Washington is projected to face a $720 million budget shortfall over the next four years, according to the latest quarterly revenue forecast released Tuesday.
Chief Economist Dave Reich cited several global and national risks contributing to the economic uncertainty, including tariffs and ongoing conflict in the Middle East. Reich said both the national and state economies are slowing down.
“The changes in the Washington State revenue forecast reflect increases due to legislative changes made during the 2025 legislative session that will increase state revenues, and revenue reductions due to a weaker economic outlook,” Reich said. “Overall, the legislative changes are larger, and the state revenue forecast is increased for the 2025–27 and 2027–29 biennia. The revised economic forecast calls for slower employment and personal income growth and reduced residential construction, which reduces the forecast for revenues such as sales taxes and business and occupancy taxes.”
Lawmakers enact taxes to close $16B gap
Earlier this year, lawmakers enacted new taxes to help close a $16 billion budget gap.
“While the Legislature took steps to close the state’s budget shortfall, it’s clear that we face ongoing uncertainty in the economy and federal funding,” K.D. Chapman-See, director of the Office of Financial Management, said. “That’s why, in our instructions to agencies for the supplemental budget, we’ve asked them to continue to look for efficiencies, savings, or reductions in non-essential services and programs.”
Governor Ferguson ‘disappointed but not surprised’ by forecast
Washington Governor Bob Ferguson said he is “disappointed but not surprised” by the forecast and does not currently anticipate calling a special legislative session. He said his team is analyzing the latest forecast.
“This will not be easy,” Ferguson said in a statement. “We already made many difficult decisions last session in order to bridge our $16 billion shortfall. Washingtonians expect us as leaders to make the tough decisions to live within our means and still deliver core services.”
Ferguson also criticized the White House’s policies.
“We knew that things were unlikely to improve in the near term, especially in light of continued chaos from the Trump Administration—including tariffs, which have an outsized negative impact on a trade-dependent state like Washington,” he said. “It is particularly discouraging given the current efforts by the Trump Administration to make draconian cuts to Medicaid, education and food benefits. If those move forward, it will mean billions of dollars in cuts impacting our most vulnerable residents.”
State representative ‘concerned’ by forecast
Lawmakers will now decide how to move forward.
“I am concerned that we’re seeing numbers lower and that if we were to do nothing based on this forecast, we would go negative by the end of the biennium,” State Rep. Ed Orcutt (R-Kalama) said at Tuesday’s meeting of the Washington State Economic and Revenue Forecast Council. “I would like to have seen a bigger ending fund balance with our budgets, just because of that reason, because we can see large fluctuations. So I had concerns right from the start when the budget was being adopted in the legislative session.”
Contributing: Julia Dallas, MyNorthwest
Frank Lenzi is the News Director for KIRO Newsradio. Read more of his stories here.
©2025 Cox Media Group
