Enacted Budget – Fiscal Years 2026-2027
Washington Governor Jay Inslee signed the state’s biennial operating, capital, and transportation budgets for fiscal 2026 and fiscal 2027 on May 20, with some partial vetoes. The enacted budget provides for operating spending of $150.4 billion from all funds over the biennium – or $185.1 billion when including transportation and capital spending. Near general fund spending in the enacted operating budget for the biennium totals $77.9 billion. These figures reflect a 5.7 percent increase in total budgeted operating spending and a 7.1 percent increase in near-general fund spending over the previous biennium’s budget with supplemental changes (as revised in 2025). The enacted budget was based on a March 2025 near general fund revenue forecast of $70.95 billion for the next biennium (a 6.8 percent increase over estimates for the previous biennium), including $34.72 billion in fiscal 2026 (a 2.8 percent annual increase) and $36.23 billion in fiscal 2027 (a 4.3 percent annual increase). After incorporating a downward revision to revenue estimates in the June 2025 forecast as well as changes in the enacted budget, the projected near general fund balance at the end of the fiscal 2026-2027 biennium is $33 million and the projected ending balance in the state’s rainy day fund (Budget Stabilization Account) is $2.02 billion.
The enacted budget takes a balanced approach to address the state’s projected shortfall through a combination of savings on the spending side along with tax changes to generate additional revenue. The operating budget makes new investments in K-12 education including special education, creates a new grant program to hire more local law enforcement officers, and includes funding to overhaul the state’s recycling system. The budget also funds new two-year collective bargaining agreements with most public employee unions. The operating budget incorporates new revenue generated by a package of tax legislation, with an estimated revenue impact of $4.3 billion for the fiscal 2026-2027 biennium. Enacted tax changes include a permanent across-the-board increase in the state’s business and occupation (B&O) tax, a temporary B&O surcharge on high-income firms, and higher tax rates on large financial institutions and computing firms, and increased tax rates on capital gains and estates above certain thresholds. Additionally, the sales tax base was expanded to include more services, tobacco taxes were broadened to include nicotine pouches, and some tax expenditures have been eliminated. One tax change enacted by the legislature, which would have removed a tax deduction that benefits community banks, was vetoed by the governor. Additionally, the governor signed a revenue package to address a projected gap in the transportation budget, which includes increasing the state’s gas tax as well as new and higher fees and taxes on rental cars, car sales, and other items. The capital budget signed by the governor invests in affordable housing, mainly through the Housing Trust Fund, while also providing funds for K-12 school construction, salmon recovery, and behavioral health facilities.