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Sales tax, B&O tax, and Payroll Expense Tax revenue exceeded prior projections, producing a net gain of roughly $8.8 million over the three-year forecast period.
Budget
October Forecast: Do we have more money or not?
The Office of Economic and Revenue Forecasts’ (OERF) October revenue forecast is $8.8 million above what the Mayor’s proposed budget assumes for 2026-28. But that’s only because the forecast follows current law, which has the payroll tax health care exemption expiring. Extending it means less Payroll Expense Tax (PET) revenue, which turns the $8.8 million gain into a $2.8 million shortfall. NOTE: Updated, see below. Seattle Channel OERF Presentation
The forecast office puts 2026-28 revenue $8.8 million above the proposed budget which assumes Council extends the payroll tax health care exemption, and the forecast does not. With the extension, the gain becomes a $2.8 million shortfall.
The forecast includes $11.5 million more payroll tax revenue over 2026-28 than the proposed budget does. That’s because the forecast assumes the health care exemption expires, which adds $5.7 million in 2027 and $5.8 million in 2028, and the proposed budget assumes it’s extended. That gap is nearly all of the $12.4 million payroll tax increase in the forecast. With the extension, the +$8.8M becomes -$2.8M.
The other gains were sales tax (+7.1M), General Fund interest income (+$8.9M, on higher Treasury yields), and B&O (+6.9M). OERF staff said they have less confidence in the B&O forecast than in past years, citing the B&O restructure and shifted filing deadlines. REET offset those gains, falling $19.5 million as mortgage rates passed 7% and the home sales forecast dropped.
Seattle-area employment fell year over year while U.S. employment grew about 0.2%. Education, health, and World Cup-related leisure and hospitality added jobs, but wholesale and retail trade and tech lost them. OERF projects roughly flat jobs in 2026 and 2027 and doesn’t expect employment to move significantly past pre-pandemic levels until 2028.
NOTE: Updated Oct. 25 to reflect the differing PET revenue assumptions which then changed this brief’s take-away.
Reality
The proposed budget and the forecast assume different payroll tax laws, indicating the significance of discreet policy assumptions and decisions on the overall bottom line.
KEY STATS
- $8.8M above the proposed budget over 2026-28; about -$2.8M with the health care exemption extended.
- $11.5M of the payroll tax increase comes from the exemption assumption.
- Sales tax up 11.6% year over year through July, with about 8 points from sectors affected by the new public safety sale tax (ESSB 5814)
- REET down $19.5M over 2026-28, with a roughly 10% decline expected in 2026.
- In the pessimistic scenario, which OERF puts at about 25% odds, the region loses roughly 58,000 jobs.
Receipts
- SponsorOffice of Economic and Revenue Forecasts
- CommitteeEconomic and Revenue Forecast Council
- VoteNone. Baseline scenario adopted without objection.
- Fiscal noteproposed budget assumptions -> +$8.8M over 2026-28 under current law; -$2.8M with the health care exemption extended.
Budget documents
The documents behind this brief. Saved PDFs preserve the version we read; original links may change.
Economic and Revenue Forecast October 2026
Office of Economic and Revenue Forecasts
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