFC) supports statewide goals by accurately forecasting economic activity and state tax revenue for Washington State. ERFC is comprised of both legislative and executive members and the State Treasurer. Four times a year the organization adopts a bipartisan revenue forecast that is then used to build the state operating budget. The ERFC is also charged with providing the state budget outlook to increase transparency and to promote state government financial stability.
What else do we do?
The agency’s secondary goals are i) to provide timely information and analysis to our customers and ii) to promote state financial stability and transparency. Our objectives and strategies to meet these goals include:
- Provide timely, accurate responses to inquiries from individuals, the public and private sectors, and the press
- Use our website to display data and publications related to the revenue forecast and state and national economic activity
- Provide presentations on the state economy and the forecast process to private sector groups and public agencies
- Use the four-year Budget Outlook process and related documents to increase transparency of the state budget and state revenues
- Solicit customer input through biennial surveys and analyze feedback
- Provide the strategic plan to Economic and Revenue Forecast Council for review and constructive feedback
- Convene and participate in workgroups to review the economic and revenue forecasts and the Budget Outlook
How do we do it?
- Prepare quarterly General Fund-State and Near General Fund revenue forecasts for approval by the Economic and Revenue Forecast Council.
- Produce quarterly baseline, optimistic, and pessimistic forecasts of the national and state economy for approval by the Economic and Revenue Forecast Council.
- Prepare monthly reports to the Economic and Revenue Forecast Council and Workgroup Members, comparing tax collections with estimates and providing recent economic information.
- Monitor economic trends, re-estimate economic and revenue models, and update data sets.
The General Fund-State (GF-S) revenue forecast for the 2011-13 biennium was quite accurate; the average revenue variance per month (adjusted for non-economic factors) was 0% in FY 12 and 1.5% in FY 13. Our forecast of 2013-15 General Fund-State revenue has been quite stable. Excluding non-economic changes, our June 2014 forecast was 1.1% above the initial 2013-15 forecast made in February 2012.
We also assist other agencies with their forecasting processes. In fact, our credibility and performance encouraged the legislature to officially task us with the preparation of the state’s Lottery forecast. We have also been contracted by the Liquor Control Board on multiple occasions to assist with the development and re-estimation of the liquor model in past biennia. Overall, the agency has a strong reputation for accurate, unbiased data analysis and forecasting.
Assessment of External Challenges
The accuracy of the economic and revenue forecasts is strongly affected by the external environment. The primary external factors affecting forecast accuracy are revisions to external data and unforeseeable events. The economic and revenue forecasts depend upon data from a variety of sources, including the state and federal government. These data often undergo extensive and unpredictable revisions after they are used in a forecast. The revisions frequently extend several years backward into history. While the Economic and Revenue Forecast Council continuously monitors the accuracy of the data to the best of its ability, it cannot control or predict the full extent of data revisions. These revisions affect not only the data used in our state model, but also data that feed into the model used for the national forecast.
However, we actively work to understand data revision processes and to identify potential revenue changes due to administrative factors. We monitor the employment data collection and estimation techniques used by the U.S. Bureau of Labor Statistics and the Employment Security Department to understand any changes in employment survey techniques, and work with the Department of Revenue to obtain advance notice concerning audit assessments or court cases which may affect the revenue forecast.
Assessment of Internal Capacity and Financial Health:
The Economic and Revenue Forecast Council is one of the few state agencies that employs the same number of full time employees as it did when created. The capacity to take on additional tasks, ranging from the annual Economic Climate Study to the Budget Outlook, has been created by increasing the efficiency of our core forecasting duties.
Our funding has been adequate to sustain the agency but we do anticipate several challenges. These include the potential for increased lease payments, a lack of any clear method for funding cost of living increases, and potential reductions to technology, data subscription and staff development allotments.
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