The much-anticipated revenue estimates, released Tuesday, come as the state grapples with an operating budget shortfall estimated to be as much as $15 billion over the same four-year period, and at a time of great economic uncertainty with potential unknown actions by the federal government.
As lawmakers prepare to negotiate a 2025-27 biennium budget, they are debating whether to introduce new taxes or to deeply reduce spending to existing programs, or both.
Tuesday's estimates project Washington to see $71 billion in revenue in the next two-year budget period and $76 billion for 2027-29 — nearly $480 million and $420 million less, respectively, than November's forecast.
"Today's revenue forecast shows a modest decline in projected revenue, which is what we expected," state Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee, said in a statement. "While it doesn't change the broader fiscal challenges we face, it reinforces the need for a balanced and sustainable approach as we finalize the 2025-27 operating budget."
But while Democratic budget leaders in the Legislature say the latest figures are in line with what they expected, Republican leaders continue to raise concerns of overspending as they make the case against new taxes.
One positive change from the November projections was a modest $54 million increase in revenue for the current two-year budget, which ends June 30.
The state nonpartisan Economic and Revenue Forecast Council says the declines, though partially offset by capital gains and estate taxes, are caused by lower interest incomes and an expected $400 million drop from November's figures for sales taxes and business and occupation taxes in the next two-year budget period.
"This change reflects lower actual revenues and a generally lower forecast for Washington personal income, employment and building permits that likely mean lower revenues in the future compared to last fall," Dave Reich, forecast council executive director, said in a statement.
Gov. Bob Ferguson has proposed $4 billion in cuts over the next four years, including monthly furloughs for the next two years for state employees, who recently collectively bargained for 5 percent wage increases over the next two years.
"The latest revenue forecast confirms that our financial outlook remains challenging," OFM Director K.D. Chapman-See said in a statement.
While Democrats have said they're considering some of Ferguson's proposed cuts, there are concerns from some in the party about the potential impact of an all-cuts budget. Democrats have stressed that they believe new taxes are needed to balance the budget over the next four years, and are considering moving the state's Rainy Day funds into the general fund.
"With revenue growth slower than it has been in about a decade, and the continued impacts of inflation being felt across the budget, we know what we need to do," Rep. Timm Ormsby, D-Spokane, chair of the House Appropriations Committee, said in a statement. "House Democrats are taking a balanced approach to reducing the budget where we can and addressing our regressive tax structure to ask the wealthiest in our state to help us keep people alive."
Ferguson has been noncommittal on whether he'll turn to tax increases proposed by Democrats. He said in January he was "deeply skeptical" that an "untested" wealth tax could be a realistic solution to the budget gap.
Republicans, on the other hand, have been much more supportive of Ferguson's approach to cuts. Senate Republicans recently released their own budget proposal which forgoes wage increases for state employees altogether.
Republican leaders like Sen. Chris Gildon, R-Puyallup, a ranking member on the Senate Ways and Means Committee, say the forecast highlights the need to limit spending and avoid new taxes.
"Even with today's forecast the state expects to have $4.5 billion more over the next two years, so the sky is not falling," said Gildon in a statement. Still, he said, legislative budget writers should show "restraint," with uncertainty over federal actions that could impact Washington.
Budget writers are expected to release their proposed budget next week. Lawmakers have until April 27, when the legislative session adjourns, to land a balanced budget.
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