(The Center Square) – In the final hours of the legislative session, state lawmakers passed budgets on Thursday to fill a multi-billion-dollar hole with new taxes, reserves, one-time transfers and some cuts.
Budget leaders on both sides of the aisle met on Wednesday for final negotiations after each chamber passed their respective supplemental operating and transportation budget proposals last month. Since they couldn’t agree on the opposite chamber’s amendments, the conferences proposed a compromise.
Both chambers passed those proposals Thursday, with seven Democrats voting against the operating budget with Republicans. The transportation and capital budgets received wide bipartisan support. The votes ultimately increased operating spending in the 2025-27 biennium from $77.9 billion to $80.2 billion.
Transportation spending will increase from $15.6 billion to $16.7 billion, and capital spending will rise from $7.5 billion to $8.4 billion. Much of this session’s focus was on filling another multi-billion-dollar operating budget deficit, with Democrats approving several bills Thursday to push the budget through.
House Democrats argued Thursday that the $2 billion increase will offset federal cuts under the Trump administration. House Republican Budget leader Rep. Travis Couture disagreed, noting that the impact on the state amounts to only a fraction of the spending passed Thursday, urging members to vote no.
“We will now have an $80 billion budget over the course of the biennium,” he said, “an almost 12% increase in spending after a multi-billion-dollar deficit and the largest tax increase in state history.
Gov. Bob Ferguson said the state faced a $2.3 billion deficit ahead of the state legislative session, but Thursday’s passage doesn’t put Democrats’ spending crisis in the rearview mirror. Future budget woes are anticipated in the years ahead as the party reconstructs the state tax code and expands spending.
Republican budget leaders said Wednesday that the final operating budget will result in a $878 million deficit by 2028, before coming out of the negative the following year if a new controversial tax holds.
“Apparently, some people think this budget is alarming,” Senate Democratic budget leader Sen. June Robinson punned after the chamber returned from a fire alarm. “I’m not very good at delivering jokes.”
Much of the 2025-27 supplemental operating budget was built around the millionaire’s tax Democrats passed earlier this week. The income tax on wages exceeding $1 million won’t start collecting revenue until 2029, but it allows Democrats to comply with statutes that require a balanced four-year outlook.
The House debated the income tax for over 24 hours straight before sending it to the governor’s desk.
The potentially unconstitutional tax won’t do much to increase spending during the 2025-27 biennium, as it mainly allows the majority party to avoid larger cuts now, thanks to billions of dollars in revenue in the years ahead. Still, if a court blocks the income tax, it could blow a hole in the operating budget.
“We don’t even know if this income tax that is assumed in our budget is going to hold up in court,” said Rep. April Connors, R-Kennewick. “This budget does not solve our long-term financial problems.”
Washington state residents have rejected an income tax on the ballot 10 times over the last century.
Connors said spending has more than doubled over the last decade or so, urging caution, as other Republicans have called the tax and operating budget a symptom of Democrats’ “spending addiction.”
Democrats balanced the 2025-27 operating budget by adjusting existing taxes and transferring $880 million from the state’s rainy-day fund to help fill the deficit. Budget leaders also utilized several other one-time transfers, including from state pensions for retired law enforcement officers and firefighters.
Republicans say the pension fund transfer sets a dangerous precedent for other retirement programs, while the majority argues that the pension fund has more than enough money to shoulder the burden.
“These are very challenging budget times,” Sen. Steve Conway, D-Tacoma, said during final debates.
The largest cuts were to state child care subsidy programs and public education. Lawmakers passed a new attendance policy dictating how much child care providers are reimbursed, reduced state funding for transitional kindergarten and running start, adjusted school bus depreciation schedules and more.
Democrats also eliminated tax exemptions for prescription drug providers and data centers, providing a little more money to help Democrats ultimately expand spending by $2 billion. Almost half of that is to help pay for the state’s rising legal liability, which the Legislature struggled to address this session.
The state currently touts about $2.1 billion in reserves, which will fall to $1.3 billion after the 2025-27 biennium, before rising to $3.3 billion after the 2027-29 biennium. However, those projections assume a $880 million repayment later in 2029 from the pension for law enforcement officers and firefighters.
If the courts were to block the new income tax, that could also impact the state’s reserves in 2027-29, since the tax assumes more than $2 billion in revenue to balance spending over the four-year outlook.
“I believe this budget is structurally unsound,” Senate Republican budget leader Chris Gildon said. “It’s still an $80 billion house of cards that is built on an unsolid foundation, and accordingly, I urge a no.”
Ferguson has 20 calendar days (excluding Sundays) to sign or veto budget bills that are delivered to his office within the final five days of a legislative session.
