Gov. Inslee releases future-focused budget proposal, highlights the growing costs of income inequality
Today, Gov. Jay Inslee released a balanced budget proposal that protects progress on the programs and services that working families and businesses depend on — public safety, education, early learning, housing and behavioral health.
Washington is among several states facing a budget shortfall. The costs to maintain current services and program levels for the next four years went up approximately $12.6 billion due to inflation, higher projected caseloads in several safety net programs, expansion of popular programs like early learning, and workforce costs. Revenues dipped lower than forecasted due to lagging home sales and collections for sales and capital gains taxes.
Inslee’s proposed 2025–2027 budgets hold steady or minimize reductions in priority areas including:
- Housing: $905 million for 5,000 additional affordable housing units, homelessness services, and preventing evictions and foreclosures.
- Behavioral health: $719 million to continue expanding access to mental health and substance use treatment and recovery services.
- K-12: An additional $1.3 billion for K-12 schools to support increased costs for maintenance, supplies, technology and educator compensation.
- Childcare and early learning: $510 million to improve provider subsidy rates for Working Connections Child Care. $48 million for increased ECEAP rates school and right-sizing of the program to reduce unused part day slots and create 750 school day slots. Expanded entitlement for ECEAP is delayed.
- Public safety: $3.5 million to maintain the recent expansion of training for local corrections officers. $7 million for 60 additional state law enforcement officers, and $13 million for deployment of speed cameras to reduce work zone injuries and deaths. $33 million to open a new juvenile rehabilitation center.
- College and career training: $6 million to continue full funding for Career Connect Washington and $182 million to maintain the nation’s most generous financial aid program, Washington College Grant.
- Clean energy transition: $982 million of funding from the Climate Commitment Act continues popular and emission-reducing programs such as Washington’s EV rebate program, cost-saving weatherization improvements, electric school buses, hybrid-electric ferries, and free transit for youth.
- Retention and recruitment: Most Washington state employees will receive small cost-of-living adjustments of 3% in 2025 and 2% in 2026. The consumer price index — a measure of inflation — increased 3.0% in the Seattle area over the past year.
- Transportation: Sustained funding for new ferries and improved ferry service, and increased funding for fish barrier removal projects to meet the state’s legal responsibilities. Climate Commitment Act funding allows for additional bike and pedestrian projects and more transit services across the state. A funding gap for highway projects will require legislators to explore options to adjust delivery timelines or funding.
“Rolling back our work in areas like mental health, housing and education is not something we can afford, particularly at the moment we’re finally seeing the results of years of work and investments,” Inslee said. “This is a budget that keeps us moving forward, puts working families first, and continues creating a fairer tax system.”
Efficiency cuts and a new wealth tax
Earlier this month, Inslee directed a freeze on non-essential hiring and spending, a move that will result in savings while the Legislature considers spending plans. Overall, Inslee is proposing about $2.0 billion in reductions or delayed implementation of certain programs over the next four years.
Reductions include closure of Mission Creek Corrections Center for Women due to decreasing need for lower-security beds. Inslee proposes closing two residential habilitation centers and helping residents move to other community-based settings. The state would also close three reentry centers where demand for services is low.
To address the remaining gap, Inslee proposes a merger of the state’s LEOFF 1 and LEOFF 2 pension plans which allows a one-time shift of $1 billion to the general fund while still leaving a surplus in the combined LEOFF system. He is also proposing a new wealth tax and B&O tax changes. Over four years, the wealth tax would generate $10.3 billion and the B&O tax would raise about $2.6 billion.
The B&O changes would apply to approximately 20,000 companies with annual income of more than $1 million in the “service and other activities” category. Examples include lawyers and accountants. The tax rate would increase from 1.75% to 2.1% in October through December 2026. Beginning January 2027, all B&O tax rates will increase 10%, though some businesses will see no change due to their tax filing threshold and qualification for small business tax credits.
The wealth tax places a modest 1% tax on residents with worldwide wealth exceeding $100 million — approximately 3,400 of Washington’s wealthiest individuals.
“Our economy is among the strongest in the nation, and we’ve created a lot of millionaires — thousands of them,” Inslee said. “Even with recent tax reforms, they continue to pay very little in taxes compared to the average working family. At a time of increasing income inequality, a 1% wealth tax paid by the wealthiest few is the fairest way to protect the state’s progress on programs that support the safety and economic well-being of the entire state. The middle class is increasingly fractured as fewer people hold more wealth and more families try to make every dollar stretch further.”
The median household income in Washington is currently $93,440. But such statistics mask the widening wage gaps between those who work in a small number of high-paying sectors such as technology and the majority of Washingtonians who work in non-tech sectors such as education, construction, the service industry, and manufacturing.
Billions in budget cuts would compromise tenuous gains
When Inslee came into office in 2013, Washington state was working its way out of the Great Recession. Gregoire and the Legislature reduced state spending by more than $11 billion — cuts that were necessary at the time, but led to damaging gaps in Washington’s mental health, education, higher education, and health care systems.
It took nearly a decade for Inslee and legislators to rebuild to pre-recession levels, let alone keep up with the state’s population growth. And now, possible Trump cuts to safety net programs could further strain the state’s ability to support low-income and working families. Inslee highlighted numerous examples where deep cuts would compromise the tenuous progress being made on Washingtonians’ top priorities.
- After the state Supreme Court’s ruled in 2018 that Washington had finally met its obligation to fully fund K-12 education, schools continue to face funding significant funding pressures. Legislators have been looking for ways to expand funding for special education, paraeducators and mental health services for students.
- Newly-opened behavioral health facilities have helped the state meet its Trueblood obligations and reduced wait times for people awaiting competency services in jails from months to days. Training more providers and opening more facilities are urgent next steps to shore up the rest of the system.
- Washington’s College Grant has emerged as the nation’s most generous financial aid system in the country. Recent policies go a step further to guarantee low-income students free tuition at state colleges. Deep cuts to higher education will further set back efforts to meet the goal of 70% of students earning a college degree or career credential.
- Washington is investing in various efforts to prevent and respond to homelessness. Leaders recently celebrated a 40% reduction in youth homelessness. The innovative Apple Health and Homes program is helping adults with disabilities access housing they might otherwise not be able to afford. Washington also launched an encampment resolution program proving to be successful at keeping people housed and connecting them to services such as addiction treatment, behavioral health, and job training. Funding for homelessness and housing is already strained, requiring leaders to make difficult choices about how to prioritize work.
- Washington has made headway on several health care initiatives. Washington’s first-in-the-nation “Cascade Care” public health insurance option is now available in all 39 counties. Voters recently upheld WA Cares, making it easier for people to access long-term care services. Washington’s Paid Family & Medical Leave program is among the most generous in the nation and has helped more than 500,000 people take needed time off to care for a new baby, a parent or partner, or themselves.
- Passage and funding of the Fair Start for Kids Act in 2021 was the culmination of years of work by a broad coalition of people to make child care more available and affordable. The number of families accessing subsidized child care is growing, and improving pay for child care workers remains a heavy lift. The state estimates about 323,000 children under 5 and 456,000 school-age children need child care. An average family with an infant and a young child spends 35.5 percent of their income on child care.
“Our strong economy and quality of life isn’t an accident. It’s because Washington has never been afraid to invest in its people, and that’s exactly what this budget does,” Inslee said. “We have the means to continue moving forward and ensure good health and economic well-being isn’t limited to a wealthy few.”
Highlights of the governor’s proposed budget are available on OFM’s website.
