We estimate that Washington is facing a $5.1 billion budget shortfall for 2025–27. However, this is not a revenue shortfall. Biennial revenues have not declined. Instead, spending growth has outpaced revenue growth. Indeed, legislators have regularly appropriated more than they expect to collect from forecasted revenues—especially in 2023–25. Enacted appropriations for 2023–25 exceed revenues expected for the biennium by $5.466 billion (8.2%). The spending growth occurred even as the Legislature has known that revenues would come in more slowly beginning in 2023–25.

Aside from that, the seeds of the projected 2025–27 shortfall were planted in 2021, when the Legislature swept the rainy day fund, enacted a major program that was scheduled to bow wave beyond the four-year outlook, and adopted a volatile new tax. Then, the 2023 and 2024 budgets were balanced using one-time funds.

Further, the Legislature drew down reserves to continue dramatic spending increases. If legislators had refrained from doing so, they might have sufficient reserves to cover what would be a smaller estimated shortfall.

Read the report here.