Manageable, or Unchartered Territory?

In the 2025 Legislative Session, lawmakers must close a $10 billion -$12 billion budget gap between spending promises and available tax revenue.

As they address the challenge, it’s natural to wonder: Is this budget situation manageable, or are we in unchartered territory?

The budget shortfall during the Great Recession

  • Washington’s last gap between outgoing spending and incoming revenue was created by a decline in tax revenue caused by the Great Recession.1

  • The Great Recession was an economic event outside state lawmakers’ control that caused tax revenues to crater in every state in the nation.2

  • Over the course of three biennia during the Great Recession, revenues in Washington dropped by a total of $12.6 billion.3

The budget shortfall today

  • Today, Washington is not in a recession and revenues have not declined.4

  • While revenues have slowed from historically high rates to a more typical rate of growth, they are still forecasted to grow by 7.5% in each of the next two biennia.5

  • Estimated spending in 2025-27 is about 10% higher than forecasted revenues. Estimated spending in 2027–29 is about 7% higher than forecasted revenues.6

Comparing the Great Recession’s budget shortfall to today’s

  • Washington’s budget gap during the Great Recession was twice as large as the current budget gap in real dollars in a budget half as large. The resulting budget gap between 2009 and 2013 added up to $23 billion in today’s dollars.7

  • This gap accounted for approximately 25% of the budget. The current 8% budget gap represents one-third of that share.8

  • The Legislature closed the Great Recession-driven revenue shortfall through spending reductions.9

Manageable, or unchartered territory?