Washington

During the 2025 legislative session, Washington enacted a biennial budget for fiscal 2026 and fiscal 2027. On December 23, Washington Governor Bob Ferguson released a supplemental operating budget proposal for the current biennium. The supplemental operating budget calls for $79.4 billion in spending over the biennium from funds subject to the state’s revenue outlook (including the General Fund-State, Education Legacy Trust Account, Opportunity Pathways Account, and Workforce Education Investment Account), a $1.2 billion (1.5 percent) increase from the prior budget. Total budgeted funds in the governor’s supplemental operating and transportation budgets for the biennium are $172.1 billion. Most of the increase is driven by inflation and caseload growth, while at the same time the proposal includes spending reductions and other measures to address a projected $2.3 billion budget shortfall. The budget also identifies an investment of $165 million in state funds to respond to federal fund changes to safety net programs. For fiscal 2027, the operating budget is based on total revenues and resources of $39.5 billion, including a $0.9 billion beginning balance, estimated official consensus revenues of $38.1 billion (5.1 percent above the estimate for fiscal 2026), adjustments and transfers, and proposed revenue changes. The revised appropriation amount for fiscal 2027 is $39.3 billion, leaving a projected ending balance of $140 million. The supplemental budget forecasts an ending balance in the Budget Stabilization Account (rainy day fund) of $1.03 billion, after deposits and withdrawals proposed for the biennium, with total reserves estimated at $1.17 billion at the end of fiscal 2027. In addition to the operating budget, the governor proposed a supplemental capital budget on December 18 calling for new appropriations financed through bond authority (mostly for housing investments) and a supplemental transportation budget on December 19 calling for $2.1 billion in transportation infrastructure investments.

Key Budget Highlights

The governor’s supplemental budget for fiscal 2026 and fiscal 2027 calls for investing in strategic priorities including housing, transportation, and addressing affordability, as described below. The Office of Financial Management also reached two collective bargaining agreements outside of the standard biennial bargaining cycle to provide inflationary increases, competitive pay for low-wage workers, and targeted wage increases and premium pay for certain positions.

Housing

• Directs funding to strengthen the supply of affordable housing by extending the reach of the Housing Trust Fund.
• Takes steps to reduce costs for developers, including reinstating permit review grants and providing multifamily building efficiency grants.
• Extends low-income home rehabilitation grants for flood victims.
• Supports actions to protect long-term access to affordable housing, such as funding incentives for transit-oriented development.

Transportation 

• Proposes the largest investment in road and bridge preservation and maintenance in the past 20 years.
• Includes dedicated funds to preserve bridges, as well as for paving projects this summer and over the next 10 years.

Affordability

• Provides state funds to support Cascade Care premium health subsidies to residents earning 250 percent of the federal poverty level.
• Directs Climate Commitment Act (CCA) revenues to maintain the Working Families Tax Credit.
• Uses CCA funds to provide Washington Families Clean Energy Credits.
• Directs additional funds to the State Home Energy Assistance Program.
• Provides funding for the Summer EBT program.
• Funds support services for individuals newly arrived immigrants.

Impact and Responses to Federal Fund Changes

• Provides additional funds for staffing and IT to implement new work requirements for SNAP and Medicaid. 
• Includes funding for the increased 75 percent cost match for SNAP administrative costs.
• Invests in staff and IT to lower SNAP error rate.
• Provides state funds to continue providing food benefits to immigrants deemed ineligible for SNAP under new eligibility requirements.
• Backfills federal Medicaid funding for Planned Parenthood with state funds. 
• Backfills federal Medicaid funding for certain long-term care sere services to continue serving noncitizens.

Addressing Budget Shortfall

• Implements targeted operating spending reductions for agencies, including reducing recent expansions and program increases as well as delaying implementation of some programs.
• Proposes legislation to change how the state allocates capital gains tax revenues.
• 2 percent reduction to executive and management services positions.
• 5 percent administrative reduction to goods and services and travel.
• Shifts certain costs from the general fund to other dedicated funds.
• Sweeping unreserved fund balances to the general fund.
• Ends several tax breaks for large corporations, including the data center refurbishment exemption, moves more prescription drug wholesalers to the standard business and occupation tax rate, and closes a loophole related to a premium tax on insurance companies.
• Transfers funds from the BSA (rainy day fund) to the general fund.