Understanding Washington’s multi-billion dollar budget hole • Washington State Standard

Washington state’s budget is, to put it bluntly, in a world of crisis.

There is a large gap between what the state collects in taxes and what it must pay for its obligations in education, social services, health care, corrections, and other day-to-day government operations.

On paper, the gap is billions of dollars wide. In early November, Governor Jay Inslee pointed this out between 10 and 12 billion US dollars through the next two households. Add in the bill for new public employee contracts and it could be closer to $15 billion.

These big numbers are predictions. They represent the difference between the expected cost of government services and the money expected to be available to pay for them by mid-2029.

Put another way, agencies will need $10 billion to $12 billion — or more — to implement federally funded programs already promised in the next two budget cycles.

Start over

Washington operates on a two-year budget. The current one ends on June 30, 2025 and is balanced. The next budget is not. Not even the one after that. That’s the billion-dollar challenge facing state lawmakers and the next governor, Bob Ferguson, when the legislative session begins in January.

This isn’t a complete surprise. The supplementary budget approved in the last session showed that government spending exceeded tax revenues. Lawmakers and Inslee dipped into reserves and used up the last of the federal pandemic aid to make ends meet.

Last Monday, the House Budget Committee heard this projected budget deficit is $4.35 billion in the 2025-27 biennium and $6.7 billion in the 2027-29 period. That’s a gap of $11 billion – and that doesn’t include the roughly $4 billion for new collective bargaining agreements.

There are several factors behind these numbers, said Mary Munroe, the committee’s budget coordinator.

Although the economy is on solid footing, it generates less tax revenue. Consumer spending is slowing after a post-pandemic surge. Home sales are also down. And the capital gains tax doesn’t bring in that much as originally predicted.

In total, there will be $1 billion less in revenue over four years than lawmakers expected last session.

Demand for social services, health care, education and other publicly funded programs is increasing. And forecasts show that the number of cases continues to rise. Some recently passed legislation will expand program eligibility over the next few years. Serving more people requires hiring or contracting with more workers. Inflation will also drive up costs.

How did the gap get so big?

After agencies submitted requests for the 2025-27 budget to Inslee in September, the total increase for “maintenance needs” was $11.5 billion, according to the Office of Financial Management, the governor’s budget office. In budget language, maintenance spending refers to how much agencies are expected to pay for programs already in law.

The Department of Social and Health Services, which serves nearly two million people, requested $3 billion. This would cover a projected increase in the number of low-income people and families receiving cash assistance. Costs also arise as more people receive home care and move into retirement homes, assisted living facilities and nursing homes.

The Ministry for Children, Youth and Families is reviewing spending from 2021 Fair Start for Children Act. The groundbreaking law expands and guarantees access to federally paid early intervention programs and subsidized child care for families with lower household incomes. It funded new slots for providers and expanded the number of families who can use them.

As a result of the law, costs for state early childhood education and care programs and Working Connections child care programs will increase as eligibility increases. These changes amount to $941 million in the next budget and nearly $2.1 billion over four years.

Declining document capture fee revenue is driving the Commerce Department’s request for $403 million to maintain programs such as emergency housing grants, temporary rental assistance and assistance for homeless youth. That money comes from fees people pay when they file property deeds and other documents 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, due in part to sluggish home sales.

A $210.5 million request from the State Board of Community and Technical Colleges is headed to voter approval Initiative 732 in 2000. It led to a call for annual cost-of-living increases for faculty and other college staff. Unless the law is changed, these increases will be 4% on July 1, 2025 and 2.6% on July 1, 2026.

Soak up red ink

Governor Jay Inslee and the leaders of the majority Democratic caucus in the House have signaled their approaches to closing the gap and balancing the budget.

Step 1: Save money now.

Inslee ordered state agencies on Dec. 3 to freeze “most non-voluntary and non-essential” hiring, as well as service contracts, purchases and travel.

Step 2: Delay costly commitments.

Inslee instructed agency leaders Tell him where savings are being made This could be achieved through possible deferral of program improvements.

One example is the Fair Start For Kids Act. This law sets specific dates for expanding eligibility and increasing provider salaries over the next four years. Eliminating these deadlines could reduce projected maintenance needs by approximately $2.1 billion.

“You are the Legislature and you have the power to control the law,” Munroe, the budget coordinator for the House Appropriations Committee, told members Monday.

Step 3: Open the tap further.

Democrats are unabashedly pushing for new or higher taxes to close the gap.

House Speaker Laurie Jinkins and Senate Majority Leader Jamie Pedersen see voters’ retention of the capital gains tax in the November election as a sign that they are comfortable tapping the wallets of wealthy individuals and corporations. And Democratic budget writers in both chambers all but insist that revenue will be part of the solution to the budget puzzle.

What could they do??

There is interest in implementing a statewide version of the JumpStart tax in Seattle Companies with high payrolls and well-paid employees. Businesses with an annual payroll of $8.8 million in the city and at least one employee who earned $189,371 or more in 2025 were required to pay it.

Expect another run at a Property tax that would introduce a 1% levy on intangible assets over $250 million including cash, bonds and stocks. The same applies to a property transfer tax when selling expensive real estate. This suggestion too didn’t reach the finish line last meeting.

And a road toll could be considered to finance transport. Drivers would pay a fee for each mile driven while also receiving a credit 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, although not all are easy.

“This is a spending problem. “We are not in a recession,” Braun said this week.

He said it would be “very logical” to delay improvements to Fair Start for Kids. Braun said if the state also withheld funding for the collective bargaining agreements, those two decisions would offset half of the deficit, leaving what he called a “manageable number.”

Good ideas must be prioritized. But Stokesbary said slowing state growth and not increasing taxes was the better option.

What about the new one?

Bob Ferguson will be sworn in as governor next month. As a candidate, he avoided answering questions about the state’s spending habits and tax policies.

Even as governor-elect, he didn’t say much. In a current interview He told the Seattle Times that he wanted to examine the budget for savings and efficiencies before engaging in a conversation about taxes. But Ferguson didn’t rule out supporting new or higher taxes.

Reporter Laurel Demkovich contributed to this article.