Gov. Ferguson does not expect special session after budget forecast shows revenue decline

Gov. Bob Ferguson does not anticipate calling lawmakers back to Olympia for a special session to address the state’s budget after an updated revenue forecast showed the state will bring in less money than lawmakers anticipated. However, he said Tuesday his office is “closely monitoring developments from the federal government that could force me to revisit that question.”

A new estimate predicts that state government will collect $720 million less over the next four years than the Legislature assumed when it passed a budget this spring.

“While this revenue forecast is disappointing, it is not surprising,” Ferguson said in a statement Tuesday. “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.”

Revenue taken in by the state will still increase significantly in the coming years. The Economic and Revenue Forecast Council projects that Washington will collect $74.8 billion between 2025 and 2027, an increase of $3.8 billion from the March forecast legislators used to build the budget.

In total, the forecast shows the state is projected to bring in an additional $8.8 billion over the next four years.

According to Dave Reich, executive director of the forecast council, the state will bring in almost $1.2 billion more through the sales tax over the next two years than previously expected, which he attributed to both changes adopted by the legislature and changes in the state’s economic outlook. Washington will also bring in an additional $1 billion through the Business and Occupation tax, about $100 million from the tobacco tax, around $500 million through fund transfers and other agencies, and around $100 million through other revenue sources than it previously projected.

“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 in a statement. “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.”

K.D. Chapman-See, director of the Office of Financial Management, said Tuesday that while the Legislature had taken steps to address the budget shortfall during the recently completed legislative session, “it’s clear that we face ongoing uncertainty in the economy and federal funding.”

“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,” Chapman-See said in a statement.

Ferguson said Tuesday that the forecast “makes it abundantly clear” that the state cannot absorb all of the potential cuts from the federal government, including to Medicaid, education and food benefit programs.

“If those move forward, it will mean billions of dollars in cuts impacting our most vulnerable residents,” Ferguson said.

While Ferguson has completed his first legislative session, he will introduce his first budget when lawmakers return to Olympia in January. The supplemental will be smaller in scope than the two-year operating budget adopted during the 2025 session.

On the heels of the Legislature adopting around $7 billion in budget cuts, Ferguson said the Office of Financial Management has “already communicated to agencies that they need to look for additional savings.”

“This will not be easy. We already made many difficult decisions last session in order to bridge our $16 billion shortfall,” Ferguson said Tuesday. “Washingtonians expect us as leaders to make the tough decisions to live within our means and still deliver core services.”

Following the updated economic forecast, Rep. Timm Ormsby, D-Spokane, who chairs the House Appropriations Committee, said he believes the budget “can weather the negative economic impacts we see in this forecast driven by federal action.”

“Washington’s economy remains strong, but we will continue to monitor international conflict and the Congressional budget process in advance of next session,” Ormsby said. “House Democrats are committed to protecting services and programs that ensure everyone can thrive.”

In a statement Tuesday, Sen. Chris Gildon, the Senate Republican Budget leader from Puyallup, put the blame squarely on Democrats in Olympia.

“While the governor tries to shift blame to the federal government, this simply highlights a combination of ineptitude, government greed and catering to special interests by his own state party,” Gildon said. “Our state didn’t quite hit the financial iceberg today, but it certainly lies dead ahead.”