Why Washington state is in a big budget hole — again
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Washington's Legislature adjourned last spring after tackling a multibillion-dollar budget deficit and passing what appeared to be a balanced spending plan.
- Now, nine months later, state lawmakers are back in Olympia — facing yet another budget shortfall.
Why it matters: The state is once again in the hole — this time by more than $4 billion over four years — making new spending a tough sell and putting significant cuts back on the table.
State of play: Declining revenue projections account for more than a third of the projected deficit, according to nonpartisan legislative staff — a hit of roughly $1.7 billion through mid-2029.
- Those drops didn't materialize until after lawmakers adjourned in April, with the declines attributed partly to slowdowns in housing construction and employment.
- Federal tariffs have also contributed to changes in the forecast, while creating uncertainty going forward, per state economists.
Separately, the cost of maintaining existing programs has gone up significantly, state officials estimate.
- All told, the state is looking at more than $3 billion in increased maintenance and caseload costs over the next four years, nonpartisan staff estimate.
- Some of that is driven by inflation, and some of it is caused by higher numbers of people applying for and using state services.
Case in point: The number of Medicaid clients who need long-term care — such as in adult family homes — is growing at an 8% annual rate, up from roughly 3% a year before the pandemic, Gov. Bob Ferguson's office estimates.
Changes in federal law are also increasing Washington's costs, including by requiring state officials to invest in new systems to implement new work requirements for Medicaid and SNAP.
What they're saying: State Senate Majority Leader Jamie Pedersen (D-Seattle) said the state's latest budget woes are caused "almost entirely" by the federal government and the Trump administration.
- During a Seattle CityClub event last week, he cited the "destabilization of the entire health care market" through Medicaid changes and the ending of enhanced Affordable Care Act subsidies as one factor influencing the state budget.
The other side: Republicans contend that Democrats have been overspending for the past several years and it's finally catching up to them.
- "It's absolutely a result of decisions within the state to spend more than we're taking in," Senate Minority Leader John Braun (R-Centralia) said at the same Seattle CityClub panel.
Between the lines: Washington lawmakers typically have to pass an operating budget that balances over four years. During tough economic times, though, they can adopt a plan that balances only for the current two-year cycle.
- Gov. Bob Ferguson has proposed using that option this year, which would narrow the immediate challenge to plugging a roughly $1.5 billion-$2 billion gap between now and March.
- That could provide near-term relief, especially if lawmakers also tap the state's rainy-day fund — but it would push much of the problem into the next budget cycle.
What's next: Lawmakers will receive another revenue forecast in February that could ease their budget challenge — or make it harder.