(The Center Square) – In October it was revealed that the state operating budget faced a potential $5 billion shortfall for the 2025-2027 biennium. While that figure has changed slightly, the shortfall amount for the four-year outlook has altered drastically in recent weeks, though the number depends on who you ask and when you ask them.
Initially, the state Office of Financial Management estimated the budget shortfall between 2025-2029 could be between $10-12 billion. However, an official from Governor Jay Inslee’s Office remarked at a meeting last week that the estimate was now around $14 billion.
Though Inslee’s office and the official later said it was an error, Inslee himself later went on to say at a press conference for his 2025-2027 operating budget that the shortfall could be even higher, to the tune of $16 billion.
If that were to be accurate, along with the latest revenue forecast by the state Economic and Revenue Forecast Council, the state would have to increase its operating budget spending in the 2027-2029 biennium to $87 billion, a 10% increase from Inslee’s proposed operating budget for the upcoming biennium, and a $13 billion and 17% increase from the current biennial budget spending.
According to the Washington Research Council, the latest update on the 2025-2027 budget shortfall puts the figure at $4.8 billion. If Inslee’s $16 billion figure were accurate, it would leave the remaining $11.2 billion in the 2027-2029 biennium.
ERFC’s latest revenue forecast estimates that the total revenue for the Near General Fund-State accounts, where money for the operating budget originates, at $75.8 billion.
Those revenue forecasts are based in part on estimated annual tax money the state will receive and are used to determine whether or not the state operating budget balances over the four year period, as required by state law. That same law, enacted in 2012, allows the state to assume a 4.5% annual revenue growth in the second biennium of a four-year outlook, though it has yet to do so.
WRC, a Washington-based think tank, puts the four-year shortfall much lower than Inslee’s $16 billion, at either $7.8 billion or $11.1 billion; the difference is based on whether or not new collective bargaining agreements are approved. The CBAs alone, if approved, will increase the 2025-2027 shortfall to $6.3 billion.
That $1.3 billion is among other new spending the state is taking on and which is responsible for the budget shortfall despite record revenue levels.
During ERFC’s last revenue forecast meeting, OFM Director Pat Sullivan attributed the budget shortfall to “a combination of things. There’s a significant maintenance level increase [and] a number of investments that we’ve made over the years. We funded a number especially housing a number of programs with federal COVID money you know when those programs work there’s a there’s pressure to use general fund money to replace the COVID dollars.”
Other new major spending increases for the 2025-2027 budget include:
$526 million in reduced revenue forecasted for the biennium.$461 million to pay for programs or services previously covered by federal funds$1 billion for Fair Start for Kids, which was signed into law in 2021 but has been gradually implemented.
In an October report, the WRC argued that “the Legislature is facing a substantial 2025–27 budget shortfall of its own making. This situation was entirely foreseeable. The Legislature has known that revenues would come in more slowly beginning in 2023–25. Nevertheless, the state increased spending by 15.8% at a time when revenues were expected to increase by just 3.5%.”
However, if Inslee’s $16 billion figure is accurate it’s not certain what new spending will be responsible for it.
In an email to The Center Square, WRC Senior Research Analyst Emily Makings wrote, “I have no idea where the $16 billion figure came from, but it must include policy increases that the governor didn’t even include in his proposal.”
Note: The Center Square reached out to OFM inquiring about Inslee’s $16 billion shortfall figure and what might be causing it. The state agency is in the process of providing examples, and the story will be updated with its response.
