Washington state is projected to face a significant budget shortfall of $5.1 billion in the upcoming 2025-27 biennium, according to preliminary estimates. This gap stems from the rising cost of maintaining current services, which exceeds forecasted revenues for the Near General Fund Outlook (NGFO). The shortfall could expand to $7.5 billion over the next four years.
The estimate factors in the September revenue forecast, expected costs for collective bargaining agreements, and inflation adjustments. The state’s rainy day fund is projected to hold $2.977 billion by the end of the forecast period, leaving a considerable deficit to be addressed.
This shortfall isn’t due to a recession but rather a result of legislative choices. Lawmakers increased spending despite knowing that revenue growth would slow. Additionally, reserves were tapped to fund general spending, leaving an insufficient cushion to cover the gap.While these are early estimates, with two more revenue and caseload forecasts to come before the Legislature enacts the 2025-27 budget, the current outlook signals a challenging fiscal period ahead for the state.
