The state Economic and Revenue Forecast Council (ERFC) held its quarterly meeting today. The forecast of general fund–state revenue for the current biennium (2013–15) increased by $106.8 million to $33,546.6 million. The forecast of general fund-state revenue for the upcoming biennium (2015–17) increased by $129.4 million to $36,448.9 million.
This is the eighth consecutive meeting at which the forecast for the 2013–15 biennium has been increased.
Budget reports from legislative fiscal committees often roll-up three accounts; the general fund–state, the education legacy trust account and the Washington opportunity pathways account. We refer to this three-account roll-up as the NGFS+. For the NGFS+ the forecast of revenue for the 2013–15 biennium increased by $134.3 million to $34,201.2 million, while the forecast for the 2015–17 biennium increased by $139.6 million to $37,124.4 million.
(The winter update to the revenue forecast had been originally scheduled for March 20. The early action supplemental budget (HB 1103), which the governor signed yesterday, moved the update meeting up to today.)
At noon the Economic and Revenue Forecast Council issued its monthly Economic and Revenue Update. Here are the key bullets on revenue from the summary:
- Major General Fund-State revenue collections for the January 11 – February 10, 2015 collection period were $53.8 million (3.8%) higher than the November forecast.
- Cumulatively, collections are now $69.0 million (1.5%) higher than forecasted.
- Last month, there were several large one-time assessment payments and re-funds that totaled $21.2 million. In addition, a $21.0 million refund that was forecasted for the month is now expected to occur in March instead. Had the refund occurred when forecasted, and the one-time payments not occurred, cumulative collections would have been $26.8 million (0.6%) higher than forecasted.
- Because the $21 million refund is still expected to occur, the effective cumulative surplus is $48.0 million (1.1%).
Here is a chart snipped from the Update showing monthly seasonally-adjusted Revenue Act collections since 2004.
This is the third collections report since the revenue forecast was last revised in November. Overall state revenues are on track: This month’s strong showing offsets weakness in last month’s report.
The next collection report is due on March 11. These will be followed by a revised revenue forecast on March 18.
The latest episode of our In Focus podcast is above. In it, Lew, Kriss and I talk current events.
Some relevant links:
As we wrap up the week, here are some items of interest:
- The Office of Financial Management released a paper on the impacts of I-1183 (liquor privatization). Sample line from the report: “Thus, pre-privatization, the LCB mission was achieved: to induce and maintain a liquor market characterized by allocative inefficiency, inhibiting full market demand.”
- Good editorial from the Seattle Times: “Washington apple growers embrace globalization’s rewards — and risk.”
- Jon Talton on UW President Michael Young moving to Texas A&M: “Young was said to be impressed by the willingness of Texas lawmakers to invest in higher education.”
- NPR has a map showing the most common job in each state from 1978 to 2014. Watch as Washington’s most common job moves from secretary to software developer.
As Jim Camden at the Spokesman-Review reports, yesterday the Senate Commerce and Labor Committee held a hearing on bills that would allow for a lower minimum wage for teenagers (SB 5421 and 5422). One part of the hearing stood out to me, and Camden notes it in his blog post:
Democrats on the committee criticized the proposals, and argued that unemployment rates for young adults are higher in Idaho.
This is not correct. According to the Bureau of Labor Statistics, in 2014, the unemployment rate for those aged 16-19 in Washington was 23.2 percent. For those aged 20-24, it was 14.3 percent. In Idaho, the unemployment rate for those aged 16-19 was 14.7 percent and for those aged 20-24 was 9.6 percent. (The story is the same for 2013.)
We wrote a policy brief last year on the teenage unemployment rate in Washington.
Negotiators working on a new contract for dockworkers at West Coast seaports, which handle about $1 trillion worth of cargo annually, have resolved a key dispute in their difficult talks, an association representing employers said Monday. . . .
The new agreement addresses neither wages nor pensions, but what would seem an ancillary issue: who maintains and repairs the truck beds used to haul containers of cargo from dockside yards to distribution warehouses. Chassis repair became a big stumbling block, however, because automation at seaports is expected to take jobs — and the International Longshore and Warehouse Union wants to find new members where it can.
But even with this progress, as the Wall Street Journal notes,
it will take months to end the widespread pain, freight disruptions, and losses caused by the massive cargo traffic jam.
The near-paralysis at the ports is rippling through the economy. Railroads are reducing service to the West Coast. Cargo ships have slowed down—and even turned around—as containers have stacked up at the ports. . . .
The Economist, under the striking title “Watching fruit rot,” writes about the impact this is having on West Coast port competitiveness:
Meanwhile, frustrated exporters and importers will find other routes. In a recent survey by the Journal of Commerce, 60% of shippers said they had begun redirecting cargoes away from America’s West Coast ports. Once that business leaves, it may never return. Western ports have already lost market share to the East Coast since 2002, when failed labour talks led to an 11-day lockout and a total shutdown.
More ominously, the Panama Canal is being widened to accommodate larger ships. That task will soon be completed, allowing ships from Asia to bypass the West Coast entirely and deliver goods directly to the Eastern seaboard. Jacksonville, Florida opened a new container terminal in 2009; traffic from Asia is already booming, even before the new-look Panama canal opens.
Indeed, the Journal of Commerce has an example of cargo moving elsewhere:
Labor disputes on the West Coast and a recovering national economy sent record-breaking cargo volumes to Georgia ports in 2014. . . .
While disputes on the West Coast continue to snarl traffic in and out of Los Angeles-Long Beach, Oakland and the Pacific Northwest, Foltz said strategic investments on his end have been able to entice shippers to Georgia’s congestion-free seaports.
As a result, December, usually one of the slowest months of the year, marked Georgia’s second-busiest month on record, moving 277,633 TEUs.
Meanwhile, in a broader note about trade, Peter Tirschwell writes in the Journal of Commerce about the problem of port congestion:
[Moffat & Nichol economist Walter] Kemmsies said the biggest threat to global trade isn’t protectionism, war, terrorism, disease or natural disaster. Instead, it’s mounting congestion at ports around the world, a phenomenon that’s been building for years and burst out into the open in 2014.
“That’s my big fear for global trade,” Kemmsies said.
With a growing middle class throughout the developing world demanding a greater quantity and variety of consumer goods, the pressures are growing. The United Nations projects the middle class globally will more than double in size in the next 15 years, rising from about 2 billion today to 4.9 billion in 2030. “If we actually get that many people — almost 5 billion — in the global middle class, our industry is going to completely collapse. The congestion will be that severe,” Kemmsies said.
The idea that port congestion isn’t just temporary is gaining currency, despite the counterintuitive reality that global trade is likely to slow this year. There is a lengthy list of reasons for this, but they all add up to the same conclusion: The hardships U.S. shippers are experiencing at West Coast ports, even if it’s partly the result of longshore labor slowdowns, is just one example of a phenomenon playing out globally. No matter where you’re importing or exporting, if it’s moving in a marine container, you should be planning potentially weeks of additional lead time into your supply chain.
That the middle class is growing globally seems like an excellent problem to have.
According to the National Agricultural Statistics Service, the value of Washington’s agricultural production was $10.2 billion in 2013. (Up from $9.97 billion in 2012.) This is a new record high. Additionally, “Record high values of production were established for five of the top ten Washington commodities, including milk, potatoes, cattle and calves, grapes, and pears.”
As shown in the table below, apples are still Washington’s highest value agricultural commodity ($2.2 billion), though their value declined by 11.8 percent from 2012 to 2013. Milk is now second ($1.3 billion), as wheat falls to third ($1.0 billion). Hops jumped up quite a bit, from 14th to 10th — a 40.3 percent increase in value.
More at the link, including a table that shows how Washington crops and livestock rank nationally.
Yesterday Opportunity Washington: Priorities for Shared Prosperity was launched. Opportunity Washington was developed by the Washington Alliance for a Competitive Economy (WashACE), which is a partnership of the Association of Washington Business, Washington Roundtable, Washington Research Council and Enterprise Washington.
Opportunity Washington is “a roadmap for expanding Washington’s culture of opportunity to individuals, families, employers, and communities in every corner of the state.” The main priorities are:
Alaska Airlines CEO Brad Tilden helped launch Opportunity Washington at the AWB Legislative Summit in Olympia. See here for AWB’s take.
Close to our hearts here at the Research Council is (surprise!) the research behind the initiative. See here for the full report, which “identifies a long-term policy framework that state leaders should pursue to build on current strengths, address areas for improvement, and ensure Washingtonians have access to rewarding life and career opportunities.”
New data from the Current Population Survey shows that union membership in Washington declined in 2014, both in absolute numbers and as a percentage of total employment. In 2014, Washington’s total union membership was 490,112 (compared to 544,986 in 2013) and the percent of employment that was unionized was 16.8 (compared to 18.9 percent in 2013).
The U.S. Bureau of Labor Statistics reported on the national numbers (which also declined since 2013) and Professors Barry Hirsch (Georgia State University) and David Macpherson (Trinity University) estimated the rates of public- and private-sector unionization by state.
The public-sector unionization rate in Washington was 48.5 percent (14th highest in the nation) and Washington’s private-sector unionization rate was 10.9 percent (4th highest).