Governor Ferguson's Budget Priorities and Savings Plan (Posted March 5, 2025)
On December 17, 2024, outgoing Washington Governor Jay Inslee proposed operating, capital and transportation budgets covering fiscal years 2026 and 2027. Newly elected Governor Bob Ferguson released his budget priorities on January 9 and detailed savings plan on February 27. Governor Ferguson's documents build upon Governor Inslee’s proposal (outlined below). Governor Ferguson’s detailed plan to save $4 billion to address the state’s projected shortfall is based on operating budget reduction proposals submitted by state agencies, most of which were asked to reduce spending by at least 6 percent. K-12 education, community and technical colleges, and public safety agencies were exempt from the reductions. The savings plan follows the release of his budget priorities prior to his inauguration. When combined with $3 billion in savings identified in Governor Inslee’s proposal, Governor Ferguson’s plan would reduce the shortfall by $7 billion.
The plan would achieve $4 billion in savings through: targeted reductions and efficiencies that do not directly impact critical services (such as reducing staff travel and eliminating non-essential task forces); pausing or phasing in program expansions or rate increases not yet implemented; scaling back recent investments; and limiting replacement of one-time federal funding. Additionally, the governor proposes savings by requiring most state employees to take one furlough day per month for the next two years. At the same time, Governor Ferguson’s plan proposes adopting many of Governor Inslee’s initiatives, including all proposed K-12 education investments and virtually all new investments in public safety and homelessness and housing assistance. The plan would also maintain collective bargaining agreements, current cash assistance programs, and Medicaid eligibility. Governor Ferguson identified the following new investments as budget priorities:
Public Safety
- New grant funds to support local law enforcement agencies hiring new peace officers
- Increases resources to address the backlog at the state patrol toxicology laboratory
Housing
- Capital investments in Housing Trust Fund
- Extends affordable housing through Connecting Housing to Infrastructure Program (CHIP) and create the Supporting Housing Affordability and Infrastructure Program
Ferries
- Investments to improve state ferries’ performance
Affordability
- Expands school meals program to ensure universal free breakfast and lunch are available to all public school students in the state
- Expands affordable childcare access for small business employees
Proposed Budget - Fiscal Years 2026-2027 (Posted January 6, 2025)
Governor Inslee's operating and transportation budgets call for total fund spending of $166.6 billion over the biennium. The operating budget calls for near-general fund (General Fund-State, Education Legacy Trust Account, Opportunity Pathways Account and Workforce Education Investment Account) spending of $78.8 billion (after reversions), including $2.1 billion in recommended policy changes. Fiscal 2026 appropriations are recommended at $38.9 billion and fiscal 2027 appropriations are recommended at $39.9 billion. Compared to appropriations for fiscal 2025 (after proposed revisions), fiscal 2026 appropriations, as proposed, would grow 3.0 percent on an annual basis. For the biennium, near-general fund appropriations proposed for fiscal 2026-2027 are 9.4 percent above total revised appropriations for the fiscal 2024-2025 biennium. The budget is based on a revenue forecast (before policy changes and transfers) of $71.4 billion for the next biennium, including $35.0 billion in fiscal 2026 – a 3.7 percent annual increase from the fiscal 2025 estimate. The governor’s budget also recommends a series of resource changes totaling an additional $6.4 billion for the biennium, including various revenue actions, a transfer from the Budget Stabilization Account (BSA), and other fund transfers. The governor expects to start the new biennium with a $1.4 billion general fund balance and end with a balance of $0.5 billion. Additionally, the governor’s budget projects a balance in the BSA (the state’s rainy day fund) of $0.4 billion at the end of fiscal 2027. Therefore, the governor’s budget estimates total reserves of $0.9 billion at the end of the next biennium. By the end of fiscal 2029, the budget projects total reserves of $5.3 billion.
Former Governor Inslee's Proposed Budget Highlights
Former Governor Inslee’s budget proposal takes steps to close a projected shortfall and achieve balance over the next four years while preserving progress and minimizing reductions in priority areas including housing, behavioral health, and clean energy, as well as education, childcare and early learning, and transportation. To close the budget gap, the proposal includes targeted spending reductions and revenue changes, as well as other strategies including a pension plan merger. The budget also proposes cost-of-living adjustments of 3 percent in 2025 and 2 percent in 2026 for most state employees. Highlights of Governor Inslee’s budget include:
Behavioral Health
- Funds to provide services for individuals transitioning from inpatient psychiatric care to community settings
- Invests in clinical education on and expanding access to medication for opioid use disorder treatment
- Capital investments to build new state hospital and behavioral health capacity
Affordable Housing and Homelessness
- Funds to continue serving newly arriving individuals who do not qualify for federal refugee resettlement
- Maintains operating budget investments such as various homeless grant programs, permanent supportive housing services, and foreclosure prevention services.
- Historic capital investment in Housing Trust Fund to add more than 5,000 affordable housing units
Climate and Energy
- Invests in environmental justice efforts using Climate Commitment Account funds
- Continues emission-reducing programs such as the EV rebate program, weatherization improvements, electric school buses, hybrid-electric ferries, and free transit for youth
- Capital investments in climate resilience projects
Education
- Continues state support for school meal programs to supplement federal funds
- Funding to provide technical assistance to school districts facing financial challenges
- Funds to update the apportionment system in an effort to reduce the administrative burden on school districts
- Maintains the Washington College Grant financial aid program and fully funds Career Connect Washington
Childcare and Early Learning
- Increases childcare provider subsidy rates and slots
- Delays implementation of making the Early Childhood Education and Assistance Program (ECEAP) an entitlement
Revenue Changes
- Creates a new wealth tax of 1 percent on residents with worldwide wealth exceeding $100 million
- Increases the business and occupation (B&O) tax for certain businesses by 20 percent on a temporary basis, and increases all B&O tax rates by 10 percent starting in January 2027