Tight Revenue Outlook Puts Pressure on State Budget

Officials said the situation marks a sharp shift from the pandemic era, when large infusions of federal relief dollars significantly boosted state revenues. Those temporary funds have now expired, forcing lawmakers to confront structural imbalances in the budget.

Washington’s operating and capital budgets have more than doubled over the past decade, according to officials. The state spent roughly $80 billion during the 2013-15 biennium, compared to more than $173 billion in the current two-year budget, according to state officials. At the same time, the Economic and Revenue Forecast Council said projected tax revenue has dropped by about $500 million since lawmakers adopted the latest biennial spending plan.

During the most recent budget cycle, legislators faced projected gaps, which they aimed to close through service reductions and tax increases, according to state reps. Despite those actions, the Economic and Revenue Forecast Council has warned of future shortfalls, driven in part by rising health care costs and growing demand for state services.

Washington’s Medicaid program has expanded to serve approximately 2.2 million residents, roughly one-quarter of the state’s population. State officials have pointed to health care spending as a major driver of ongoing budget pressures, alongside looming federal reductions to programs such as the Supplemental Nutrition Assistance Program.

A Senate Ways and Means fiscal analysis projected that the budget could be short by $1.1 billion by the end of the 2027-29 biennium. Looking ahead to the current legislative session, officials said the shortfall is estimated at roughly $390 million. Any changes to the budget already in place would need to be addressed through a supplemental budget approved by lawmakers.

Gov. Bob Ferguson said he expects to release his proposed budget this month, setting the stage for House and Senate budget writers to begin work when the 2026 legislative session convenes in January. The governor has indicated his proposal will focus on spending reductions rather than new taxes, an approach that could shape negotiations in Olympia in the months ahead.

Local lawmakers have voiced concerns about both the scale of state spending and the tax increases approved in recent sessions.

Rep. Hunter Abell (R-Inchelium), criticized the growth of the state budget and its impact on families and businesses.

“I’m extremely concerned about the reckless increase in spending and tax hikes adopted by the majority last session. They absolutely crush families and small businesses operating in a difficult economic environment,” Abell said. “As a reminder, our state budget has more than doubled in the last 10 years. Washingtonians are rightly asking themselves if their roads, schools, health care, and public safety are all twice the quality. Unfortunately, the answer is clear.”

Abell also pointed to last-minute tax legislation passed during the previous session, arguing it was rushed and poorly implemented.

“This is absurd, and there should be egg on the face of every legislator who voted for ESSB (Engrossed Substitute Senate Bill) 5814,” he said. “We need to do the hard work of getting our state spending under control, reducing the tax burden on Washington families and businesses, and improving the competitive environment so that businesses are able to succeed and thrive in Washington.”

He added that, while he is cautious about the governor’s commitment to an all-cuts budget, he remains skeptical based on past actions.

“I believe in the old adage of ‘trust but verify,’ and that is certainly true when it comes to Olympia, taxes, and the peoples’ money,” Abell said.

Rep. Andrew Engell (R-Colville), also emphasized the need to refocus state priorities amid tightening finances.

“One of my favorite quotes is on time management from Brian Tracy, ‘There is never enough time to do everything, but there is always enough time to do the most important thing.’” Engell said. “This also applies to budgeting. Washington’s people are already taxed to the breaking point and we need our government to get back to the basic functions of government and then there will be plenty of money.”

Engell said he recently met with the governor to discuss the budget outlook and urged restraint when making cuts.

“I suggested he look at cutting some of the new programs that were created and funded in this year’s budget rather than starting by cutting existing programs that have a proven track record,” Engell said. “I thanked him for his plan to oppose increasing taxes again since he already signed the largest tax increase in history this year.”