Martin Falbisoner / Wikimedia Commons
Washington state agencies are being told to brace for difficult financial decisions ahead, as Gov. Bob Ferguson’s administration signaled that existing programs may not be sustainable under projected revenue levels heading into the next two-year budget cycle.
Why It Matters
For Washingtonians who depend on state-funded services — from transportation to social programs — the warning signals potential reductions in government spending across multiple departments. The memo marks the beginning of what could be a third consecutive legislative session dominated by efforts to close a significant fiscal gap.
What Happened
Budget Director K.D. Chapman-See issued a three-page memo on June 5 alerting agency directors to expect “significant budget shortfalls next biennium in both operating and transportation budgets.” The memo stated that projected revenues will likely fall short of what is needed to maintain current service levels.
Ferguson directed agency leaders to hold off on phasing in most new programs and to refrain from proposing additional ones. Agencies are also being asked to take a close look at programs created or expanded since January 2019, as well as programs where Washington offers notably higher service levels compared to other states.
All agency budget requests must be submitted to the Office of Financial Management by September 14.
By the Numbers
- $80 billion — Washington’s current two-year operating budget
- $43.7 billion — the two-year operating budget signed into law in 2017, reflecting how dramatically state spending has grown
- 14.2% — Washington’s population growth between 2015 and 2025, a factor often cited to justify increased government spending
- 42% — the share of revenue from a new millionaire income tax that is expected to go toward tax relief provisions rather than general spending
- Sept. 14 — deadline for agencies to submit budget requests to state financial management officials
Zoom Out
The state’s operating budget has nearly doubled since 2017, far outpacing the roughly 14 percent population growth over that same period. Critics of Washington’s spending trajectory have long argued that budget expansions during flush years create structural obligations that become difficult to unwind when revenues soften.
The administration is also navigating uncertainty around a new income tax targeting high earners. That tax faces active opposition efforts in the form of a repeal signature drive, along with court challenges and the possibility of a ballot initiative. Even if the tax survives legal scrutiny, roughly 42 cents of every dollar it generates is committed to tax relief provisions — limiting how much it can offset projected deficits, and that revenue would not arrive until the second half of the upcoming budget cycle regardless.
Washington’s fiscal pressures are not unique in the region. States across the Mountain West and Pacific Northwest have grappled with the challenge of sustaining government program expansions built during periods of strong revenue growth. Nationally, demand for public services tied to housing insecurity and homelessness continues to strain state and local budgets.
Previous efforts to close Washington’s budget gaps have relied on a combination of spending cuts, a tax package, withdrawals from the state’s rainy day fund, one-time accounting maneuvers, and reductions to child care program funding. Those tools have limits, and the administration’s early warning suggests officials believe the next round of adjustments will need to go deeper.
What’s Next
With the September 14 submission deadline in place, agency leaders now face the task of drafting budget requests that account for the possibility of reduced funding. The governor’s office has not yet specified the size of the anticipated gap, meaning agencies are preparing for uncertainty as much as a defined number.
The Legislature will then take up the budget issue when it convenes for its next session. If current projections hold, lawmakers will face their third straight session managing a significant deficit — a pattern that is increasingly testing the limits of Washington’s fiscal toolkit.
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