Washington faces a projected $900 million state budget shortfall for the 2013–15 biennium and an even larger shortfall of nearly $1.1 billion for the following biennium (2015–17), according to a four-year outlook released today by the Washington State Economic and Revenue Forecast Council.

The outlook was released in conjunction with the November revenue forecast, which reduced General Fund revenue projections for the 2013–15 biennium by $88 million, compared to the previous quarterly forecast in September. The next two-year budget cycle begins July 1, 2013.

The Forecast Council’s revenue projection for the current biennium (2011–13) increased, but by only $8 million.

“Revenue collections are on track, but personal income is falling off slightly compared to our previous forecast,” said Steve Lerch, council executive director.  “Our overall forecast is down a very small amount as a result.”

Still, Gov. Chris Gregoire said she was encouraged by many of the economic indicators underlying today’s forecast, especially in the housing and export sectors.

“Housing is more affordable than it has been in a long time and aerospace remains strong,” Gregoire said. “While we are seeing clear signs of recovery, economic growth remains slow, and we have to ensure that every Washingtonian who wants a job has one.”

Gregoire, who is preparing her final budget before leaving office in January, noted that the Forecast Council’s estimated $900 million near-General Fund shortfall for 2013–15 is slightly better than what the Office of Financial Management had projected in a preliminary outlook in August. But she stressed that the outlook does not include any additional spending that will be needed to meet basic education needs identified by the state Supreme Court in the McCleary decision.

“We have a shortfall even before we begin trying to address McCleary,” Gregoire said. “I’ve instructed state agencies and my fiscal staff to scrub the budget for every possible savings. But, as I’ve been saying for months, it will not be possible to solve this problem entirely with spending cuts.

Today’s outlook is the first official four-year projection released by the Forecast Council under a new law adopted this year by the Legislature. The outlook compares projected revenue over the next four years to projected expenditures, including maintenance-level increases and all spending increases required by statutory or contractual obligations.

The Governor is required by law to propose a 2013–15 budget by Dec. 20. The Forecast Council will then release a new four-year outlook in January based on the Governor’s proposed budget. Under the new law (Senate Bill 6636), beginning with the 2013–15 budget, the Legislature will be required to adopt an operating budget that balances projected revenue and expenditures over two full biennia, or through the 2015–17 biennium.

Today’s 2011–13 revenue forecast marks only the second straight quarterly increase for the current biennium — the first time since 2007 that the state has seen consecutive increases. Over a four-year period beginning in the fall of 2007, the state’s revenue projection was lowered in 17 of 20 quarterly forecasts, declining by $12.6 billion during that period.

“Needless to say, we’ve already taken many deep and painful program cuts the past few years,” said OFM Director Stan Marshburn. “Finding new places to cut will be very challenging.”

Gregoire also noted that the state’s structural budget shortfall has been prolonged in recent years by an over-reliance on one-time fixes, including fund shifts and temporary cuts or revenue increases. She said minimizing one-time solutions should be a key principle in preparing a sustainable 2013–15 budget.

Today’s revenue forecast increases projected General Fund revenue for the current biennium to $30.9 billion. The Forecast Council’s forecast for the 2013–15 biennium now projects revenue collections will be about $33 billion.

While the Forecast Council’s four-year outlook shows revenue growing to about $36 billion in the 2015–17 biennium, it also projects a nearly $1.1 billion shortfall for that two-year budget.