What Budgeting Choices Contributed to the Budget Shortfall?

For the first time since the Great Recession1, the state of Washington is spending more than it’s collecting in taxes. This multi-billion gap represents 8% of the overall budget.

Unlike during the Great Recession, Washington is not in a recession: The economy is booming.2

So how is there a budget shortfall? Because of a budget crisis? Or budgeting choices?

Some notable decision points from the last four years:

Rainy Day Fund withdrawal and federal fund allocation

  • In 2021, state government withdrew the $2 billion of reserves it had in the Rainy Day Fund.3

  • There was no budget gap at the time.4

  • State government allocated almost $16 billion in federal relief funding.5

Record revenue growth plus large spending increases

  • In the 2021-23 budget, revenues grew at record rates to record levels.6

  • By 2022, state government had an almost $14 billion revenue surplus, the highest in history.7

  • With that surplus, the state added $10.5 billion in spending, an increase of more than 20%.8

  • This was the largest spending increase going back to the 1990s.9

Record revenue growth plus large spending increases

  • In the next two-year budget cycle, the state economist projected tax revenues would grow by 3.5%.10

  • State government added nearly $10 billion, growing spending by another 16%.11

  • Several billions of this new spending were added as recently as last spring..12

  • Since 2021, state revenues have grown by a record 25%, while state spending has grown by nearly 40%.13

Budget crisis, or budget choices?