Washington State Capitol (Jerry Cornfield/Washington State Standard)
Washington State’s budget is, to put it nicely, in a world of hurt.
There is a wide gap between what the state collects in taxes and what it must pay for its obligations in education, human services, health care, corrections and other day-to-day government operations.
On paper, the gap is billions of dollars wide. Governor Jay Inslee determined this in early November between $10 billion and $12 billion through the next two budgets. It could be closer to $15 billion if the tab for new government contracts is added.
Those big numbers are projections. They represent the difference between the expected costs of government services and the money expected to be available to pay for them until mid-2029.
In other words, agencies need $10 billion to $12 billion — or more — to implement state-funded programs already promised in the next two budget cycles.
Start from the beginning
Washington works on a two-year budget. The current one ends on June 30, 2025 and is in balance. Not the next budget. Not even the one after that. That’s the multibillion-dollar challenge for state lawmakers and the next governor, Bob Ferguson, when the legislative session begins in January.
This isn’t a total surprise. The supplementary budget approved during the last session shows that state expenditures exceed tax collections. Lawmakers and Inslee tapped reserves and used the latest federal pandemic aid to make ends meet.
Last Monday, the House Appropriations Committee heard the issue the expected budget deficit amounts to $4.35 billion in the 2025-27 biennium and $6.7 billion in the 2027-29 biennium. That’s a gap of $11 billion – and doesn’t include the roughly $4 billion cost of new collective bargaining agreements.
There are several factors behind these numbers, explains Mary Munroe, the committee’s budget coordinator.
Although the economy is on a solid basis, it generates less tax revenue. Consumer spending is slowing after a post-pandemic spike. Home sales have also fallen. And the capital gains tax doesn’t yield much as originally predicted.
In total, over four years, there will be $1 billion less in revenue than lawmakers anticipated last session.
Demand for social services, health care, education and other government-funded programs has increased. And forecasts show that the number of cases will continue to rise. Some recently passed laws will expand participation in the program in coming years. Serving more people means hiring or contracting more employees. Inflation will also increase costs.
How did it get so big?
In September, after agencies submitted requests for the 2025-2027 budget to Inslee, the total for “maintenance level” needs was $11.5 billion, according to the Office of Financial Management, the governor’s budget office. In budget language, maintenance-level spending refers to how much agencies predict they will have to pay for programs already written into law.
The Department of Social and Health Services, which serves nearly 2 million people, sought $3 billion. This would cover an expected increase in the number of low-income people and families receiving financial assistance. There are also costs associated with more people receiving care at home and moving into single-family homes for adults, assisted living centers and nursing homes.
The Ministry of Children, Youth and Families will manage expenditure from 2021 Fair Start for Children Act. The landmark law expands and guarantees access to state-funded early learning programs and subsidized child care for families with lower household incomes. It funded new slots for providers and expanded how many families can use them.
As a result of the law, spending for the state’s Early Childhood Education and Assistance and Working Connections Child Care programs will increase as eligibility increases. These changes amount to $941 million in the next budget and almost $2.1 billion over four years.
Declining document collection costs are behind the Commerce Department’s request for $403 million to maintain programs such as emergency shelter grants, temporary rental assistance and support for homeless youth. This money comes from fees people pay when they file real estate deeds and other paperwork with county auditors.
The department has budgeted $908 million for fee-funded services through 2027, but only about $505 million is expected to come in, partly due to slow home sales.
A $210.5 million request from the state Council of Community and Technical Colleges comes after voters pass Initiative 732 in 2000. It ushered in the requirement for annual increases in the cost of living for teachers and other staff of the colleges. Unless the law is changed, these increases will be 4% on July 1, 2025 and 2.6% on July 1, 2026.
Soaking up red ink
Gov. Jay Inslee and majority Democratic leaders in the Legislature have signaled their approach to closing the void and balancing the budget.
Step 1: Save money now.
Inslee on Dec. 3 ordered government agencies to freeze “most non-discretionary and non-essential” hiring, as well as service contracts, purchases and travel.
Step 2: Postpone costly obligations.
Inslee sent agency leaders there tell him where savings are This can be achieved by potentially delaying program improvements.
An example is the Fair Start For Kids Act. That law sets specific dates for expanding eligibility and increasing provider compensation over the next four years. Eliminating these deadlines could reduce expected maintenance needs by approximately $2.1 billion.
“You are the legislature and you have the power to police the law,” Munroe, the budget coordinator for the House Appropriations Committee, told members Monday.
Step 3: Open the income tap wider.
Democrats are unapologetically seeking new or higher taxes to close the gap.
House Speaker Laurie Jinkins and Senate Majority Leader Jamie Pedersen view voters’ retention of the capital gains tax in the November election as a sign that they are willing to tighten the pockets of wealthy individuals and corporations. to tap. And Democratic budget writers in both chambers are almost convinced that revenue will be one piece of the solution to the budget puzzle.
What could they do??
There is interest in trying to implement a statewide version of Seattle’s JumpStart tax companies with large payrolls and well-paid employees. Businesses with an annual payroll of $8.8 million in the city and at least one employee earning $189,371 or more in 2025 were required to pay this.
Expect another walk at one wealth tax that would introduce a 1% tax on intangible assets above $250 million, such as cash, bonds and stocks. The same goes for a transfer tax when selling expensive properties. That proposal too didn’t make it to the finish last session.
And a road use charge could be considered to finance transport. Drivers would pay a fee for each mile driven, while receiving credits for gas taxes paid.
Senate Minority Leader John Braun, R-Centralia, and House Minority Leader Drew Stokesbary, R-Auburn, see tax-free paths to eliminating the deficit, though not all are easy.
“This is a spending problem. We are not in a recession,” Braun said this week.
He said it would make “a lot of sense” to delay improvements to Fair Start for Kids. Braun said that if the state also stopped funding the collective bargaining agreements, these two decisions would wipe out half of the deficit, leaving a “manageable number.”
Good ideas must be prioritized. But Stokesbary said slowing government growth and not adding taxes is the better option.
What about the new guy?
Bob Ferguson will be sworn in as governor next month. As a candidate, he dodged answering questions about the state’s spending habits and tax policies.
Even as an elected governor, not much is said. In a recent interview with The Seattle Times, he said he wanted to sift through the budget for savings and efficiencies before entering into a conversation about taxes. But Ferguson did not rule out supporting new or higher taxes.
Reporter Laurel Demkovich contributed to this article.
