(The Center Square) – The Washington State Economic and Revenue Forecast Council decided to reject a more optimistic economic assumption that would have presumed more revenue, as some members warn of increasing tort debt liability.
Under state law, the operating budget must be balanced within a four-year period, which means spending cannot exceed the revenue forecast. However, that same law allows the Legislature to adopt a 4.5% economic growth assumption if it is higher than ERFC’s forecast. However, in the budget enacted this session, legislators chose not to use the 4.5% growth rate.
ERFC debated whether or not to use that figure as part of its economic and revenue forecasts for the 2027-2029 biennium; had they adopted the 4.5% growth rate, it would have added a $1 billion to the state’s assumed revenue by that biennium.
Even though the council chose to adopt a revenue forecast that does not include the 4.5% rate, Rep. Chris Gildon, R-Puyallup, raised concerns at ERFC’s Tuesday’s meeting over the state’s forecasted tort liability, which is not included in forecasting. According to Gildon, the current liability is roughly $500 million and could go up to $1 billion by the end of the four-year forecast planning.
Rep. Ed Orcutt, R-Kalama, also inquired if there was a way to have the forecast account for tort liability.
“We know there’s liability out there, and it has not been accounted for,” he said. “If it’s not part of the budget … and it has not been written in as expenditures in the budget, I’m really concerned that it’s being ignored for the purpose of this outlook. There’s no intent involved there, but it’s just one of those things where if you know there is there liability out there.”
Office of Financial Management Director K.D. Chapman-See told ERFC that not all tort debt is paid through the state’s general fund account, which is why it’s not included in the budget expenditures.
“We have had more unpredictability in those tort claims in recent years, but we do work within actuary and OFM intends to continue to work with our legislative partners over the course of the interim to work on how we smooth that curve over the next several years,” she said. “This is an issue that we’re aware of tracking its nominee or general fund account, which is why it’s not on the outlook.”
Washington State Treasurer Mike Pellicciotti, a former legislator, told ERFC that “the Legislature will need to address in the years ahead, but it’s essentially a liability, right? It’s a debt that currently exists, and it is different than the forecast that I think is currently being looked at.”
However, he added that “I don’t think it changes the need to address it. What I’m hearing is what is a large growing number that needs to be addressed and can’t be just an accumulating debt. It’s most certainly a growing liability the Legislature needs to address, because at some point the number gets to a point where it’s a significant debt that needs to be reconciled, but is different than the forecast vote I think that is taking place today.”
