Economic & Revenue Forecast Council Analysis of Governor’s Budget Shows Negative $2 Billion General Fund Balance in 2021

This isn’t good news. The Economic and Revenue Forecast Council met yesterday to adopt a budget outlook based on the governor’s proposal. The balance sheet presents a daunting picture. By the end of Fiscal Year 2021, the outlook projects a negative balance of $2.041 billion; draining the rainy day fund of $1.445 billion leaves a negative balance of $596 million.

As we’ve written, the I-1351 class size initiative compounds the problem.  The ERFC writes,

The largest adjustment in K-12 education is an increase of $2.95 billion in 2017-19 and $5.55 billion in 2019-21 for providing funding for K-12 compensation pursuant to the McCleary court decision. The Governor’s proposal also provides an increase of $330 million in 2017-19 and $631 million in 2019-21 for implementing class size reductions pursuant to Initiative 1351. The amounts noted for Initiative 1351 are in addition to the amounts shown in the maintenance level section of the Outlook.

The shortfall, remember, comes despite tax increases in the governor’s proposal that would boost taxes $4.4 billion in the 2017-19 biennium, rising to $7.1 billion in 2019-21. 

As the ERFC outlook notes, the governor’s proposal assumes legislation to suspend the four-year balanced budget requirement.

Although the governor’s budget is widely recognized as just an opening bid in a lengthy budget negotiation process, the ERFC analysis is a useful reminder of the complexities budget making this session.