Dr. Chang Mook Sohn
Office of Forecast Council
711 South Capitol Way, Suite 300
P.O. Box 40912
Olympia, WA  98504-0912
(360) 753-2061

OLYMPIA, March 18, 1999—The U.S. economic expansion has shown surprising strength in recent months.  Rather than slowing as expected in November, it has actually accelerated.  GDP growth in the fourth quarter of 1998 was the strongest since 1996 and the momentum is expected to carry over into 1999.  Despite an essentially unchanged aerospace forecast and a slight deterioration in overseas markets, the higher U.S. forecast resulted in an upward revision in the Washington economic and revenue forecast.

The revision to the General Fund-State revenue forecast for the current and next biennia combined is an increase of $158.5 million.  The forecast for the 1997-99 biennium of $19,583.5 million is $65.0 million higher than expected in November of which $14.2 million is due to collection experience since November.  The remaining $50.8 million represents an increase in the forecast for the remainder of the current biennium.  The forecast of $20,272.7 million for the 1999-01 biennium is $93.6 million higher than expected in November.  The forecast revision for the next biennium is less than 0.5 percent of the total revenue for the biennium.

As required by law, optimistic and pessimistic alternative forecasts were developed for the 1997-99 and 1999-01 biennia.  The forecast based on more optimistic economic assumptions netted $146 million more revenue in the current biennium and $1,013 million more in the next biennium than did the baseline forecast while the pessimistic alternative was $134 million lower in 1997-99 and $1,017 million lower in 1999-01.  An alternative forecast based on the average view of the Governor’s Council of Economic Advisors yielded $5 million less revenue in the current biennium but $57 million more in the next biennium than did the baseline forecast.