Washington State Legislative Update 

Week of March 17-21, 2025

This week, regular legislative activity primarily revolved around policy committee hearings, where lawmakers reviewed and debated bills that had recently advanced from the opposite chamber. Some of these include high profile bills like Unemployment Insurance for Striking Workers (5041), Waste Management (5284), Firearm Restrictions in Sensitive Places (5098) and Rent Stabilization (1217). These hearings are part of the lead up to the April 2 deadline for bills to be passed out of policy committees.

Ferguson Administration Updates

Just two months into his first term, Governor Bob Ferguson’s administration is experiencing significant staffing challenges. Key staff members, including Legislative Director Joyce Bruce, Deputy Legislative Director Shawn Lewis, Chief Strategy Officer Mike Webb, and several others in his office have resigned. These departures follow reports of internal concerns, including complaints about a hostile work environment. In response, Governor Ferguson’s office indicated they plan to restructure their leadership approach to address these issues.

The timing of these leadership changes presents unique challenges, especially given the current stage of the legislative session. Next week, we expect budget proposals from the House and Senate, along with revenue proposals from both chambers. Governor Ferguson’s proposed spending cuts, including eliminating teacher bonuses and furloughing state employees one day per month over two years, sparked considerable criticism. Some stakeholders, legislators, and members of the public have called on lawmakers to focus not only on cuts but also on identifying revenue solutions to address the state’s substantial $15-$16 billion budget deficit.

March 18 Revenue Forecast

Budget writers, who are putting the finishing touches on budgets that will be released Monday, March 24, received more bad news on Tuesday with the latest revenue forecast. In the upcoming two-year budget beginning July 1, projections indicate a decline of $479 million, bringing the total to just under $71 billion. For the 2027-2029 biennium, the latest forecast anticipates a $420 million decrease, with revenue expected to reach $76.4 billion. Washington’s chief economist, Dave Reich, noted that the state’s revenue collections have yet to fully stabilize since the pandemic. Representative Timm Ormsby (D-3), chair of the House Appropriations Committee, released a statement following the forecast that strongly foreshadows revenue proposals, “With revenue growth slower than it has been in about a decade, and the continued impacts of inflation being felt across the budget, we know what we need to do. House Democrats are taking a balanced approach to reducing the budget where we can and addressing our regressive tax structure to ask the wealthiest in our state to help us keep people alive.”

Majority Revenue Proposals Released

On Thursday, the Majority Senate Democrats released their revenue proposals. And on Friday, the Majority House Democrats released theirs.

Senate

  • 5797 (Frame, D-36) Financial Intangibles Tax — a tax of $10 on every $1,000 of assessed value of certain financial assets (stocks, bonds, exchange-traded funds, and mutual funds) held by individuals with more than $50 million of these assets, paid by about 4,300 individuals. It generates approximately $4 billion per year starting in fiscal year 2027 for public schools.
  • 5796 (Saldana, D-37) Removing the Cap on Employer Payroll Taxes — a 5% tax on large employers on the amount of payroll expenses above the Social Security threshold — currently $176,100 per year. This tax is limited only to companies with $7 million or more in payroll expenses— about 5,289 companies. The proposal is similar to the city of Seattle’s “JumpStart” tax and includes a full credit for businesses already paying that tax. It would raise about $2.3 billion per year once fully implemented, going to public schools, health care, basic needs assistance for seniors and those with developmental disabilities.
  • 5798 (Pedersen, D-43) Allowing Property Tax to Grow by Population and Inflation — raising the property tax growth limit for the state’s common schools levy and for cities and counties, as well as special purpose districts, from the current 1% cap to the combined rate of population growth plus inflation. Local governments have the option to take a lower growth rate if they so choose. Instead of being tied to an arbitrary number, it would allow the growth limit to reflect the actual cost of providing public safety and related services. The proposal also completely exempts participants in the “Property Tax Exemption for Senior Citizens and People with Disabilities” program from paying the state property tax. The state property tax is dedicated to public schools, with about $779 million in additional funding over the full four-year budget cycle, while increased funding in cities and counties would go to public safety, criminal justice, and community protection.
  • 5794 (Salomon, D-32) Repealing Tax Preferences — repealing 20 tax exemptions where the public policy objective was not met, it is unclear whether the policy objective was met, or the exemption is legally obsolete, according to nonpartisan auditors at the Joint Legislative Audit & Review Committee, including for in-state hauling, gold bullion, prescription drug wholesalers, and more. This generates just over $1 billion over the full four-year budget cycle for public schools, health care, and social services.
  • 5795 (Krishnadasan, D-26)  Cutting Sales Tax – a half-point sales tax reduction, from 6.5% to 6% – a decrease in revenue of approximately $1.3 billion per year.

House 

  • 2046 (Berg, D-44) Financial Intangible Assets Tax – imposes a property tax of $8 on every $1000 of assessed value on certain financial intangible assets, such as stocks, bonds, mutual funds, and index funds, with the first $50 million in assessed value exempt from the tax. Other exemptions include pensions, retirement accounts, and education savings accounts. The Department of Revenue estimates around 4,300 Washingtonians will pay the tax, generating approximately $2 billion per year, beginning in fiscal year 2027, which will be dedicated to the Education Legacy Trust Account.
  • 2049 (Bergquist, D-11) Increasing State and Local Flexibility to Fund Schools and Public Safety – would modify the state and local property tax authority and adjust the school funding formula. The bill maintains the 1 percent cap on property tax growth but allows for increases based on inflation and population changes, not to exceed 3 percent. The bill also adjusts levy equalization methods. The Department of Revenue estimates the change will increase funding for state investment in K-12 schools by $50 million in fiscal year 2026 and $150 million in fiscal year 2027.
  • 2045 (Fitzgibbon, D-34) Surcharge on High-Grossing Corporations and Financial Institutions – imposes a 1% Business & Occupation (B&O) tax surcharge on businesses with taxable income over $250 million. This surcharge applies to approximately 400 businesses statewide. The bill also includes an increase to the surcharge on specified financial institutions (approximately 200) with annual net income of $1 billion or more from 1.2% to 1.9%. Under this proposal, Washington will generate nearly $600 million in fiscal year 2026 and nearly $2 billion in fiscal year 2027.

The Week Ahead

Majority Democrats are set to hear their proposed budgets on Tuesday, March 25. Both the House and Senate Operating and Transportation budgets are scheduled to be heard on March 25th. These hearings set the stage for negotiations and revision before final approval.

Important Dates:

  • Monday, January 13 – First Day of Session
  • Friday, February 21 – Policy Committee Cutoff, House of Origin
  • Friday, February 28 – Fiscal Committee Cutoff, House of Origin
  • Wednesday, March 12 – House of Origin Floor Cutoff
  • Wednesday, April 2 – Policy Committee Cutoff, Opposite House
  • Tuesday, April 8 – Fiscal Committee Cutoff, Opposite House
  • Wednesday, April 16 – Opposite House Floor Cutoff
  • Sunday, April 27 – Sine Die

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Brynn Brady

Ceiba Consulting, Inc.

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