Washington State Faces $10B-$12B Budget Shortfall

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With only seven weeks remaining until Washington state’s next legislative session, party leaders are preparing to tackle a projected budget shortfall, estimated to be between $10 billion and $12 billion over the next four years. This deficit is driven by falling revenues and rising costs for state services. Despite these fiscal challenges, Democrats maintain firm control of the state government, holding substantial majorities in both the House and Senate, along with the governor’s office and other statewide positions.

Sen. Jamie Pedersen, D-Seattle, assumes the position of majority leader, with Sen. Manka Dhingra, D-Redmond, serving as deputy majority leader. The projected budget deficit has led to talks of potential new taxes, a proposal that has already faced resistance from Republican leaders.

Rep. Drew Stokesbary, R-Auburn, who has been reelected as House minority leader, criticized the Democrats for their spending decisions, blaming them for the budget shortfall. He argued that instead of acknowledging their overspending, Democrats are seeking to raise new taxes, which he believes would harm the state’s economy. Rep. Chris Corry, R-Yakima, elected deputy minority leader, shared similar concerns, pointing to overspending and delayed entitlement programs as key contributors to the budget crisis.

Another factor contributing to the projected shortfall is a $3 billion expenditure for state worker pay raises, which Gov. Jay Inslee recently approved after negotiations with unions. This increase adds significant pressure to the state budget.

As the legislature prepares for its session, Sen. Pedersen has floated the idea of a wealth tax to address the shortfall, following the failure earlier this year to pass a property tax on financial assets valued above $250 million. However, Republicans, including Corry, argue that such a tax would be unconstitutional and liken it to “class warfare.” Corry also pointed out that voters had rejected three out of four initiatives in the Nov. 5 election, and he believes the Democrats misinterpreted this defeat.

In addition to the wealth tax, there are rumors that Democrats may revisit property taxes, potentially allowing local governments to exceed the 1% annual increase cap. In the 2024 session, Republicans successfully blocked Senate Bill 5770, which would have lifted this cap, and Corry anticipates an even more heated debate on the matter in the upcoming session, with new, more progressive Democrats pushing for higher taxes.

Despite the strong Democrat majorities, Corry expressed hope that Republicans could seize the opportunity to refocus state priorities, particularly on cutting spending, as many families across Washington state are also being forced to make financial adjustments.

House Republicans have selected their caucus chair, Rep. Peter Abbarno of Centralia, and their floor leader, Rep. April Connors of Kennewick, for the next session. Allyn Representative Dan Griffey was re-elected as whip, and Allyn Representative Travis Couture and Walla Walla Representative Skyler Rude will be assistant floor leaders.

In the Senate, Democrats have re-elected Sen. Bob Hasegawa, D-Tukwila, as majority caucus chair. As both parties gear up for a potentially contentious session, the budget deficit and the prospect of new taxes are expected to be central issues on the legislative agenda.

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