In 2019, the Legislature imposed a business & occupation (B&O) tax surcharge on certain businesses to help fund higher education. Under current law, 14.3% of collections from the 1.75% B&O tax rate for businesses in the “service and other activities” category is deposited in the workforce education investment account (WEIA). Additionally, all the revenues from the 1.22% workforce education investment surcharge on advanced computing businesses are deposited in the WEIA. (The WEIA is a fund subject to the outlook.)

Funds in the WEIA may be used “only for higher education programs, higher education operations, higher education compensation, state-funded student aid programs, and workforce development.” Importantly, statute also specifies that WEIA expenditures “must be used to supplement, not supplant, other federal, state, and local funding for higher education.”

This year, the Legislature passed several tax bills that would impact WEIA revenues, particularly ESHB 2081. (Gov. Ferguson has not yet acted on the bill.) As passed by the Legislature, ESHB 2081 would make two changes that would directly increase WEIA revenues. First, it would add a third B&O rate tier for service and other activities businesses (2.1%), specifying that 14.3% of the revenues from both the 1.75% tier and the 2.1% tier would go to the WEIA. Second, the bill would increase the WEIA advanced computing surcharge from 1.22% to 7.5%. It would also increase the annual cap on surcharge collections from members of an affiliated group from $9 million to $75 million.

ESHB 2081 would increase WEIA revenues by an estimated $653.2 million in 2025–27 and by $967.7 million in 2027–29. Compared to the March 2025 revenue forecast for each biennium, that’s an increase of 69.3% in 2025–27 and 95.4% in 2027–29.

Meanwhile, the operating budget (as passed by the Legislature) would amend the WEIA statute to allow the account to supplant other funding for higher education in 2025–27, with the intent to continue the policy in 2027–29 (Sec. 951).

The operating budget would appropriate $1.583 billion from the WEIA in 2025–27, a 65.5% increase over enacted 2023–25 WEIA appropriations. WEIA funding would grow as a share of total funds for higher education.

The budget would use the new WEIA revenues to fund policies that were previously funded with the general fund–state (GFS). (The GFS funds are then available for use elsewhere in the budget.) For example:

• The budget would appropriate $400.0 million for the University of Washington for general use from the WEIA instead of from the GFS in 2025–27.
• $177.9 million would be appropriated from the WEIA for employee compensation in 2025–27, including the costs of the collective bargaining agreements (CBAs) with higher education employees and the costs of extending them to non-represented employees. In previous budgets, the costs of the CBAs have been funded from the GFS.
• $28.0 million is appropriated from the WEIA in the 2025 supplemental budget for the I-732 cost-of-living adjustment (COLA) for community and technical college employees. As I wrote last year, there was an inadvertent double appropriation for the I-732 COLA in 2023–25. The maintenance level for the 2025 supplemental would reduce GFS appropriations by $27.9 million and WEIA appropriations by $102,000 to correct the problem. The budget would then add back $28.0 million from the WEIA to restore the funding at the policy level. Thus, not only would the Legislature still fund its mistaken appropriation, it would shift the funding source from the GFS to the WEIA.

Additionally, some items that would be funded from the WEIA in the 2025–27 budget seem to be getting fairly far removed from the purpose of the account. For example:

• $15.0 million would be appropriated for UW’s Center for Behavioral Health Learning. This is the new behavioral health facility with long-term civil commitment beds that is also supposed to provide behavioral health education. The state appropriated $20 million from the GFS to support the facility and its 75 beds in the 2024 supplemental. The 2025–27 budget does not specify that the $15 million be used for teaching activities. (The Seattle Times reported last month that the facility has a shortage of new patients.)  
• $3.5 million would be appropriated for UW “to address challenges and capacity with discharging patients from acute care settings into post-acute care community settings at Harborview medical center and the University of Washington medical center.”
• $650,000 would be appropriated for UW for “short-term transition and stabilization support for individuals incompetent to stand trial due to intellectual or developmental disability.”