(The Center Square) – Some of the most prominent chambers of commerce and business associations in Washington state are advising caution around proposals to increase state spending by roughly $2 billion.
The state House and Senate both released supplemental operating budget proposals this week that fill Washington’s multi-billion-dollar deficit in the 2025-27 biennium by raiding the state’s rainy-day fund; the plans balance out over a four-year outlook while relying on revenues from a proposed income tax.
Voters have rejected an income tax on the ballot 10 times over the last century or so. Democrats and Gov. Bob Ferguson claim it will affect only millionaires, but a simple majority could lower the threshold in the future. Critics have called it unconstitutional and warned that it could be injuncted by the courts.
“The House and Senate budget proposals would both continue the trend we’ve seen over the last several years of spending more money than the state has coming in,” according to a statement issued by the Washington Roundtable, Association of Washington Business, Bellevue Chamber of Commerce, Seattle Metropolitan Chamber of Commerce and Greater Spokane, Inc. “Both plans increase spending to roughly $80 billion — approximately $8 billion above the prior biennium — and rely heavily on withdrawals from the Budget Stabilization Account (Rainy Day Fund) and other one-time resources.”
Total state spending, including the operating, transportation, capital budget and other expenses, has increased by roughly 100% since 2015. Last year, the state faced a deficit that Democrats say reached $16 billion, which they filled with cuts and a $12 billion tax hike after considering local authorizations.
Despite signing the largest tax increase in state history, Ferguson said the state faced another deficit of roughly $2.3 billion when he proposed his supplemental budget in December. Recent forecasts have reduced that figure slightly as revenue comes in, but the majority party is still looking to expand the state’s coffers rather than address unsustainable spending that, in the future, relies on an income tax.
“While the budgets are projected to balance over four years — a goal we support — that balance depends on new income tax revenue assumptions and leaves an ending fund balance under $1 billion,” according to the joint statement, “an amount that is unlikely to cover future maintenance-level costs and collective bargaining agreements, or be able to absorb any meaningful economic volatility.”
The operating budget leaders for their respective chambers, Sen. June Robinson, D-Everett, and Rep. Timm Ormsby, D-Spokane, call the proposals maintenance-level spending. Robinson said Monday that incoming tax revenue is relatively flat, attempting to make a case for increased spending and taxes.
“It’s not an easy decision to use rainy day fund dollars,” Robinson said during a press conference on Monday. “It also seemed untenable to make an additional $750 million of reductions in this budget.”
House Republican Budget Leader Rep. Travis Couture says Democrats are putting government over the people, draining state reserves without addressing rising costs for taxpayers who shoulder the impact.
“That’s not leadership,” Couture wrote in a statement earlier this week, “it’s a spending addiction.”
The House and Senate operating budget proposals balance through 2027 but would result in deficits of roughly $900 million or more in 2028, before reaching a surplus in 2029. Still, that assumes the courts won’t issue an injunction against the proposed income tax and that businesses won’t head elsewhere.
According to a fiscal note, the state won’t begin collecting money from the millionaire's tax, if passed, until 2029. At that point, the state projects it will generate $2.5 billion, rising to more than $3.3 billion in the following two years. If it gets held up by a court, revenues could fluctuate, affecting the budget.
“We understand that legislators are navigating unpalatable trade-offs to manage this budget, which is why budget sustainability – practices that align spending with realistic revenue growth; economic development – including strategies that grow revenues through economic activity; and affordability – acknowledging that business tax increases ripple through the economy – must be priorities going forward,” according to the statement issued this week by the chambers and business associations.
