Majority Democrats in the state House and Senate unveiled competing supplemental budget proposals Sunday as lawmakers race toward a March 12 legislative session adjournment.
The plans dropped just a week after the state's February revenue forecast showed modest improvement, trimming but not eliminating the $2.3 billion shortfall in the 2025-27 budget.
Budget writers say the updated forecast softened the projected deficit but still leaves lawmakers billions short as rising costs in programs tied to enrollment and eligibility, such as Medicaid, special education and other social services, along with collective bargaining agreements and program growth, outpace revenue.
Republicans criticized the plans as overspending. Rep. Timm Ormsby, D-Spokane, the House’s lead budget writer, said Democrats are working to protect core services while closing the gap.
With the session's end nearing, lawmakers must reconcile differences between the chambers and pass a final supplemental budget before the deadline.
Here are five key takeaways from the Senate and House proposals.
Rainy Day Fund
Echoing a proposal from Gov. Bob Ferguson, both chambers propose tapping the state's Rainy Day Fund to help cover the deficit. The Senate proposes withdrawing $750 million; the House would pull $880 million and later replenish it in 2027-29 using surplus funds from a pension account for law enforcement officers and firefighters.
The fund is intended to stabilize the budget during downturns, and lawmakers argue the current shortfall meets that test.
Climate Commitment Act
House and Senate Democrats diverge sharply over how to use proceeds from Washington’s Climate Commitment Act carbon auctions.
The House would shift $569 million, including to support the Working Families Tax Credit, with plans to backfill the money later using pension funds. The Senate does not redirect climate dollars to the tax credit.
Both budgets maintain CCA funding for wildfire prevention and response programs.
Ferguson's December proposal leaned more heavily on cuts and redirected nearly $570 million in CCA funds and also a dip into the state's budget stabilization account.
Medicaid
Medicaid spending continues to climb, driven by rising health care costs and a growing number of enrollees, particularly seniors and people with disabilities who require long-term care.
The House would eliminate occupational, speech and physical therapy coverage for adult Medicaid recipients and provide a limited, one-time rate boost for certain long-term care facilities. It also sets aside $1.56 million to create a civil legal aid program for Medicaid-eligible residents being discharged from long-term care settings for fiscal year 2027.
The Senate instead proposes $71 million to restore Medicaid savings assumed in prior budgets that are unlikely to materialize, avoiding some of the House's service reductions.
Income tax assumption
Both budgets assume revenue from a proposed tax on income above $1 million, though the policy has not yet passed.
Legislative analysts estimate the tax could generate roughly $3.5 billion annually. Democratic leaders say the money would expand the Working Families Tax Credit, exempt hygiene products from sales tax and reduce business and occupation taxes for small businesses.
The Senate’s $79.4 billion operating budget pairs $2.3 billion in new spending with the anticipated tax revenue. The House uses a Department of Revenue statistic that assumes $9.3 million in revenue for 2025-27.
The proposal remains under consideration in the Legislature. If passed, it would begin taxing income earned in 2028, with the first taxes due in April 2029. The measure is expected to face legal challenges and a likely initiative effort.
Tort liability
Mounting legal payouts are consuming a growing share of the budget. The Senate would direct $1 billion to the state’s self-insurance liability fund; the House includes about $1.3 billion. State payouts reached a record $500 million last fiscal year, leaving the fund more than $1 billion in the red.
Last year, Ferguson and lawmakers resorted to a budget gimmick to avoid accounting for those very real legal costs. Now they're trying to belatedly address the issue.
Lawmakers had also considered requiring many claims against state and local agencies to go through arbitration before reaching court.
The measure, strongly opposed by trial lawyers, will not advance this session, House Speaker Laurie Jinkins said Tuesday.
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