Proposed Budget - Fiscal Years 2026-2027
On December 17, 2024, Washington Governor Jay Inslee proposed operating, capital and transportation budgets covering fiscal years 2026 and 2027. The 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.
Note that on January 13, 2025, Governor-elect Bob Ferguson, will take office. This summary will be updated if and when the new governor releases budget priorities and/or other budget materials.
Key Budget Highlights
The governor’s “fair and forward-looking” 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 governor proposes 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 the budget include:
Behavioral Health
- Funds to provide services for individuals transitioning from inpatient psychiatric care to community settings
- Invests in clinical education and expanding access to medication for opioid use disorder treatment
- Capital investments to build a 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