New revenue forecast shows continued decline in Washington’s revenue projections
OLYMPIA – A slowing economy will force cuts to services, higher taxes or both next year as the Legislature eyes increasingly dire economic news.
The latest economic forecast from the Washington State Economic and Revenue Forecast Council released Tuesday shows that the state will bring in $508 million less through 2027 than budget writers predicted when they crafted their two-year budget, prompting calls by Republican lawmakers for budget writers to exercise financial restraint when they return to the Capitol early next year.
Combined with a June forecast that also showed a decline in revenue, the state anticipates it will bring in $1.62 billion less through 2029 .
Despite the falling revenue projection, it’s unclear whether lawmakers will be called back to Olympia to cut spending in a special session before the regular session begins in January.
In a statement Tuesday, Gov. Bob Ferguson said the newest forecast was “disappointing but not surprising.”
“For some time, my budget team has been preparing for a challenging revenue forecast,” Ferguson said.
In his statement, Ferguson added that as he drafts a supplemental budget proposal he will “be focused on delivering a balanced budget that maintains core services to the people of our state.”
Dave Reich, forecast council executive director, said Tuesday that the decline in projected revenue is tied to a slowing national economy leading to weaker taxable sales forecasts for retail and construction, decreased state agency revenues, and a reduction in projected real estate excise tax returns.
K.D. Chapman-See, director of the Office of Financial Management, said in a statement Tuesday that the agency has “been preparing for the possibility of slowing revenue growth.”
Ferguson, along with state Sen. June Robinson, D-Everett, chair of the Senate ways and means committee, said the decrease in projected revenue is the result of federal action, citing the recently passed “One Big Beautiful Bill” and tariffs as contributing factors.
“As the most trade-dependent state in the nation, we’re feeling the impact of the president’s tariffs, which are weakening our trade relationships and hurting farmers, small businesses, and manufacturers across the state,” Robinson said in a statement. “This threatens the revenue we rely on to fund essential state services like education and behavioral health.”
Republicans, however, argue that the majority Democrats have spent well beyond the state’s fiscal means. State Sen. Chris Gildon, R-Puyallup, said in a statement Tuesday that “what we’re seeing is the result of ineptitude, catering to special interests and the Democrats’ ‘tax-first’ agenda. It shouldn’t be this way.”
Gildon added that Ferguson and Democratic legislators could look to call a special session to rein in previously approved spending, though he added “it’s more likely they will blame this situation on the federal government and the cost of delivering core state services rather than take responsibility and correct course.”
State Rep. Ed Orcutt, R-Kalama, a member of the Economic and Revenue Forecast Council, told reporters Tuesday that Ferguson and budget writers should come to Olympia for the upcoming session prepared to make cuts.
“Obviously, when you get into session, then things get tweaked,” Orcutt said. “But at least come in with some ideas on where we can start trimming that budget to get it back into balance.”
Orcutt added that the revenue council’s next forecast, which will be released in November, will “help see how much trimming needs to be done.”
“I’m concerned about what could happen with that revenue forecast, too,” Orcutt said. “America is strong, and I think that with interest rates starting to come down, if they continue to come down, then you might start to see a little more retail sales coming back, and that was one of the big areas that we saw a drop in this revenue forecast. So hopefully, we can see those interest rates come down, and see retail sales start to come back up.”