Washington's newest state forecast knocked nearly $900 million off revenue projections for the next four years.
The lower official estimate comes as the state wrestles with what Gov. Bob Ferguson describes as a $15 billion operating budget shortfall over the same period.
The Office of Financial Management released
The good news from the OFM: forecast revenue for the current 2023-2025 biennium is up $54.4 million to $66.44 billion.
The bad news: projected collections are down $479 million for the 2025-2027 biennium that starts July 1, and $420 million for 2027-2029, for a net decrease of $845 million.
State lawmakers have been debating tax increases and program cuts to close the budget gap as they hit the final stretch in budget talks.
Democrats control both houses in Olympia, and the governor's office.
On Thursday, Senate Democrats
"Rather than balance our budget entirely through devastating cuts or doubling-down on our regressive tax code on the backs of working families, we're asking the wealthiest among us to finally do their part and pay what they owe," Sen. Noel Frame, D-Seattle, vice chair of the Senate Ways & Means Committee for Finance, said in a statement.
The House and Senate budget leads are expected to release the omnibus operating, capital construction and transportation budget proposals next week.
After the budget proposals drop, lawmakers will hammer out compromises with the aim of approving the budgets before the legislative session ends April 27. The state approves separate budgets in the three categories rather than an all-in-one.
Town halls held by Washington lawmakers the weekend of March 15-16 to discuss the state's budget woes universally drew constituent concerns about what is occurring on the federal level, Democratic leaders said at a press conference Tuesday.
"We saw record numbers of people at all of our town hall meetings," said House Speaker Laurie Jinkins, D-Tacoma.
Most of the comments at her town hall were related to concerns about potential cuts to Medicaid and Social Security, Jinkins said, but attendees also asked that the state not adopt an "all cuts, no revenue" budget.
On the federal level, constituents are "recognizing that we can only do so much," Jinkins said. "On the state level, they are asking us to make sure that we aren't cutting and eliminating programs that save people's lives."
Talk of changing to a more progressive tax structure that could involve adopting a wealth tax, or tax on high income residents, has been a frequent topic this session.
Washington doesn't have an income tax.
Former Gov. Jay Inslee had introduced a budget alternative in December that involved no tax increases, but would require steep program cuts. He suggested instead of making steep cuts, the state should adopt a 1% tax on individual wealth above $100 million, which he estimated could bring in $10.8 billion over the next four years.
His successor, Ferguson, who took office in January, has been leaning into cuts over tax increases. Several different taxes had been proposed, even ahead of the Senate Democrats announcement Thursday, but Ferguson hasn't come out in support of any of them. His budget proposal
The final decisions on the operating budget, which is to be heard by the House on Monday, before crossing over to the Senate for a vote, will be made based on the economic forecast, Jinkins said.
"What we have seen thus far, it's actually actions at the federal level that are driving our economic forecast," Jinkins said.
"The revenue forecast shows a modest decline in projected revenue, which is what we expected," state Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee, said in a statement.
"While it doesn't change the broader fiscal challenges we face, it reinforces the need for a balanced and sustainable approach as we finalize the 2025-27 operating budget."
For the 2025-2027 biennium, the lower forecast brings projected revenues down $479 million to under $71 billion. The 2027-2029 biennium would see a $420 million reduction based on the latest forecast, bringing projected revenue to $76.4 billion.
The OFM projects $66.44 billion of revenue for the current biennium that ends June 30.
Sen. Majority Leader Jamie Pedersen, D-Seattle, said legislative leaders have been meeting with the governor regularly, and they align with Ferguson on the need to make reductions first. But "nobody has wanted to make cuts necessary to cover the entire deficit," he said.
Pedersen said in a statement Thursday's tax proposal "reflects what we have heard from our communities: the wealthiest few should share more of the responsibility of investing in public schools and the services people need."
The proposals include: a $10 tax on every $1,000 of assessed value of financial assets including stocks and bonds held by individuals with more than $50 million of these assets; a 5% payroll tax on large employers for payroll expenses above the Social Security threshold of $176,100 per year; raising the property tax from its current 1% cap to grow based on population and inflation; a repeal of 20 tax exemptions and a half percent sales tax cut.
Sen. Chris Gildon, R-Puyallup, the GOP budget leader, said the lower revenue forecast is more reason to keep a lid on new spending and avoid tax increases.
"Even with today's forecast the state expects to have $4.5 billion more over the next two years, so the sky is not falling," Gildon said in a statement. "Still, our chief economist repeatedly cautioned us to expect slow revenue growth. Legislative budget writers should take heed and show restraint going forward, especially with the uncertainty about actions at the federal level that could affect our situation."
Republicans continue to support limiting new spending to core priorities like K-12 and public safety, preserving social services and protecting the rainy-day fund, he said.
"If our Democratic colleagues deplete the rainy-day fund and abuse their taxing authority this year, it could put us in a very vulnerable position next year," Gildon said.
Of the Democrats' proposal to tap reserves, Jinkins said "the rainy day fund is there for when it's raining, and it's raining."
She compared budgeting to dealing with a public health crisis, saying when you are in an emergency you address it with the resources you have available, because then you are further ahead when the next crisis hits.
Senate Bill 5392, a bill sponsored by Robinson that would move the entire $1.6 billion from the budget stabilization fund to the general fund by June 2026, is currently in that body's Ways and Means committee. It would replenish the account by repaying it in two installments in 2028 and 2029.
State Treasurer Mike Pellicciotti, a Democrat, has opposed depleting the rainy day fund.
"What cannot be an option at this time is depleting our state reserves, which are critical for our financial strength and state sovereignty," he wrote in a
The state is rated Aaa by Moody's Ratings and AA-plus by S&P Global Ratings and Fitch Ratings. It has a positive outlook from S&P and stable outlooks from Moody's and Fitch.
The lower projected revenue increases, partly offset by capital gains and estate taxes, are caused by lower interest incomes and an expected $400 million drop from November's figures for sales taxes and business and occupation taxes in the fiscal 2027-29 biennium, according to the nonpartisan Economic and Revenue Forecast Council.
"This change reflects lower actual revenues and a generally lower forecast for Washington personal income, employment and building permits that likely mean lower revenues in the future compared to last fall," Dave Reich, forecast council executive director, said in a statement.
The revenue forecast "confirms that our financial outlook remains challenging," OFM Director K.D. Chapman-See said in a statement.
