Newly elected legislators in the Washington State House of Representatives gathered in Olympia recently beginning their orientation for the upcoming 105-day session that begins Jan. 13. The biggest challenge these 18 legislators will face is dealing with a possible $12 billion funding shortfall, compared with earlier projections. “Sobering news” was how the Nov. 20 forecast was reported.

As your elected representatives, these legislators will seek your input and priorities for the tough decisions that lie ahead. Democrats control both chambers of the legislature and a new governor is expected to propose a revised budget after his inauguration. The state has three budgets — the general fund, a capital budget and the transportation budget.

People don’t want to pay more in taxes, so legislators will need to tighten the state’s spending belt. Not only is affordable housing an issue, but simply the cost of day-to-day living is a big factor for far too many families.

Big picture

State spending (general fund) has grown from about $11 billion in 2000 to $37 billion in 2025. Per capita, inflation adjusted spending has grown about 50 percent, from about $4,000 per person to $6,000 per person.

Washington state has 133,250 employees, full-time equivalent. The largest percentage, 45%, are higher education — college — employees. Local K-12 school employees are primarily paid for by the state, but they are not state employees.

For comparison, Washington has 8 million people. Oregon has 4.2 million people and 45,000 state employees.

Approximately 75% to 80% of the budget is “mandatory” spending. These include constitutional elements, federal requirements (Medicaid) and other state-created obligations.

Education, health care and other human services programs are major drivers of state spending. While some spending is discretionary, most is mandatory to varying degrees.

Current budget revenues

The fiscal year 2023-25 biennium projected $66.4 billion in general fund revenues. Sales and use taxes make up 48% of revenue; business and occupation taxes make up 20%; property taxes 14%; with real estate excise, alcohol, tobacco, cannabis and lottery, utility, capital gains, estate and other taxes making up the balance.

The state takes 6.5% in a sales tax, with local entities adding to that amount. The total state and local sales tax rate varies from 7% to 10.6%. The average statewide is 9.38%. Additionally, there are 230 sales and use tax preferences, including exemptions.

Property taxes bring in about $9 billion and make up 14% of state revenue. Currently, levy amounts can rise by 1% of assessed value each year, plus new construction. Last session there was a proposal to raise the maximum increase to 3%, triple the current amount, but it didn’t pass.

Business and occupation taxes raise about 20% of revenues. Approximately 384,000 businesses pay this tax. Rates vary depending on business activity, from 0.138% to 3.3%. These taxes are applied to gross receipts, not profits. So, an unprofitable business would have to pay these taxes. There are four main rate categories — retailing, wholesaling, manufacturing and services.

A new capital gains tax began in 2022, and the Climate Commitment Act tax began in 2023.

Expenditures

The state budget planned to spend a total of $173 billion for the two-year 2023-25 biennium in three different budgets. The two-year operating budget — general fund — is $140.9 billion; the transportation budget is $14.7 billion; and the capital budget $17.8 billion. These budgets can overlap, for example the general fund pays for the staffing of the Department of Transportation, while the transportation budget pays for numerous “projects” including construction of new facilities, maintenance, the state patrol, the state ferry system and more.

Public schools (K-12) get the largest share of state spending at 43%. Higher education (colleges) gets 8%, the Health Care Authority gets 8%; the Department of Social and Health Services gets 10% plus handles another 3%; Children, Youth and Families receives 5%; and Behavioral Health gets 5%. Debt service consumes 4% of the spending.

Looking ahead, there are negotiated state employee pay raises that add to budget pressures. Gov. Inslee instituted a hiring freeze earlier this month. He will submit his suggested 2025 budget later this month.

As a representative, I welcome citizen input on revenues and expenditures. You can visit the Office of Financial Management, ofm.wa.gov/, for more details on any aspect of the state budget. Thank you for your input, support and encouragement.

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John Ley will be the 18th Legislative District representative effective Jan. 13, 2025.