Shared with us from Jim Hedrick, NYBA lobbyist:

"Top Five Takeaways from Washington's 2026 Primary Election

1. Progressive Democratic challenges largely failed to gain traction - asseveral high-profile progressive Democratic candidates challenged incumbent legislators viewed as more moderate or establishment Democrats. Based on the initial primary results, those efforts generally fell short.

The most closely watched contest was in Seattle's 43rd Legislative District, where Senate Majority Leader Jamie Pedersen, sponsor of the proposed Millionaires' Tax legislation, overwhelmingly outpaced challenger Hannah Sabio-Howell. Pedersen received more than 71 percent of the initial vote compared with Sabio-Howell's 17.9 percent, demonstrating strong support among Democratic primary voters despite organized opposition from the party's progressive wing. Although both candidates advance to the November general election under Washington's Top Two Primary system, the primary results significantly diminish expectations of a broader progressive insurgency.

A similar pattern emerged in north Seattle's 46th Legislative District. Representative Gerry Pollet led challenger Will Dreher by more than 20 percentage points, while Representative David Hackney secured a comfortable lead over two challengers and will face Ashley Fedan in November. Collectively, these races suggest Democratic voters generally favored incumbent legislators over progressive challengers.

2. Southwest Washington legislative districts present the Republican Party's greatest risk - The most competitive legislative races in the state appear concentrated in Clark County and surrounding southwest Washington districts. In the 17th Legislative District, Republican Representatives Kevin Waters and David Stuebe each received less than 44 percent of the initial primary vote against Democratic challengers. In neighboring 18th District, Representative Stephanie McClintock also trailed on election night, while Representative John Ley—whose guilty plea related to residency-based voter fraud has become a central campaign issue—was likewise behind his Democratic opponent.

These four House races represent some of the strongest pickup opportunities for Democrats this fall. If Democrats prevail in even one or two of these contests, they would further expand their already substantial House majority.

3. Voters will have a choice in Washington Supreme Court elections this Fall - 3 of the 4 contested Washington Supreme Court races produced general election matchups featuring candidates viewed as representing differing judicial philosophies. Moderate Dave Larson advanced to face Ferguson appointed Justice Theo Angelis. Moderate David Stevens will compete against Jaime Michelle Hawk, while more moderate Scott Edwards moves on to face Colleen Melody. Chief Justice Debra Stephens advanced comfortably and appears well positioned for another term.

Although Washington judicial races are officially nonpartisan, these contests are expected to attract significant attention and outside spending as interest groups seek to influence the ideological direction of the state's highest court.

4. Democrats remain positioned to make modest legislative gains . . . again - Based on the initial primary returns, district competitiveness, and the current political environment, Democrats appear positioned to make modest gains in the House while maintaining their existing Senate majority.

Currently, Democrats hold a 59-39 majority in the House and a 30-19 majority in the Senate. A net gain of one to four House seats appears plausible heading into November, while the Senate map offers Republicans relatively few realistic pickup opportunities.

Even with additional House gains, Democrats would remain short of the two-thirds supermajority required for certain legislative actions, which would require 65 House seats and 33 Senate seats.

5. Washington's 3rd Congressional District is emerging as the state's marquee race - incumbent Democratic Congresswoman Marie Gluesenkamp Perez and Senate Minority Leader John Braun will be Washington’s, if not the nation’s. premier congressional contest.

Initial primary returns showed Braun trailing by only 263 votes, an encouraging result for Republicans in a district that has consistently produced competitive general elections. The close margin signals that both national parties are likely to devote significant financial resources and organizational attention to the race over the next three months.

Given the district's history of close elections and its importance to the balance of power in Congress, the 3rd Congressional District is expected to become one of Washington's most closely watched and expensive campaigns heading into November."

From NYBA lobbyist Jim Hedrick,

"June Revenue Forecast

The Washington State Economic and Revenue Forecast Council (ERFC) released its updated (quarterly) state revenue forecast on June 26. The changes from the February forecast consist of two distinct components: 

1. Changes in revenue resulting from updated economic conditions, and
2. Additional revenue generated by tax and policy changes enacted by the 2026 legislature.

It is important to distinguish between these two components when evaluating the state's fiscal outlook. For the current 2025–27 biennium the economic forecast reduces expected revenue by $427 million compared to the February forecast. Total projected GF-S revenue declined $384.8 million, to $70.028 billion. Legislative actions enacted during the 2026 session are projected to generate an additional $1.3 billion in revenue. A significant portion of this increase is attributable to higher-than-anticipated collections and revised projections for the state's capital gains tax. 

For the following 2027–29 biennium, for which Governor Ferguson and the 2027 legislature will write their next budget, the economic forecast reduces expected revenue by $450 million from the February forecast. Legislative changes are projected to generate approximately $2.2 billion in additional revenue, with the largest share resulting from the newly enacted millionaires tax.

The takeaways from this forecast are as policymakers, stakeholders, and the public review these figures, it is essential to distinguish between economic forecast changes and new revenue resulting from legislative policy decisions. It is likely there will be a tendency to combine the two components and report net revenue increases of approximately $961 million for the 2025–27 biennium, and $1.78 billion for the 2027–29 biennium. 

While these are mathematically accurate net changes, relying solely on these larger figures can create a misleading impression of the state's underlying fiscal condition.

The economic forecast itself indicates that expected revenue growth has weakened in the current and next biennium. The positive net totals are only achieved because of taxes enacted by the Legislature during the 2026 session and not because the state's economy is generating additional revenue above previous expectations.

This distinction is critical for future budget deliberations. Budget planning should recognize that the state's fiscal outlook has softened, and the improved revenue picture is driven primarily by legislative tax increases rather than stronger economic performance.

Businesses should expect continued attention to revenue generation during future legislative sessions if economic growth remains sluggish. Additional proposals affecting business taxation remain possible, particularly if projected revenues weaken further.

 Washington's economy continues to cool. Major indicators include:

·      Sales tax growth is expected to moderate, potentially slowing local revenue growth.

·      Employment growth has slowed considerably.

·      Payroll employment is nearly 22,000 jobs below assumptions made in February.

·      The statewide unemployment rate has increased to 5.2%.

·      Personal income growth has softened.

·      Housing activity remains below expectations despite modest improvements in multifamily construction.

·      Consumer confidence remains weak while inflation, particularly energy costs, remains elevated.

Although Washington avoids recession in the forecast, economic growth is expected to remain modest over the next several years. This June 2026 forecast reflects two competing realities. Washington's economy has softened enough to reduce baseline revenues, yet the Legislature's tax package more than offsets much of that decline over the long term. Policymakers have stabilized the state's budget for now, but slower economic growth, continued inflationary pressures, and uncertainty surrounding federal fiscal policy suggest that budget and tax issues will remain central topics entering the 2027 legislative session.

The next official revenue forecast will be September 25 and should provide an important indication of whether the current slowdown is temporary or the beginning of a more sustained period of slower growth."

In early June, NYBA's lobbyist Jim Hedrick reached out to the Department of Revenue to clarify language that appeared in this year's session, in ESHB 2711. DOR confirmed in their response that the change in language in ESHB did not amount to any change in the intent of the .5% recreational vessel tax that passed during the 2025 session. Rather, it was intended to streamline the the administration of the existing 0.5% recreational vessel tax by aligning its application with the retail sales and use tax framework.

One important reminder regarding this tax: It is NOT a sales tax, and thus any trade-in value is not deductible. The .5% applies to the entire sales price.

Below is the response from the Department of Revenue, to Jim's inquiry:

"The changes made in ESHB 2711 were not intended to create a new tax obligation or increase the tax imposed on recreational vessels. Rather, the amendments were intended to clarify the administration of the existing 0.5% recreational vessel tax by aligning its application with the retail sales and use tax framework.

Although the bill removed the corresponding use tax and lease language from the recreational vessel tax statute, the use tax continues to apply through the retail sales and use tax structure. As a result, a separate use tax provision is not necessary because the recreational vessel tax follows the same taxable event as the underlying retail sales or use tax.

Regarding trade-ins, there is an important distinction between the retail sales tax measure and the recreational vessel tax measure. Under the retail sales tax statutes, the selling price generally allows a deduction for qualifying trade-in property. Therefore, the value of a qualifying trade-in reduces the measure subject to retail sales tax.

For purposes of the recreational vessel tax, the trade-in value is not deductible. While the tax is calculated alongside the retail sales tax, the recreational vessel tax statute requires the trade-in amount to be added back into the measure. As a result, the trade-in deduction applies to the retail sales tax calculation, but not to the 0.5% recreational vessel tax.

The removal of the lease language and other revisions were intended to clarify that the recreational vessel tax is not a separate and distinct tax with its own independent preferences and rules. Instead, it functions as an additional surcharge administered through the retail sales and use tax system, allowing applicable sales and use tax rules and preferences to align, except where the recreational vessel tax statute specifically provides otherwise, such as the treatment of trade-in value.

If your client has questions about their specific tax liability, they can email in for a binding ruling using the Rulings@dor.wa.gov email address.

From NYBA lobbyist Jim Hedrick:

"As the 2026 legislative session races toward its March 12 adjournment deadline, lawmakers in Olympia tackled major housing, privacy, tax, budget, and policy battles this week. With Friday night marking the opposite-house floor cutoff, several high-profile proposals moved forward while others quietly faded as time ran out.

Governor Bob Ferguson also stepped off the sidelines this week and inserted himself into the debate over the proposed Millionaires Tax. Whether the proposal ultimately passes or fails, progressive tax reform has clearly emerged as the defining issue of the 2026 legislative session; and one Democratic leaders appear poised to make a central theme of the 2026 election cycle.

Million Dollar Drama
The proposed Millionaires Tax, which currently awaits a vote on the House floor next week, had appeared doubtful earlier in the week. In an email to supporters, Governor Ferguson acknowledged the proposal faced uncertain prospects and lacked clear support in the Legislature.

By Thursday night, however, the political landscape had shifted. Negotiations intensified and momentum began building behind a revised version of the measure. On Friday, Ferguson announced he would sign the latest version of the proposal if it reaches his desk, signaling that a compromise may finally be within reach and that the long-debated tax could be nearing the finish line.

For review, the millionaires tax imposes a 9.9% state income tax on earnings above $1 million, affecting roughly 30,000 Washington taxpayers and generating an estimated $4 billion annually once it takes effect in 2028. The newest version of the bill reflects several changes made during negotiations with the governor. Most notably, it directs a significant portion of the new revenue toward universal school meals for K-12 students, while dedicating five percent of the proceeds to child care and early learning programs. Lawmakers also expanded targeted tax relief aimed at offsetting costs for some families and businesses, a change that helped bring the governor on board.

Notably absent from the revised proposal is funding previously set aside to help cities and counties manage rising public defense costs, a removal that has drawn concern from local governments already grappling with increasing legal obligations.

 While the governor’s endorsement removes one major obstacle, the bill still faces procedural and political hurdles. The Senate has already approved its version, but the House must now pass the revised measure before the Legislature adjourns next week. Republican lawmakers are expected to challenge the proposal on the floor and may attempt to slow the process through amendments and procedural tactics. Even within the Democratic caucus, there remains some caution about establishing what many view as the state’s first true income tax.

If the bill ultimately passes and is signed into law, the political fight will likely shift quickly from the Legislature to the courts and the ballot box. Washington’s longstanding constitutional interpretation treats income as property, raising questions about whether a graduated income tax can withstand legal scrutiny. As a result, the debate over the measure may be far from over even after the legislature adjourns.

The Ground Floor

Governor Ferguson’s signature affordable housing bill, SB 6026 (Alvarado, D-Seattle), passed another major hurdle this week. The bill, aimed at expanding residential development in areas traditionally reserved for commercial or mixed-use purposes, passed the House on a 69-27 vote after the Senate had approved its version earlier (36-12). The Senate is expected to vote to concur with the House amendments next week, sending the legislation to the Governor for signature.

The legislation reflects the state’s ongoing housing shortage and focuses on encouraging development in areas already served by infrastructure, employment centers, and services. Cities with populations of 30,000 or more, along with non-rural counties under the Growth Management Act, will be required to allow residential uses in commercial or mixed-use zones— with certain exceptions such as industrial areas, sensitive shorelines, historic districts, and lands outside urban growth areas.

The bill also eases regulatory barriers that have slowed housing development. For example, it limits local requirements to include ground-floor commercial space to no more than 40% of commercial zoning, while publicly subsidized affordable housing is fully exempt. Developers can request waivers or reductions, and local governments must consider whether doing so would help create more housing. Local ordinances will need to be updated within 18 months, or the state rules will take effect automatically.

Law Enforcement Technology and Privacy Protections

Privacy advocates and law enforcement alike saw progress this week on SB 6002 (Trudeau, D Tacoma), a bill that regulates the use of automated license plate readers (ALPRs). The Senate passed the bill 40-9, and the House approved its version 84-10. With broad agreement between lawmakers, local governments, the ACLU, and law enforcement agencies, the Senate is expected to concur with the House version next week.

SB 6002 establishes clear rules for when and how ALPR systems can be used, aiming to balance public safety with privacy rights under the U.S. and Washington Constitutions. ALPRs may be used to track stolen vehicles, missing persons, outstanding warrants, and serious criminal investigations, as well as limited traffic and parking enforcement. Most collected data must be deleted within 21 days, and sharing or selling data is strictly prohibited. The bill also protects sensitive locations including schools, places of worship, health care facilities, and food banks from ALPR monitoring. Agencies must register their systems, adopt usage policies, train staff, report annually, and conduct internal audits. Violations can carry criminal penalties, civil liability, and consumer protection enforcement. With an emergency clause, the bill takes effect immediately to safeguard privacy.

Housing

HB 2266 (Peterson, D-Edmonds) aims to expand housing options and address homelessness by changing how Washington cities and counties regulate supportive and emergency housing. The bill requires jurisdictions to allow transitional and permanent supportive housing anywhere residential units or hotels are permitted and indoor emergency shelters where hotels are allowed, removing local zoning barriers that have slowed development.

The bill limits local governments from imposing more restrictive development or operating standards than those applied to other residential or lodging uses, while allowing objective requirements like setbacks, stormwater, and building codes. Local authorities retain limited power to address health and safety, such as requiring shelter operators to notify neighbors, hold community meetings, designate emergency contacts, and adopt operational policies. In specific cases near schools or other shelters, cities may negotiate additional safety protocols. Jurisdictions cannot restrict shelters in ways that prevent meeting projected housing needs, but existing protections remain for critical areas, natural hazards, and agricultural, forest, or mineral lands. Cities and counties must update zoning and development rules within two years or by their next comprehensive plan update.

Supporters say the bill ensures consistent statewide rules to speed housing delivery for vulnerable populations, while critics warn it limits local land-use control. Overall, HB 2266 4 reflects the Legislature’s strategy to accelerate housing production and address homelessness through statewide zoning reforms.

Expanding Authority of the State Attorney General

This week the legislature considered SB 5925 (Hansen, D-Bremerton) that would expand the Attorney General’s authority to issue civil investigative demands (CIDs). The proposal gives the office the power to request documents, written responses, and oral testimony from individuals or entities when there is reason to believe state or federal laws have been violated.

The bill is designed to apply before any civil proceeding is initiated, allowing the Attorney General to gather information efficiently. It covers a wide range of potential violations, including constitutional rights, labor and employment laws, public health and safety statutes, and consumer protections. Notably, the authority does not extend to criminal investigations or federal agencies performing official duties.

Key safeguards include demands must be specific, relevant, and reasonable, and cannot require the disclosure of privileged information. Individuals and entities can petition the court to modify or quash a demand, and the court can impose sanctions consistent with civil discovery rules. The legislation also includes confidentiality provisions to protect sensitive materials and restrict disclosure. Copies of documents or testimony may only be shared under strict terms, primarily for enforcement purposes, and cannot be used in criminal prosecutions.

Finally, the bill requires the Attorney General to report to the Legislature within four years on the use of these investigative demands, including how many were issued, set aside by courts, resolved informally, or enforced through court action. In short, this bill aims to provide the Attorney General with modern tools for civil law enforcement, while maintaining checks, transparency, and protection of rights.

Data Center Oversight Fails

Not every bill survived the legislative gauntlet this week. HB 2515 (Doglio, D-Olympia), which would have required utilities and data center companies to protect ratepayers from rising costs and provide transparency on environmental impacts, failed after the Senate Committee on Ways & Means did not bring the bill to a committee vote.

The bill had strong support from environmental groups, Tribes, and ratepayer advocates, who warned that the rapid expansion of data centers could strain the grid, increase electricity costs, and impact water resources. However, major tech companies like Microsoft and Amazon lobbied heavily against it, with Microsoft publicly calling the bill “uniquely anti-competitive” just before the committee deadline.

Proponents argued the legislation was a common-sense step to hold tech companies accountable for their climate commitments and protect communities, while opponents emphasized the economic and infrastructure benefits of the data center sector. Lawmakers like Rep. Beth Doglio (D-Olympia) vowed to continue pursuing solutions, emphasizing the ongoing impact on the grid, utility bills, and environmental sustainability.

What’s Next

The regular legislative session adjourns Thursday, March 12. Between then and now there will be an agreed to operating, transportation, and capital budgets released, revenue bills to create resources to support those budges, about 150 bills that need votes to have their differences reconciled between the House and Senate, and an historic vote on this final version of the millionaires tax. One more week."

From NYBA lobbyist Jim Hedrick:

"Hedrick Weekly February 23-27, 2026

As the 2026 legislative session enters its final weeks, budget negotiations have shifted decisively from policy aspirations to balance-sheet reality. Last Sunday’s release of House and Senate supplemental operating budgets marks the point at which fiscal assumptions, revenue risk, and long-term cost exposure move from theory into binding decisions. The budgets now under negotiation rely heavily on one-time resources, delayed revenue from a proposed highearner income tax, and internal fund shifts, choices that may stabilize the near term but leave unresolved questions about future tax policy, spending discipline, and economic competitiveness. The next two weeks will clarify not only the state’s immediate spending posture, but the direction of its fiscal framework heading into the next biennium.

Operating Budgets

The Senate Democrats’ budget is less a vision document than a stabilization plan for a government whose core costs are outgrowing its revenue model. Nearly all the headline spending growth is driven by unavoidable maintenance-level increases; Medicaid caseloads, child welfare, public schools, inflation, and legal liabilities while the actual policy choices shrink programs, tap reserves, and lean on revenue that won’t materialize for years.

The budget’s biggest investment isn’t new services, but a $1 billion down payment on the state’s self-insurance liability account, an implicit acknowledgment that past underfunding and litigation risk are now crowding out everything else. That move may be fiscally responsible, but it also exposes how little room lawmakers have to maneuver. To make the math work, Democrats rely on three risky pillars:

• Delayed revenue — The 9.9% tax on income above $1 million is baked into the budget narrative even though it doesn’t generate general fund revenue until 2029. It functions more as a political placeholder than a near-term solution.
  
  
• One-time money — A $750 million withdrawal from the rainy-day fund, plus capital gains and public works transfers, plugs short-term gaps while leaving future budgets thinner and more volatile.
  
  
• Quiet program trims — Savings from Working Connections Child Care, K-12 transition funding, and Local Effort Assistance are framed as “harm reduction,” but they still shift costs and reduce access during a period of slowing economic growth.

Democratic leaders like Senate Ways & Means Committee Chair Sen. June Robinson (D-Everett) are candid that this budget is being built under pressure from inflation, caseload growth, and federal uncertainty. But the result is a plan that pushes the hardest structural decisions into the next biennium. Meanwhile, Republicans’ warning that the income tax could eventually broaden, is valid because the current budget doesn’t actually solve the underlying imbalance. In contrast, Governor Ferguson’s spending plan called for deeper near-term cuts and broader tax relief. Legislative Democrats are betting that time, growth, and a new high-end tax will converge before reserves run out. If that bet misses, the next Legislature won’t be debating enhancements it’ll be debating retrenchment.

New Revenue and Fund Transfers
Both the Senate and House budget proposals assume enactment of a new 9.9% tax on income over $1 million, approved by the Senate last week and working its way through the House this week. While revenue would not begin until 2029, the tax is projected to generate $2.3 billion for the general fund that year and about $3.5 billion annually thereafter. Democrats propose using the revenue to expand the Working Families Tax Credit, reduce B&O taxes for small businesses, and exempt personal hygiene products from sales tax. These gains are partially offset by policy changes, including an estate tax adjustment reducing revenue by $435 million and expanded school sales tax exemptions. Overall, revenue legislation in the Senate budget would raise $2.9 billion over four years, with the new income tax accounting for roughly 80% of that total.

By contrast, Governor Ferguson proposed a more restrained supplemental budget in December that relies more heavily on spending reductions, redirects $570 million in Climate Commitment Act funds, and includes a smaller draw on reserves. While supportive of a high-earner income tax, Ferguson has also called for additional small-business tax relief, repeal of hygiene product taxes (i.e. diapers), and twice-yearly sales tax holidays statewide.

Transportation Budgets

Monday, the House and Senate supplemental transportation budgets were released and reflect a shared recognition that Washington’s transportation system faces mounting cost pressure. However, they diverge sharply in how to manage fiscal risk and long-term obligations. The contrast is not simply about spending levels, but about the balance between near-term delivery certainty and long-term debt exposure.

The House proposal totals $16.5 billion, a $1.1 billion increase over the enacted budget, and avoids authorizing new general obligation bonds. This approach emphasizes fiscal discipline and predictability, favoring cash-funded investments and reappropriations to address system needs without expanding future debt service. For the private sector, the House budget signals a steady but constrained project pipeline, with lower exposure to future fiscal corrections or mid-biennium rebalancing driven by debt costs.

The Senate proposal totals $17 billion, a $1.5 billion increase, and relies heavily on financing to manage escalating construction costs and schedule risk. The Senate authorizes $1.1 billion in new general obligation bonds, including $400 million for a cost-increase reserve account intended to absorb inflation and unforeseen project overruns. Preservation funding reaches approximately $525 million, combining $405 million in new funding and $40 million in reappropriations, alongside a $45 million increase in maintenance.

Notably, both chambers exclude the Governor’s proposed $1 billion ferry vessel construction plan. The absence of a clear commitment to ferry fleet replacement perpetuates uncertainty for maritime contractors, suppliers, and port-adjacent businesses, while increasing the likelihood that deferred capital costs will escalate in later biennia.

Final negotiations are likely to center on bonding levels and preservation funding, rather than overall spending. The House position establishes a lower bound on new debt, while the Senate frames bonding as necessary risk management rather than expansion. A probable conference outcome includes reduced bonding authority relative to the Senate proposal, preservation funding closer to the Senate level, and partial retention of the cost-increase reserve concept at a smaller scale. Ferries remain a wildcard: absent external pressure or a late-stage agreement on delivery strategy, they are likely to remain unresolved in this supplemental.

Capital Budgets

The 2026 House and Senate supplemental capital budget proposals advance targeted investments in housing, climate resilience, education infrastructure, and flood preparedness while relying on remaining debt capacity and Climate Commitment Act revenues. Together, the proposals emphasize near-term infrastructure needs while also using capital resources to support broader state budget stability.

The Senate proposal authorizes $723 million in net total funds, including $382.6 million in new debt-limit bonds and $219 million from Climate Commitment Act accounts. Major investments focus on housing and homelessness, water conservation and clean energy, small school district modernization, and flood response. In addition to project funding, the proposal redirects approximately $1 billion in capital cash resources—such as capital gains, public works, and higher education building accounts—to support the operating budget. While total capital appropriation levels for public works and higher education buildings are maintained through 4 account substitutions, the shift reduces available cash traditionally reserved for capital purposes.

The House proposal appropriates $910.6 million in total funds, including $399.4 million in debtlimit bonds and $511.2 million from other state and federal accounts. The bond appropriation nearly exhausts the remaining $404.4 million in available bond capacity for the biennium. The proposal also relies heavily on Climate Commitment Act funding, dedicating $400 million to clean energy, building decarbonization, salmon recovery, and habitat conservation.

An additional $239.9 million in Climate Commitment Act funds is used to refinance previously bond-funded natural resources projects, freeing up bond capacity that is then applied to higher education building projects. The resulting higher education building account revenues are redirected to the operating budget. These account changes are net-neutral within the capital budget but play a significant role in supporting the House supplemental operating budget.

Overall, the proposals preserve headline capital investment levels while increasing reliance on refinancing strategies and carbon-market revenues, effectively using the capital budget as a stabilizing mechanism for the state’s broader fiscal framework.

The Week Ahead

The week will start with the Opposite-House Fiscal Committee cutoff on Monday, March 2 and the week will end with the Opposite-House Floor Cutoff, Friday March 6. Behind the scenes are budget negotiations where a smaller yet more elite group of legislators, including fiscal committee chairs, are reconciling differences between the House and Senate budget proposals. Customarily, a representative from the governor’s office also sits in to make certain that not only the Governor’s interests are represented and communicated but also to make certain specific components will get signed into law by the governor; the governor has a sub-section level veto power on bills that contain an appropriation.

There’s just two weeks left to adjournment on March 12."

From NYBA lobbyist Jim Hedrick:

"Breathing Room

The Washington State Legislature wrapped up House of Origin floor action this week, sending a wave of bills across the rotunda to opposite-chamber policy committees. Lawmakers now face  a fast-moving timeline, with only until February 25 to review, debate, and advance those measures.

One of the sure signs that session is entering its final phase is the release of the pre-budget revenue forecast, which budget writers rely on to put final touches on their proposals. The  Monday forecast from the Washington State Economic and Revenue Forecast Council showed Washington’s economy and state finances performing modestly better than expected.

Projected General Fund–State revenue for the 2025–27 biennium is now approximately $827 million higher than the November forecast, bringing total expected collections to roughly $75.3 billion. Revenue for the 2027–29 biennium is also projected to be more than $1 billion higher, largely driven by stronger personal income, employment, and tax receipts.

This improved outlook gives budget writers some welcome breathing room as they prepare supplemental budget proposals easing, but not eliminating, pressure as lawmakers work through competing priorities ahead of the March 12 adjournment. Democratic budget leaders have been quick to emphasize that while the forecast helps, challenges remain.

Legislative Budgets

Following the revenue forecast, the Legislature will roll out its supplemental budget proposals for the second year of the biennium. Operating budgets from both chambers are scheduled for release Sunday afternoon, House at 3:00 p.m. and Senate at 4:00 p.m., and will be posted publicly online.

Public committee hearings are slated for Monday, followed by committee markup and votes on Tuesday. Floor action could come as early as Wednesday or Thursday.

If the budget process feels fast, that’s because it is. Leadership moves quickly to minimize opportunities for amendments or organized opposition, and procedurally the budgets must be placed “into dispute” to formally trigger negotiations between the chambers.

Millionaire’s Tax

On Monday, majority Democrats sought to bolster the state’s long-term revenue outlook by approving SB 6346 (Pedersen, D-Seattle), commonly referred to as the “Millionaire’s Tax,” following a lengthy and often contentious floor debate. Minority Republicans offered multiple amendments aimed at reshaping the proposal, but none were adopted.

When the final vote was taken, three Democrats—Senators Cortes (D-Battle Ground), Hansen (D-Bremerton), and Krishnadasan (D-Gig Harbor)—broke with their caucus and joined Republicans in opposing the bill, resulting in a 27–22 vote. The measure now moves to the House.

The tension did not end there. On Tuesday, Governor Ferguson addressed the bill during a media availability, proposing to direct more than half of the projected revenue, roughly $1.9 billion annually, back to Washingtonians through affordability measures. His plan includes approximately $1 billion to dramatically expand the small-business B&O tax credit, effectively eliminating B&O taxes on the first $2.5 million in revenue for many businesses and reducing them for thousands more.

He also proposed roughly $380 million annually to expand the Working Families Tax Credit by increasing eligibility and boosting rebate amounts by 30 percent, along with targeted sales-tax relief, including a sales-tax holiday for purchases under $1,000 and exemptions for diapers, baby products, and hygiene items. Ferguson emphasized that these investments must represent new dollars directly back into people’s pockets.

Legislative Democrats responded with visible frustration, not only over the substance of the proposal but also over how it was unveiled. Rather than negotiating through press conferences, they urged the governor to engage directly with legislative leadership.

The 5 o’clock Bill

One of the recurring dramas of floor cutoff days is identifying the “5 p.m. bill”—the last bill introduced before the deadline. Bills must be introduced by 4:59 p.m. to remain eligible, after which legislators often go “at ease” to caucus and negotiate before returning for final action.

This year, however, the Senate hit an unexpected snag when Senator Short (R-Coleville) requested that the full 39 pages of a bill dealing with transmission reliability and capacity be read aloud. Typically, only the first and last lines are read. The full reading, a rarely used procedural tactic, consumed significant time and effectively stalled floor action.

As a result, several bills scheduled for consideration never reached the floor and are now considered dead. In the aftermath, members from both parties acknowledged the unforgiving nature of cutoff deadlines. Majority Leader Senator Pedersen (D-Seattle) later suggested the delay stemmed from a misunderstanding, noting that discussions would continue and that the issues could be revisited next session.

Bills Suffering the Cutoff

Several high-profile bills failed to advance before the House of Origin cutoff, despite extensive debate. Among them was HB 1834 (Callan, D-Issaquah), Attorney General request legislation addressing minors’ use of social media. Despite months of stakeholder negotiations, three substitute versions, and 15 floor amendments, the bill ultimately stalled. HB 2389 (Cortes, D, Everett), which sought to prioritize community-based rehabilitation in juvenile justice, also failed to advance after drawing more than 60 amendments and intense debate. Speaker Jinkins acknowledged during floor action that the votes were not there.

Other bills that died include HB 2611 (Scott, D-Seattle) establishing a 32-hour workweek; HB  2578 (Lekanoff, D-Tulalip) adding tribal representatives to the Fish and Wildlife Commission; HB 2112 (Leavitt, D-Lakewood) setting a minimum age for accessing adult content online; and SB 6111 (Salomon, D-Seattle) requiring social-media platforms to verify user age.

Environmental Protections and the Line Between Efficiency and Erasure

Two politically linked bills quietly died on the Senate floor calendar this week when time ran out. SB 5466 (Shewmake, D-Bellingham) would have granted broad environmental exemptions to accelerate transmission of “green energy,” while SB 5609 (Kauffman, D-Auburn) sought to strengthen protections for cultural resources as a condition of permitting. Together, the bills highlight a growing fault line in Olympia between utilities, environmental advocates, Tribes, and labor.

Every session, the State Environmental Protection Act (SEPA) shows up wearing two hats. On one side are categorical exemptions, designed to streamline low-impact projects and prevent regulatory paralysis. In a state facing housing shortages, infrastructure needs, and ambitious climate goals, exemptions are often framed as common sense.

On the other side are cultural resources, which don’t regenerate or relocate. Archaeological sites, tribal cultural properties, and historic landscapes are uniquely vulnerable because damage is often invisible until it’s irreversible. Once a project is categorically exempt, the legal trigger to even look for these resources can disappear.

Supporters of expanded exemptions argue SEPA has become a litigation tool detached from environmental outcomes, driving delay and cost. But cultural-resource protection is not outlined elsewhere in Washington State law as other resources do such as land use, water, fish, and air quality. Protection of cultural resources is about ensuring development does not unintentionally erase history, particularly Indigenous history. The uncomfortable truth is that categorical exemptions don’t just reduce paperwork; they reduce legal visibility. When review disappears, so does consultation and when consultation disappears the tension between Tribes trying to protect their heritage and state government, labor and utilities trying to produce, construct and sale energy becomes intense. This phenomenon is not going away anytime soon.

The real question is not whether efficiency matters. The question is whether speed is being calibrated carefully enough to preserve the remaining legal backstops for cultural resources under SEPA. SEPA reform done right can make the process faster and fairer. Done wrong, it risks trading short-term convenience for permanent loss. And once that’s gone, no categorical exemption can bring it back.

The Week Ahead

Budgets and fiscal committee work will dominate the coming week as legislators and lobbyists scramble to get that “one last thing” added—or removed—from spending and tax bills. Fiscal committees will face long days of testimony and executive action, not only on budget bills but also on policy bills that have crossed over.

That workload is driven in part by the opposite-house policy committee cutoff on Wednesday, February 25. Expect a busy week and for more bills to stall, die, or change significantly as scrutiny intensifies under the very real constraint of limited spending capacity."

From NYBA lobbyist Jim Hedrick:

"On November 18th, the updated state quarterly revenue and economic forecast was released. The November 2025 forecast shows an economy that’s slowing down both nationally and here in Washington, albeit not dramatically. The U.S. outlook is slightly stronger than it was in September, in that output is slightly stronger, and inflation has eased a bit. Washington’s outlook however has softened: job growth is slower, the rate of personal income growth is slower, and the housing market looks weaker. 

 

The net result is the near-term revenue forecast is only slightly changed. Revenue for the current 2025–27 biennium are increased by about $105 million; an increase driven by higher estate tax and tobacco settlement revenue, even with weaker sales taxes. For the following 2027-29 biennium, state revenue is projected to decrease by about $185 million compared to the September estimate.

 

For Governor Ferguson currently writing his first budget to be released in December and state lawmakers grappling with the 2026 supplemental operating budget, this newest revenue forecast shows only a modest change in how much money the state expects to collect over the next few years. The anticipated shortfall in the 2025-27 budget is currently a little over $100 million. Because of that, the 2026 supplemental budget, which is meant to make mid-course adjustments, not to make major changes to the overall biennial budget, will be extremely limited with no capacity for new spending. The types of taxes driving this revenue forecast come from one-time sources, like estate and tobacco taxes rather than broad economic growth. 

 

In short: the supplemental budget will make targeted adjustments, not major expansions, because the revenue outlook is basically modest and the economic picture is uncertain.

 

Despite all these uncertainties, total state revenue is still expected to see steady growth at a pace of 10.9 percent between the 2023–25 and 2025–27 biennia, and another 6.6 percent between 2025–27 and 2027–29. State revenue collections continue to improve helped in part by tariff-related spending shifts to replacement products and retail sales have finally turned positive after more than a year of declines. Real estate activity picked up in 2024 before cooling again this Fall.

 

Tariffs continue to be the biggest factor of uncertainty. Over the past several months, the U.S. implemented or adjusted a wide mix of tariffs raising duties on lumber, furniture, cabinets, medium and heavy vehicles, and buses, while reducing some tariffs on items such as coffee, beef, fruit, and certain substances linked to fentanyl production. Overall, average U.S. tariff levels for 2025 are estimated at roughly 17.9 percent, the highest in many decades. This environment is contributing to near-term inflation pressure and altering consumption patterns, including within Washington’s taxable sales base.

 

Employment growth nationally has been slowing for years and dipped significantly over the summer. The Federal Reserve (FED) has cut interest rates twice as the job market has cooled. Washington State is still adding jobs, but only modestly, and the longer-term forecast for job growth has been revised downward. State economist Dr. Reich noted that the Washington construction and manufacturing sectors lead all other state industry sectors in job contraction.  

 

Consumer confidence, which picked up late last year, has fallen again this year. Washington is still seeing stronger taxable sales, but housing and real estate have slowed. Inflation, measured by Consumer Price Index (CPI), in the Seattle area is up 2.8% year over year, and consumer sentiment, which improved at the end of 2024, has taken a noticeable step back in 2025.

 

Overall, both the U.S. and Washington economies are slowing and the risks to the forecast are substantial and largely tied to federal trade policy, inflation pressures, and contraction in the housing and commercial real estate markets. While Washington state’s near-term revenue outlook is sustaining very modest growth; the extended economic forecast remains vulnerable. "

The latest from Jim Hedrick, NYBA lobbyist:

"As we look ahead to the 2026 legislative session in Washington State, it’s an opportune moment for the marine and yacht-brokerage community to take stock of key policy developments that may affect our sector. With the session slated to be a short, 60-day legislative year, timing, clarity and prioritization will matter. Below are high-level themes and implications relevant for our industry:

With revenue growth facing headwinds (due to inflation, interest rates, and shifting federal support), the Legislature is expected to exercise heightened fiscal restraint. For yacht brokers and related marine-services firms, this translates into a couple of flags: Potential slowdown in state transportation and waterfront infrastructure funding, which may impact docks, marinas and public access facilities and tighter scrutiny of any new fees or taxes proposed under the guise of raising revenue for infrastructure or maintenance. Keep an eye on proposed surcharges, fees or tax changes (including the additional 0.5% sales and use tax on the selling price on all recreational vessels that are subject to the watercraft excise tax), that hasn’t even gone into effect yet but creates a cost barrier to yacht sales.

For yacht brokers the following needs to be tracked closely:

• Any bills or budget items that change marina or waterfront land use, permitting or zoning.
• Proposals around local tax/fee tools (tax increases, delivery fees, usage fees) that could affect goods, fuel, services or slip rents.
• Budget indications for port and marina infrastructure—operations, maintenance, public-access docks, shoreline remediation.
• Developments in housing policy that might interface with marina properties (for example, residential development proposals on or near marina sites).
• Committee assignments, calendars and cut-off deadlines since the compressed session means timing matters.

The 2026 legislative session is scheduled to end in just 8 and half weeks on March 12; buckle up because it’s going to be fast and all of the small business community needs to remain vigilant."

From NYBA lobbyist Jim Hedrick:

Washington State Faces $1.2 Billion Budget Shortfall Amid Slowing State Economy

In another sobering fiscal update, State Economist Dr. Dave Reich delivered his quarterly revenue forecast today to the Washington State Revenue and Economic Forecast Council, outlining a growing budget shortfall fueled by weakening economic conditions and rising national uncertainty. Despite stronger than expected tax collections since the last forecast in June, the state now faces a projected $1.2 billion revenue shortfall over the four-year budget outlook.

Reich announced that the state’s 2025–2027 revenue forecast has been revised downward by $412 million, bringing total expected revenue for the biennium to $74.3 billion. The subsequent 2027–2029 biennium forecast was also reduced by $477 million, on an estimated $79.5 billion revenue base. These revisions have immediate implications: when measured against the current two-year budget adopted by the Legislature earlier this year, Washington is now facing a shortfall of more than $400 million, one that grows substantially in the years ahead.

Although state sales and B&O tax receipts are outperforming forecasts, longer-term economic indicators are showing signs of risk. Reich explained that expectations for key economic drivers, including housing, construction, and personal income growth, have all weakened since June, prompting the downward revisions. “The uncertainty we’re seeing is not just local,” Reich said in his remarks. “There’s significant national volatility, much of it tied to federal trade and fiscal policy.” He pointed to rising tariffs, reduced federal health care spending, and a slowing labor market as signs that the broader economy may be entering a prolonged period of stagnation.

Nationally, the U.S. economy has slightly outperformed growth expectations, but at the cost of persistent inflation, which remains elevated. Though the Federal Reserve recently lowered interest rates, citing labor market softness, Reich cautioned that these efforts may be complicated by tariff driven price increases in the months and years ahead. “Inflation is very likely to pick up over the next few years as tariffs lead to price increases,” he warned.

Closer to home, Washington’s labor market is also showing signs of strain. Employment growth, once a reliable engine of the state’s prosperity, has slowed notably. Job growth for 2025 has now been revised down to 0.3% (from 0.5% in June), and 2026 growth is expected to be just 0.2%. Meanwhile, the state unemployment rate, currently forecast at 4.5%, is projected to rise to 4.9% by 2027 before declining again by the end of the decade.

One particularly concerning development is the performance of personal income in Washington, which for the first time in years is now expected to grow more slowly than the national average, a reversal from past trends. In addition, housing permits are forecast to decline in 2025, suggesting continued weakness in the construction sector.

The aerospace industry, a longtime cornerstone of the state’s economy, remains weak, though job losses appear to have stabilized. Reich noted that a modest recovery is expected through 2029.

This revenue forecast poses a major challenge for Governor Bob Ferguson, who is now preparing to release his first supplemental budget proposal this December. With a $1.2 billion shortfall looming and the state constitutionally required to balance its budget over a four-year horizon, Ferguson and the Legislature face tough choices.

While Ferguson’s Democratic Party holds sizable majorities in both legislative chambers, the politics of addressing such a gap, especially in an election year, are fraught. Whether through spending restraint, revenue increases, or a mix of both, the state’s leaders must now decide how to close the gap while maintaining critical services and investments.

The next official revenue forecast, scheduled for November 18, will set the stage for the Governor’s supplemental budget proposal, which must be released by mid-December under state law."

Governor Ferguson Completes Executive Actions on 2025 Bills passed legislature -- Only $25 million in Operating Budget vetoes.

Yesterday, May 20, the 2025 legislative session officially ended as Governor Ferguson wrapped up post-session bill action. Speculation mounted as Governor Bob Ferguson contemplated budget and revenue legislation. Would Ferguson approve the operating budget in full? Issue selective vetoes? Or potentially prompt a special legislative session to revise critical components of the operating budget supported by new revenue? In the end, Ferguson’s vetoes were minimal, striking only about $25 million out of a $77.9 billion two-year spending plan. As for the revenue package, all the B&O tax increases, all sales tax increases on services, the tax increase on capital gains, electric vehicles and liquor all escaped any veto action. Ferguson restored one exemption used by community banks, explaining that it needed to be restored to address affordable housing.

At a press conference on Tuesday after taking final action on bills Governor Ferguson confirmed he had signed the state budgets and related revenue bills, issuing only limited partial vetoes, which can be found here by clicking on Signed/Partial Vetoes. Ferguson emphasized a “careful, line-by-line” review of the budget and acknowledged the difficulty of several decisions.

A key feature of the operating budget is a $1 billion increase in K-12 education funding, with a strong emphasis on special education. Though Washington has been facing a $16 billion projected shortfall, Ferguson noted that no state employees will be furloughed, despite his original recommendation, and all current cash benefit programs – including TANF and food assistance like SNAP – will remain unchanged. Ferguson noted the budget also maintains the state’s rainy day fund and allows flexibility to respond to potential future federal funding cuts. Washington state receives approximately 20% of budget revenue from the federal government.

Concerning the governor’s $25 million in operating budget vetoes, Ferguson described the process as “intentional and precise”. Notably, he strongly signaled the need for further refinements to revenue legislation over the interim – especially changes to the Business & Occupation (B&O) tax and tax on services – before the 2026 supplemental budget is signed next year. While he ruled out calling a special session for now, he acknowledged that ongoing discussions around revenue measures would continue and has instructed staff to begin reaching out to stakeholders. “We need to spend more time on these bills to avoid unintended consequences,” he said, suggesting more than just technical corrections are ahead.

On the Senate’s last-minute passage of a proposed wealth tax that would have removed the exemption for intangible assets, Ferguson expressed cautious openness to a “small, targeted” version. However, he noted the likelihood of legal and voter challenges and made clear he would not rely on it to balance the budget.

(Content provided by NYBA Lobbyist Jim Hedrick)