Democrats in Washington’s House and Senate agree on one thing when it comes to the state’s budget shortfall: it’ll take hefty taxes on wealthy individuals and companies to solve.
Beyond that, they charted diverging paths with spending plans released on Monday.
Senate Democrats make ends meet in the next two-year budget by delaying expansion of early learning and child care programs, furloughing state workers, and draining state reserves in order to boost funding for special education and other needs of public schools.
House Democrats plot a course that avoids controversial moves like furloughing state workers and drawing down savings. Like the Senate, they hold off expanding popular early learning and child care programs. But the House also pledges about $1 billion less in new funding for special education and public school operating costs.
Meanwhile, both plans count on huge sums from new taxes over the next four years — $17 billion in the Senate, $15 billion in the House — to keep state coffers flush.
Votes on the budgets are expected in the Senate on Saturday and in the House next Monday.
Action on major tax bills won’t occur until Democrats agree on which measures to pursue, a process that could take a few weeks of negotiation. That means the Democrat-led chambers will approve spending plans without knowing exactly where the money will come from to pay for them.
Budget writers in both chambers said they see no route to a budget deal without some amount of new revenues.
“We’ll be talking with the Senate about what combinations of revenue we need,” House Majority Leader Joe Fitzgibbon. D-West Seattle, said Monday. “We don’t have a no revenue budget prepared.”
Democratic leaders are in conversation with Gov. Bob Ferguson and his budget team as well.
“The governor is looking forward to working with legislative leaders to craft a balanced budget that preserves core services. Our team is in the process of reviewing the budget proposals released today,” Brionna Aho, Ferguson’s communications director, said in an email.
Ferguson, a first-term Democrat, has said he wants all cost-cutting options explored before considering any new taxes to deal with a shortfall estimated around $15 billion over four years. He’s also voiced skepticism about a tax on wealth that accounts for more than half the revenue the Senate is counting on and more than a third of what’s in the House plan.
While those conversations are private, Fitzgibbon said, there are some revenue options the governor “has more or less comfort with.” He deferred to Ferguson to comment further.
Neither chamber fully went along with one of Ferguson’s main funding demands — providing local governments with money to hire more law enforcement officers.
Ferguson, in his inaugural address, said he wanted $100 million for this purpose in the next two-year budget. “That idea was a cornerstone of my campaign for governor. Any budget I sign must include this funding,” he said.
House Democrats’ budget has $25 million — $12.5 million in each fiscal year — for the grants. They promise to make another $25 million available in the 2027-29 budget for a four-year total of $50 million. There’s nothing in the Senate plan.
Senate Minority Leader John Braun, R-Centralia, criticized Senate Democrats’ proposal for raising taxes while containing “unsustainable” levels of spending. He said one of the “biggest disappointments” is its failure to provide money for law enforcement hiring grants.
“Fortunately, Governor Ferguson has pledged to veto any budget that doesn’t include this funding. I hope he keeps that commitment if necessary,” he said.
The legislative session is scheduled to end April 27.
A pair of blueprints
Washington’s next budget cycle begins July 1 and runs through June 30, 2027.
Budgets put forth Monday contain similar levels of spending but they distribute the dollars differently. Budget writers will begin meeting next week to reconcile differences.
Senate Democrats are proposing a $78.5 billion budget, an increase of $6.5 billion in spending. Of the increase, $1.6 billion is new spending, most of it going to education and new collective bargaining agreements for state workers. The rest is to cover increased expenses for existing programs and services, also known as maintenance level spending.
Senate budget writers said they shaved around $3 billion in spending for the next budget, and about $6.5 billion over four fiscal years.
“Throughout the process of crafting this budget, we had to make really difficult choices to close the gap while keeping our state on strong financial footing for the future,” Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee, said Monday.
She said their chief concern is the first of the two fiscal years. State tax receipts have been tumbling as consumers slowed spending due to inflation and general uncertainty about the economy. High inflation also drove up the state’s operating costs.
To balance in the first year, Democrats assume $234 million from two new tax proposals — removing the 1% cap on annual property tax revenue collections and eliminating some tax breaks.
And they drain $1.6 billion from the Budget Stabilization Account, the state’s emergency reserve also known as the rainy day fund. Tapping it dry will leave a measly $95 million in the bank on June 30, 2026. Siphoning money from it will require support of 60% of the Senate. Democrats, with 30 members, can attain the threshold without Republican votes.
The second year of the budget cycle should be more settled, Robinson said. That’s because two more tax proposals — one on payrolls at larger corporations and another on the assets of super-wealthy individuals — will bring in nearly $6 billion, enough to allow for refilling the rainy day fund.
Robinson acknowledged emptying the emergency reserve was not desired given the possibility that the federal government could slash Medicaid or take other actions that might weaken the state budget.
“We all know that there’s a lot of uncertainty in our country right now,” Robinson said. “They are so large that it’s hard for any one state to plan or think about how to mitigate them.”
State Treasurer Mike Pellicciotti acknowledged the “challenging task” for budget writers as the federal administration threatens to withhold funds.
“What cannot be an option is exposing the people of Washington to the coercive pressure of the federal government by draining reserves in the final budget,” he said in a statement. He suggests 10% of state revenues in reserves.
“This would best maintain Washington’s excellent credit ratings and insulate our state from economic turbulence and natural disasters,” he said.
House Democrats are also proposing a $77.8 billion budget of which $920 million is for new policy changes on top of the sum needed to pay for current programs and uphold statutory obligations.
They end the first fiscal year with $1.7 billion in reserves, nearly all of it in the rainy day fund, and $3.2 billion by the end of the biennium.
This proposal, which makes many of the same spending reductions as the Senate plan, counts on $5.2 billion from his caucus’ revenue package that includes a surcharge on large corporations and financial institutions and a wealth tax similar, but not identical, to the Senate version.
“Our approach has been simple: do the least amount of harm and protect food, shelter and health as best we can,” Timm Ormsby, D-Spokane, chair of the House Appropriations Committee and the lead budget writer in the House, said Monday.
Let’s negotiate
Each budget bill spans 1,300 pages giving budget writers many topics to talk about. There are things on which both agree.
For example, both proposals would delay expansions planned under the Fair Start for Kids Act into the next decade. The 2021 law expands and guarantees access to state-paid early learning programs and subsidized child care for families with lower household incomes. It funded new slots for providers and increased the number of families who can use them.
The Early Childhood Education and Assistance Program is supposed to become an entitlement next year. It won’t be under both budgets. There will be delays to expanding eligibility for the Working Connections Child Care Program and reimbursement rates for providers as well.
Those delays net around half a billion dollars in the next budget, and close to $1 billion over the course of four years.
Use of budget reserves is a big area where Democrats in the two chambers disagree.
Furloughing state workers is another. Senate Democrats are proposing a one-year 5% salary reduction for state workers starting July 1. That would translate to around 13 unpaid furlough days in the fiscal year.
And the Senate also looks to make workers pay a larger share of their health benefits. State employees represented by unions now pay 15% with the state covering the other 85%. The proposal is for the split to become 80-20 starting with the 2027-29 budget.
Neither idea is in the House plan. “We cannot balance the budget on their backs,” Ormsby said of state workers.
Public hearings on each budget are planned Tuesday.
