The Office of Program Research (OPR) estimates that the budget shortfall is $1.5 billion in 2025–27 and $4.3 billion over the four-year outlook. That estimate includes the November revenue forecast and adjustments to the maintenance level (the cost of continuing current or planned services, adjusted for inflation and enrollment).

Some policymakers have blamed the federal government for the current state budget shortfall. For example, Rep. Ormsby said, “Due to our tax structure and the ongoing impacts of tariffs, federal cuts from HR 1, and uncertainty in the economy, we continue to see budget gaps emerge.” However, although Gov. Ferguson’s 2026 supplemental budget proposal includes funding in response to the federal spending reductions in H.R. 1, that new funding is not the cause of the shortfall.

According to the Office of Financial Management (OFM), the governor’s supplemental budget proposal would increase appropriations from funds subject to the outlook (NGFO) by $155 million in 2025–27 to address changes made by the federal government (in H.R. 1) to Medicaid and SNAP. This includes both maintenance level and policy level changes, but it’s not clear if it includes all the caseload reductions generated by H.R. 1.

Maintenance level (ML) changes in the governor’s budget related to H.R. 1 include:

• $45.7 million due to the increase in the state’s share of SNAP administrative costs, which was increased in H.R. 1 from 50% to 75%.
• $48.9 million for the state-funded Food Assistance Program (FAP). H.R. 1 removed various lawfully present immigrants from SNAP, so those individuals are automatically eligible for FAP. (Note that this amount is only known because it is included in the governor’s budget highlights document. It is not visible in the data published on fiscal.wa.gov; instead, it is lumped in with other mandatory caseload adjustments in the Economic Services Administration. This is a good example of the lack of detail in public budget data.)
• $13.9 million to backfill the loss of federal appropriations for family planning clinics in H.R. 1. (This seems like it should be classified as a policy level change.)
• Savings of $20.3 million due to various lawfully present immigrants who were receiving long-term care services losing Medicaid coverage in H.R. 1.

These are just the ML impacts of H.R. 1 that are specified as such in the public budget data. There will also be budget savings at ML related to the new Medicaid work requirements. For example, the Medicaid caseload is expected to drop by about 197,000.

There is no public information about the four-year cost of the governor’s proposed changes. However, budget documents provided to the Legislature did include the four-year impact of the governor’s proposed new policies. They show that the cost of some of the proposals would increase substantially in 2027–29. (Many of the changes in H.R. 1 don’t take effect immediately.)

Policy level changes in governor’s budget related to H.R. 1 include:

• $18.4 million in 2025–27 and $100.8 million in 2027–29 to add 500 state-funded slots for lawfully present noncitizens who were receiving Medicaid long-term care and developmental disability services.
• $13.9 million in 2025–27 and $17.7 million in 2027–29 for staffing and IT changes related to the new federal work requirements for SNAP and to expand the Basic Food Employment and Training Program.
• $23.8 million in 2025–27 and $6.6 million in 2027–29 for other IT changes and agency compliance with new federal eligibility verification requirements.
• $1.4 million in 2025–27 and $177.6 million in 2027–29 due to the H.R. 1 requirement that states fund a portion of SNAP benefits based on their payment error rate. The governor’s budget assumes that Washington will have to pay 5% of benefits beginning Oct. 1, 2027, which means that the governor assumes Washington’s payment error rate will be between 6% and 8%. (The budget request from DSHS noted that Washington’s error rate was 6.06% in 2024 and was expected to be about 9% in 2025. Consequently, the DSHS request assumed that Washington would have to cover 10% of SNAP benefits.)

OPR’s December estimate of the ML included the increase in the state share of SNAP administrative costs ($173 million over four years) and the impact of the state’s SNAP payment error rate ($176 million in 2027–29, assuming a 5% benefit match based on a 6–8% error rate).

The $155 million that the governor attributes to H.R. 1 is a small portion of the governor’s overall budget proposal, which would increase 2025–27 appropriations by $1.159 billion.

Meanwhile, the state revenue forecast has declined by $1.690 billion (over 2023–25, 2025–27, and 2027–29) since the Legislature enacted the 2025–27 budget. (Revenues are still expected to grow in each biennium compared to the prior biennium.) Federal tariff policy has played a role in that, but COVID-related impacts like high interest rates have also contributed to slower revenue growth, according to the Economic and Revenue Forecast Council. (The tax package adopted by the Legislature last year will also affect economic growth.)

In September, OFM estimated that federal tariffs imposed under the International Emergency Economic Powers Act could result in $2.2 billion less in state revenues through 2029. As I noted at the time, the estimate assumed that the high tariffs adopted in April would remain in place through 2029. However, a federal appeals court had already ruled them illegal. The U.S. Supreme Court heard the case in November but has not yet issued an opinion. Gov. Ferguson’s budget highlights document notes that OFM has now revised its estimate of state revenue reductions due to tariffs down to $900 million–$1.4 billion through 2029.

The cause of the shortfall last year and this year is that state appropriations in 2023–25 and 2025–27 significantly exceeded forecasted revenues. The increased spending was not just to continue funding existing services—from 2021 through 2025, the Legislature added net new policy spending of $14.8 billion. Then, in the enacted 2025–27 budget, the Legislature left a very low unrestricted NGFO ending balance, despite broad fiscal and economic uncertainty.

Federal actions may have deepened Washington’s shortfall, but they are not its predominant cause.