Josh Weiner
Washington State is grappling with a significant budget deficit, as the cost of maintaining programs and services increasingly outpaces projected tax revenue. Governor Jay Inslee estimates the gap will range between $10 billion and $12 billion over the next two budget cycles, potentially climbing to $15 billion when new public employee contracts are considered.
The Budget Landscape
The state’s two-year budget cycle is balanced through June 2025, but projections for subsequent budgets reveal a stark shortfall. For the 2025–27 biennium, the deficit is expected to reach $4.35 billion, escalating to $6.7 billion in 2027–29. Factors contributing to this include:
- Slowing Tax Revenue: Economic indicators such as decreased consumer spending, reduced home sales, and lower-than-expected capital gains tax receipts have led to a $1 billion revenue shortfall.
- Rising Costs: Increased demand for social services, education, and healthcare has driven costs higher, compounded by inflation and expanded program eligibility.
- Agency Needs: Departments like Social and Health Services and Children, Youth, and Families have requested billions to sustain services, such as cash assistance, childcare programs, and early learning initiatives.
Addressing the Deficit
Governor Inslee and Democratic legislative leaders have proposed a multi-step approach:
- Cut Costs: A freeze on discretionary hiring, contracts, purchases, and travel is already in effect. Agencies have been instructed to identify areas where spending can be delayed. For instance, postponing provisions of the Fair Start for Kids Act could save $2.1 billion.
- Increase Revenue: Lawmakers are exploring new taxes, such as a wealth tax on intangible assets over $250 million, an expanded real estate transfer tax, and a statewide payroll tax akin to Seattle’s JumpStart program. A road usage charge may also be introduced for transportation funding.
- Delay Enhancements: Postponing collective bargaining agreements and program expansions is under consideration, which could cut the deficit significantly.
Political Perspectives
Republicans argue that the issue stems from overspending rather than insufficient revenue. They advocate for slowing government growth instead of introducing new taxes. Minority leaders propose delaying expensive commitments like the Fair Start for Kids Act as a starting point for resolving the deficit.
Looking Ahead
Governor-elect Bob Ferguson will inherit the budget crisis when he takes office in January. While he has emphasized the importance of identifying savings and efficiencies, Ferguson has not ruled out supporting new taxes to close the gap.
The upcoming legislative session will test policymakers’ ability to balance fiscal responsibility with the growing demand for public services.
