(The Center Square) – With the 2025 session just around the corner, legislative leaders from the four caucuses have expressed their varying views on the causes of Washington state’s projected $10 billion to $12 billion operating budget deficit, including how to address the gap.
Those differences were articulated during a legislative preview at Tuesday’s Washington Observer 2024 Re-Wire Conference in Tacoma, which brought together state elected officials and others to discuss political hot topics.
The state Office of Financial Management projects an operating budget deficit of between $10 billion and $12 billion over the next four years, despite the state’s record $72 billion budget. OFM blames slowing revenue forecasts, rising costs and expanding need for the looming budget gap.
Democratic legislative leaders seemed to buy that rationale.
“The first step … is that we are going to need to scrub the budget,” Senate Majority Leader Jamie Pedersen, D-Seattle, said.
He went on to reference a Nov. 8 memo by the OFM director.
“And Gov.[Jay] Inslee, of course, has asked, and Pat Sullivan as the OFM director [has] asked agencies to do a serious scrub of their budgets and propose cuts, right?” Pedersen said.
Earlier this month, Inslee issued a directive freezing hiring, services contracts, goods and equipment purchases, and travel.
House Majority Leader Joe Fitzgibbon, D-Burien, blamed rising costs for the budget shortfall.
“Our budget situation is driven by a number of factors,” he said, going on to note that “the cost of maintaining a strong workforce is growing in our state.”
That includes escalating prices related to health care, child care, housing and transportation, Fitzgibbon explained.
Republican legislative leaders had a different take.
“It’s not as if this economic crisis, if you may, just dropped in our laps,” House Minority Caucus Chair Peter Abbarno, R-Centralia, said. “We saw it coming. There were red flags and people warned us about this, that we shouldn’t be creating new programs with unsustainable revenue sources, and now we’re stuck creating a bureaucracy that we’re going to have to start cutting back on.”
Deputy Senate Majority Leader Chris Gildon, R-Puyallup, also expressed skepticism regarding the nature of the budget deficit, referencing the fact that revenues for 2025-2027 are forecasted to be more than $5 billion higher than 2023–2025 revenues.
“Just to be clear, we don’t have a shortfall of revenue,” he said. “We will have about 5 billion more dollars next budget cycle than we had the last budget cycle – 5 billion more dollars, okay?”
Gildon said he does not know where the projected shortfall comes from specifically because he hasn’t seen a line-by-line accounting of the budget.
Potential solutions to the budget deficit generally broke down along party lines.
“If revenue is paired with important purposes, then I think we have a signal from the voters that they’re willing to accept that, and they largely upheld the work that we’ve done over the last six years,” Pedersen said, a reference to voters’ rejection of three initiatives on the fall ballot that would have repealed Washington’s capital gains tax, repealed the Climate Commitment Act, and allowed anyone to opt out of the WA Cares Fund, which provides money for long-term care insurance.
Pedersen went on to say, “So, you know, for those reasons, we are going to be seriously looking at a variety of options that might increase taxes on wealthy individuals and wealthy companies.”
Revenue options will be considered, according to Fitzgibbon.
“So, I think that means we will be pursuing revenue in our caucus, and we will be looking at the revenue options that ensure fairness,” he said. “Are there places where something is taxed but there’s a comparable service that is not being taxed where there is an inequity in how the tax is structured? Are there places where businesses or individuals with extraordinary wealth and extraordinary profits are not contributing their fair share to pay for those public services that our constituents rely on?”
Abbarno said tax hikes are a bad idea.
“Looking at efficiencies in government is going to be absolutely essential,” he said.
State government should be focused on becoming more efficient, cutting waste and prioritizing spending, Abbarno stated.
“At a time when people are struggling to make ends meet, looking at tax increases at any level, I think, is the wrong approach,” he said.
Fitzgibbon wasn’t entirely unsympathetic, saying Democratic lawmakers would do what they could to “avoid making cuts or tax increases that do involve pain.”
He explained, “I don’t think that there’s a scenario where you would see us get out of town without some cuts to the budget. I think within that we have to prioritize. We have to look at spending increases that are in law that haven’t taken effect yet. We have to look at things where one-time expenditures … have continued and ask hard questions about whether or not those are delivering what they promised…”
The 105-day 2025 legislative session convenes on Jan. 13.
