WA Legislature passes $78B budget, rent cap, gun permits as it adjourns

OLYMPIA — A $78 billion budget that will maintain core services, hike taxes on a variety of industries and send a boost to K-12 special education was passed Sunday by state lawmakers as they concluded the session with a compromised cap on rent increases and the creation of a new gun permit system.

The final budget for the 2025-27 biennium, introduced Saturday, passed on mostly party lines, 52-45 in the House and 28-19 in the Senate, overshadowing Republican discontent that did little to move the needle this session as lawmakers tried to wrap their arms around an estimated $16 billion shortfall over the next four years.

Lawmakers ultimately landed on increasing spending by $7.4 billion over the next two years and tackling the major budget hole with $5.9 billion in cuts and $9.3 billion in new revenue over the four-year period.

The session saw some tensions between Democrats and Gov. Bob Ferguson in his first budget foray, over his demands to scuttle a wealth tax and cut spending more before raising other taxes.

But the final budget delivers a win for Ferguson — a $100 million grant program devoted to hiring and retaining law enforcement officers he promised on the campaign trail — even as he faced criticism from his own party, whose members felt he didn’t fight strong enough for Democratic priorities, including when he floated furloughs for state workers.

In concession to those concerns, Democrats ditched the furloughs and the untested wealth tax (even a smaller one Senate Democrats passed Sunday), and instead pursued a new EV credit tax that goes after the richest man in the world, billionaire Elon Musk — or at least his company, Tesla.

Democrats also raised state business and occupation tax rates on a variety of industries and applied extra surcharges for businesses with more than $250 million in taxable state income. New revenues also include a sales tax on tech services and raise the capital gains tax on wealthy investors in the state.

Lawmakers also signed off on new $7.6 billion capital budget and $15 billion transportation budget that will have drivers paying higher gas taxes, starting at 6 cents more per gallon July 1, followed by 2% more per year.

Democratic leaders at a news conference after the session said they faced a difficult environment with the uncertainty from Trump tariffs and budget cuts combined with the state’s own fiscal woes.

“It was a really challenging session to try and walk a very narrow path,” said House Speaker Laurie Jinkins, D-Tacoma, saying lawmakers adopted budgets that took a “balanced approach” between protecting vulnerable people and not raising costs too much on working families.

Senate Majority Leader Jamie Pedersen, D-Seattle, said the “collaborations and conversations” between the governor and lawmakers had “improved dramatically” over the past few weeks.

But no Republican voted in support of the final deal as they maintained all along that the budget crisis was the result of overspending on state programs by Democratic lawmakers, and new revenue proposals were unnecessary.

Rep. Travis Couture, R-Allyn, criticized the budget for raising taxes and “wasteful” spending, including on healthcare and legal services for undocumented immigrants.

“The only winners in this budget are politicians, criminals and bureaucrats,” Couture said as the House debated the final operating budget plan. 

Business groups blasted the Legislature’s final budget as the biggest tax increase in state history.

“These extreme tax hikes send the wrong message to employers: grow your business, and you’ll literally pay for it. At a time when job creators need certainty and support, the state is punishing growth and innovation,” said a statement Sunday from the Seattle Metropolitan Chamber of Commerce, the Washington Roundtable, the Association of Washington Business and the Bellevue Chamber.

Rep. Mia Gregerson, D-SeaTac, said the taxes raised by lawmakers will help prevent cuts to needed state service, and protect the public workers who provide them. The final state budget plan funds pay raises for state workers that had been negotiated last year.

“We need good employees, right?” Gregerson said in an interview. “We’re trying to make sure we are honoring their roles in each of these different places, whether it’s our child care facilities, health care facilities … those are all connected. Taxes come in and our job is to spend them.”

Aside from disagreements with Democratic lawmakers on budget issues this session, the governor’s office wasn’t without its own drama as barely two months into his first term, Ferguson’s legislative director and deputy legislative director resigned from their positions amid concerns about a toxic workplace allegedly fostered by Ferguson’s top gubernatorial aide, Mike Webb. Webb resigned days later.

Soon after lawmakers adjourned, Ferguson thanked them for abiding by several of his demands, including heeding his warning on draining the state’s rainy day reserve fund, citing the likelihood of drastic budget cuts from the Trump administration.

He also applauded them for increasing the share of the budget devoted to K-12 schools, another platform he campaigned on last year.

Ferguson declined to hold a postsession news conference to take questions from reporters. Throughout his early term, he has had few such sessions, in a marked departure from past governors.

In a written statement, he said he would review the budget “line by line“ over the next few weeks, including a careful look at all the tax increases.

Here’s some of what else lawmakers did this session. 

Housing

After several years since it was introduced, lawmakers passed House Bill 1217, to cap rent increases statewide at 7% plus inflation or 10%, whichever is less. The bill, passed without support from Republicans, has been heavily contested and faced many hurdles before it finally cleared the Legislature. 

Lawmakers also passed a bipartisan measure that creates a pathway for some local areas to allow lot-splitting, which struggled to clear legislative hurdles in previous years despite support from both chambers.

Lt. Gov. Denny Heck, a prominent champion of housing policy in the state, said he was also happy to see that significant investments were made in the Housing Trust Fund this session, along with legislation to eliminate barriers to construction of new housing, such as parking reform. 

K-12 education

As Washington K-12 schools struggle to pay for the high costs of special education, legislators gave them a boost, adjusting a funding formula and removing the cap on the number of students they’ll cover.

Legislators also eased the budget pressure by increasing how much money local communities can raise for schools through property tax levies.

The governor has already signed bills allowing schools to offer exploratory career and technical education classes to sixth graders and a bill barring universities and colleges from pressuring, or even proposing or requesting, nondisclosure agreements from students who report sexual misconduct.

But many other education ideas didn’t survive. Lawmakers didn’t restrict cellphone use in schools. And they didn’t sign off on free meals at school for every Washington public school student, a priority of the new governor amid the cost-of-living crisis.

Legislators also didn’t spare the state’s youngest learners from budget cuts, reducing funding to early learning programs and delaying planned expansions of early childhood education services.

Money to hire more police

One of Ferguson’s biggest priorities that he noted during his inaugural speech was to provide at least $100 million in funding to hire and retain police officers throughout the state. House Bill 2015 provides resources to local governments and state and local criminal justice agencies, while also authorizing a local option tax for the hiring and retention of officers.

The bill now awaits a signature from the governor, but meanwhile, Republicans have argued that the bill will not do much to increase local hiring as it relies on local jurisdictions to increase their own taxes. 

Restrictions on guns

Lawmakers passed a major bill in the Legislature this year that would require Washington residents to get a permit before they can purchase firearms. The bill, if signed into law, would require residents to get a new permit every five years. While Democratic lawmakers have attempted to pass the bill in previous years, this is the first time they were able to get the legislation over the finish line. 

Democrats also proposed legislation this year to prohibit guns in more public spaces, but that bill did not advance. Measures to crack down on safe storage for firearms were also introduced this year, but did not pass.

Medical debt 

Credit scores for Washingtonians will soon no longer be affected by medical debt under a new bill signed that has already been signed into law by Ferguson.

The new law prohibits collection agencies and health care providers and facilities from reporting medical debt to consumer credit reporting agencies. The law goes into effect July 27.

Mandated reporting for clergy

Another bill that has previously struggled to cross the finish line passed this year, and it would require clergy to report instances of abuse or neglect. Professions such as police officers, teachers and health care professionals are already required to be mandated reporters, but not all states require clergy.

Washington, if the bill is signed by Ferguson, will join a handful of other states on the new clergy requirement.  

Striking workers

Democratic lawmakers passed another heavily contested bill on Saturday that would allow striking workers access to unemployment insurance for up to six weeks. Initially the bill called for benefits for up to 12 weeks but there were disagreements in the chambers over the amount of time that workers should be allowed to access benefits.

Seattle Times staff reporter Claire Withycombe contributed to this report.