Washington's budget has a multibillion-dollar gap. Is it a crisis?
Officials have said it’s the largest shortfall in state history.1
Learn more about how the state budget got to this point, what it means, and why it matters.
The state budget impacts
our daily lives.
From the price we pay to fill up our gas tank to roads and schools, housing affordability and homelessness, all have a connection to the state budget.
What Choices Contributed to the Shortfall?
Washington is not in a recession. The economy is booming. So how is there a budget shortfall? Because of a budget crisis? Or budgeting choices?
How Does the State Budget Impact Your Budget?
Washingtonians are struggling to keep up with the growth of their household costs, while the fastest growth rate of all has been the growth of state spending.
Taxes too Low, or Spending Beyond Our Means?
For the first time in over a decade, Washington lawmakers must decide how to address a gap between incoming taxes and outgoing spending.
Washington is on track to collect $10 billion more in tax revenue over the next 4 years — still, spending is set to outpace that by $12 billion.
Unlike in a fifth of other states, 1 or at previous times in Washington’s history2, state tax revenues have not declined in our state. As Jay Inslee said in his last press conference as governor: “We’ve got a booming economy rather than a recession…one of the strongest economies in the country.” 3
In fact, in 2021-23, Washington collected $11.6 billion more than it did in 2019-21 in tax revenue. 4 And the state is expected to collect another $10 billion more in tax revenue between now and 2027-29. 5
Sources
Source:
[2] https://dor.wa.gov/sites/default/files/2022-02/tax%2520statistics%25202009.pdf
[3] https://tvw.org/video/governor-jay-inslee-budget-rollout-2024121162/?eventID=2024121162
[4] https://erfc.wa.gov/sites/default/files/public/documents/publications/nov24pub.pdf
[5] https://erfc.wa.gov/sites/default/files/public/documents/publications/nov24pub.pdf
As lawmakers meet for the 2025 Legislative Session to write a two-year budget, they are required to balance spending promises with expected tax revenue.
Unlike the federal government, the state can’t spend in deficit.
But state officials say the cost to continue state programs exceeds what the state expects to bring in over the next 4 years by about $12 billion.1
How did we get here? For starters, lawmakers have increased spending by 40% percent over the last two budget cycles.
Since 2021, lawmakers have increased state spending in each of the two, two-year budgets by double digits each.1
This has led to a 39.4% percent increase in spending over four years.2
Tax revenue increased at high rates as well in the biennia before 2023-253 — but were never expected to remain at such high levels for long.4
Recent state spending choices
at-a-glance:
2021
The Legislature allocated about $16 billion in federal relief dollars. Without a budget shortfall,1 lawmakers emptied the Rainy Day Fund by nearly $2 billion.2
2022
With a $14 billion revenue surplus, the highest in state history, the Legislature directed 80% into new spending.3 This grew state spending by more than 20% over the previous biennium.4
2023
The Legislature passed the 2023-25 budget, which grew state spending by $8 billion.5
2024
The Legislature added $2 billion in spending to the 2023-25 budget,6 taking overall spending growth in the biennium to 16% -- while tax revenues were projected to grow by 3.5%.7
2025
With record-high tax revenues, including an expected $10 billion more over the next 4 years, the state is $10 billion to $12 billion short of tax revenue needed to pay for spending promises over the next 4 years.8
Sources
[1] https://researchcouncil.org/wp-content/uploads/Enacted2123.pdf
[2] https://researchcouncil.org/wp-content/uploads/SubstantialSurplus2021.pdf
[3] https://researchcouncil.org/wp-content/uploads/2022supp.pdf
[4] https://researchcouncil.org/wp-content/uploads/Enacted2123.pdf
[5] https://researchcouncil.org/wp-content/uploads/AnatomyofaShortfall.pdf
[6] https://washingtonstatestandard.com/2024/03/29/inslee-oks-2-billion-boost-in-state-spending/
[7]https://researchcouncil.org/wp-content/uploads/AnatomyofaShortfall.pdf
A comparison over the past decade:
average household income, state tax revenue, state spending
Household income growth (55%)1
- 2013: $60,106
- 2023: $93,440
State tax revenue (99%):
- 2013: $17.8 billion2
- 2023: $35.4 billion3
State spending growth (114%)4:
- 2013-2015: $33.6 billion
- 2023-2025: $72 billion
Sources
[1] https://researchcouncil.org/wp-content/uploads/SubstantialSurplus2021.pdf
[2] https://researchcouncil.org/wp-content/uploads/2022supp.pdf
[3] https://researchcouncil.org/wp-content/uploads/AnatomyofaShortfall.pdf
[4] https://washingtonstatestandard.com/2024/03/29/inslee-oks-2-billion-boost-in-state-spending/
Fact-checking recent claims about the state budget gap:
“A perfect storm” of factors1
In November, the state finance director described the budget gap as a “perfect storm” of factors outside of lawmakers’ control, coalescing at once.
“Below average” revenue2
In December, outgoing Governor Jay Inslee suggested the budget gap is the result of insufficient tax revenues, and a system “below average in the revenue that it generates.” In fact, Washington’s tax collections have performed historically well, and have supported an unprecedented expansion of state government over the past decade.
“Largest budget deficit” ever3
State officials have said this is the largest budget gap in Washington’s history. In fact, it is dwarfed by the revenue shortfall of the Great Recession.