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)

From NYBA Lobbyist, Jim Hedrick:

"The 2025 Washington State legislative session has been one of the most tumultuous and emotionally charged sessions in recent memory, marked by significant political tension, major fiscal challenges, and the deaths of two beloved legislators. From the opening days, the atmosphere was fraught with division. Deep ideological splits over how to address the state’s financial crisis created a highly charged environment where lawmakers frequently clashed not only along party lines but also within their own caucuses.

The session was further shaken by the death of former House Speaker Frank Chopp (D-Seattle). A towering figure in state politics for decades, Chopp's passing was mourned across party lines, with tributes highlighting his enduring legacy on affordable housing and social justice issues. Adding to the heavy mood, Senator Bill Ramos (D-Issaquah) passed away while in office a mere two weeks from the end of session. Other major family tragedies were Rep. Tom Dent’s (R-Moses Lakes) son was shot in a police action and the Saturday before adjournment, the wife of Sen. Chris Gildon (R-Puyallup) very unexpectedly passed away.

Operating Budget

The most pressing issue was the staggering $16 billion budget deficit. The reality of the shortfall quickly consumed legislative discussions, setting the tone for the months ahead. Proposed cuts sparked widespread protests and added to the strain inside the building. In response, a range of revenue ideas were volleyed around the Capitol, from new taxes on capital gains to expanded sales tax bases and proposals for bond measures.

The final 2025-27 operating budget, Senate Bill 5167, appropriates $77.87 billion an 8.2% increase or nearly $6 billion more thank the 2023-25 budget. This 1,366 page document moved through the legislature from conference committee report to final passage in less than 30 hours. This budget passed the House on a 52 to 45 vote having 6 House Democrats cross-over with all 39 House Republicans to oppose the bill. The state Senate passed the budget on a more comfortable 28 to 19 vote with moderate Democrat in a special election swing district race this fall, Sen. Deborah Krishnadasan (D-Gig Harbor), the lone Democrat to oppose the bill.

While the budget assumes significant savings, it does not reduce net spending. In fact, it increases spending by $1.039 billion above the maintenance level; the cost to continue current services after adjusting for caseload and inflation. The budget largely shifts funding from prior commitments to new priorities, including state and nonstate employee collective bargaining agreements. The budget does not assume furloughs of state employees and previous versions did. The proposed conference report leaves a projected ending balance for the 2025-27 biennium of $225 million NGF-O and $2.3 billion in total reserves, including $2.1 billion in the Budget Stabilization Account or Rainy Day Fund. Adequate budget reserves was an issue Governor Ferguson highlighted that he needed to see in a final budget.

The final $77.8 billion operating budget includes nearly $6 billion in cuts and close to $9 billion in new revenue over the four-year outlook — significantly less revenue than legislative

Democrats had initially sought. Governor Ferguson previously rejected each version of the revenue plan, citing concerns that the proposals were “too risky.” The final budget also steers clear of furloughs for state employees, an option both Governor Ferguson and Senate Democrats had floated earlier in the session. It remains unclear whether Governor Ferguson will support the budget in full or issue partial vetoes. His decision will be closely watched, as it could either cement cooperation with the legislative majority or trigger a new round of political negotiations in a special session.

Revenue

The revenue package passed by the legislature is expected to generate $9.379 billion. The legislature passed a suite of bills with increasing existing taxes, eliminating some tax loopholes and authorizing new taxes. Components of the revenue package include increases on the business and occupation (B&O) tax; the state’s “top-line” gross receipts tax.

§ HB 2081 (Fitzgibbon, D-Seattle) will increase B&O tax rates on manufacturing from 0.484 percent to 0.5 percent and retailing from 0.471 percent to 0.5 percent and the large “catch-all” category of business services jumps from 1.5 percent to 2.1 percent. B&O surcharge rates are increased from 1.2 percent to 1.5 percent for an additional tax on financial institutions. 2081 is expected to raise $5.6 billion over the next 4 years.

§ SB 5814 (Frame, D-Seattle) places retail sales tax to many services and especially in the tech sector, makes nicotine products subject to the tobacco products tax, imposes an additional tax on cigarettes and create a mandatory one-time prepayment of retail sales tax collections for businesses with $3 million or more in taxable retail sales in calendar year 2026. 5814 is estimated to bring in $2.6 billion over the next 4 years.

§ SB 5813 (Wilson, C., D-Federal Way) generating $680 million for the state in the next 4 years would apply an additional 2.9 percent excise tax on individual's Washington capital gains exceeding $1 million and increase the qualifying family-owned business interests deduction amount for the estate tax to $3 million with annual inflation adjustments.

§ SB 5794 (Salmon, D-Shoreline) repeals several tax preferences beginning January 1, 2026, including interest on real estate loans B&O tax deduction; insurance producers, title insurance agents, and surplus line brokers preferential B&O tax rate, precious metals and bullion B&O and sales and use tax exemptions, home energy assistance public utility tax (PUT) credit, dentistry prepayments insurance premiums tax exemption, international investment management services preferential B&O tax rate, international services B&O tax credit, and international banking facilities B&O tax exemption.

§ HB 2077 (Fitzgibbon, D-Seattle) or the “Tesla Tax” establishes a new tax on businesses producing products under the zero-emission vehicle program generating $281,000 over years.

§ SB 5786 (Stanford, D-Seattle) increases the fees by as much as 50 percent on various liquor licenses, permits, and endorsements. 5786, after being amended in the House, is expected to make roughly $5 million a year.

§ The Legislature was contemplating HB 2049 to increase the property tax levy from 1 percent to 1 percent plus the rate of inflation and population growth up to 3 percent for both state and local property tax levies. Those provisions were removed from the bill.

Transportation

The legislature found some common ground on the issue of funding transportation. SB 5161, (Liias, D-Mukilteo), the transportation budget bill was dedicated to Sen. Bill Ramos (D-Issaquah) who served as vice-chair of the Senate Transportation Committee and very unexpectedly passed away last week.

The new revenue transportation budget is $15.5 billion backed by a new 6-cent per gallon gas tax increase which will go into effect July 1. The additional tax rate is expected to raise $1.4 billion over the next six years. The diesel tax would net upward of $160 million over that time. In total, lawmakers are banking on the package to bring in $3.2 billion over the next six years. The revenue package received no Republican support in the House and five Republican votes in the Senate.

SB 5801, also by Liias, is on its way to Governor Ferguson for action and contains numerous other fee boosts for transportation. It is estimated SB 5801 will generate nearly $3.2 billion in revenue for transportation projects over the next 6 years. Among its numerous components is an increase in the passenger vehicle weight fee, an increase in the sales tax for vehicles from 0.3% to 0.5%. There are $3 increases in the fees for titles and registrations. There’s a new 8% tax on the portion of the selling price of vehicles above $100,000. There’s a 10% tax on non-commercial aircraft sales above $500,000 and an additional tax of 0.5 percent on the selling price, plus trade-in property of like kind, for purchased recreational watercraft. There’s also a temporary increase in the rental car tax from 5.9% to 11.9% before moving down to 9.9% in 2027. There’s an increase in the tire replacement fee from $1 to $5. There’s a $1 increase every three years in fees for new IDs and driver’s licenses. And there’s an added charge for ferry riders paying with credit cards, as well as a 50-cent increase to the capital vessel surcharge on each fare.

The proposed money will keep some of the state’s major highway projects on current schedules like the North Spokane Corridor, Puget Sound Gateway spanning King and Pierce counties and improvements on State Route 520 between Seattle and Redmond. $580 million is included for the new Interstate 5 Columbia River Bridge spanning Washington and Oregon. Lawmakers

also approved $2.5 billion to pay for the replacement. The bridge replacement will cost an estimated $5 billion to $7.5 billion. Permits are anticipated by 2026, and construction is projected to last until 2032.

Capital Budget ... the Bipartisan Budget

Senate Bill 5195 (Trudeau, D-Tacoma) is truly a bi-partisan budget being approved unanimously in both the House and Senate. The proposed compromise 2025-27 biennial capital budget makes major investments including $975 million for K-12 education, $827 million for natural resources, and $772 million for housing and homelessness. The budget also includes $375 million from the climate commitment account to support projects aligned with environmental and energy goals.

Governor’s Actions

During the 105-day (15 weeks) session, the Legislature passed over 400 bills; many along with the operating budget and revenue package now await action from Governor Ferguson, who has until May 20th to take action. The governor has 20 days (minus Sundays) from the end of the regular session to take action on bills passed by the 2025 Legislature.

Pursuant to the Washington State Constitution, the governor can take 1 of 4 actions on bills. The governor can sign a bill into law in its entirety, veto the entire bill, partially veto bills by eliminating entire sections of a policy bill or eliminate sub-sections of bills that contain an appropriation, or take no action by May 20th and the bill becomes law (no pocket veto like the U.S President). Only 3 bills in state history have become law by the governor taking no action.

NYBA Members, please see a recap from NYBA Lobbyist Jim Hedrick, on the status of SB5801, now that the State Legislature has adjourned for the year:

"The legislature adjourned Sunday, April 27, but not before passing SB 5801, the transportation revenue bill. The final version SB 5801 did NOT have a luxury boat tax. However, the legislature did pass an additional 0.5% sales and use tax on the selling price, including trade-in value, on all recreational vessels that are subject to the watercraft excise tax.

Senate Bill 5801 at section 201(4) page 20, lines 22-34 states:

(4)(a) Beginning April 1, 2026, in addition to taxes required under this chapter and chapters 82.12 and 82.49 RCW, there is levied and collected an additional tax of five-tenths of one percent on the selling price, plus trade-in property of like kind, for purchased recreational vessels. (b) In the case of a lease requiring periodic payments, the tax is imposed on the fair market value of the recreational vessel at the inception of the lease. (c) The revenue collected under this subsection must be deposited in the multimodal transportation account created in RCW 47.66.070. (d) For purposes of this subsection, "recreational vessel" means a vessel as defined in RCW 88.02.310* that is subject to watercraft excise tax under chapter 82.49 RCW. 

*"Vessel" means every watercraft used or capable of being used as a means of transportation on the water, other than a seaplane.

There is similar language at section 202 (6), page 23 lines 25-33 imposing the identical 0.5 percent “use” tax recreational vessels.   

Link to SB 5801 as Passed by the Legislature

Process: SB 5801 now goes to Governor Ferguson for action. Ferguson can sign the entire bill into law (likely), veto the entire bill (un-likely), or partial veto by striking entire sections (possible)."

We will update you if Governer Ferguson vetos the bill, or does a parital veto that would affect our industry.

We hope you have been able to catch up on where we currently stand with SB 5801 (see our prior email that was just sent out). 

In light of the information shared by Jim Hedrick, both in terms of where SB 5801 stands, and how our messaging has so far been received by the House Transportation committee, we are pressing forward with an updated call to action to our membership.

Call to Action BACKGROUND:

"At this point, we must operate under the assumption that the legislature will end on time AND that the luxury boat tax will remain as part of the final package. Below are members of the Senate Transportation Committee, where the luxury boat tax was added, I recommend making contacts with the Senate Transportation Committee (where the luxury boat tax was added) with the message points delivered to House members. The onslaught of calls to House Transformation members was effective; we need to remain vigilant." - Jim Hedrick, NYBA Lobbyist

Call to Action MESSAGE:

"This tax will dramatically effect working class people - boatbuilders, boatyard workers, boat detailers, mechanics, service facilities, boat brokers and the many unique small businesses that make up the vibrant Washington recreational boating community. While it may be 'aimed' at the wealthy, it will have a disproportionate affect on the working class recreational maritime community."

You are welcome and encouraged to share business-specific messages of how this will affect YOUR business directly. Concrete 'real life' scenarios have excellent impact. (See: Fluid Motion LLC letter, Pacific Maritime Title letter, Randy Cowley letter).

Call to Action CONTACTS AND PHONE NUMBERS:

Marko Liias (D) Chair: 360-786-7640

John Lovick (D) Vice Chair: 360-786-7686

Bill Ramos (D) Vice Chair 360-786-7608

Curtis King (R) Ranking Member 360-786-7626

Emily Alvarado (D) 360-786-7667 

Mike Chapman, Mike (D) 360-786-7646

Adrian Cortes, Adrian (D) 360-786-7634

Deborah Krishnadasan (D) 360-786-7650

Liz Lovelett (D) 360-786-7678

T'wina Nobles (D) 360-786-7654

Sharon Shewmake (D) 360-786-7682

Javier Valdez (D) 360-786-7690

Jeff Wilson (R) 360-786-7636

You can find additional information on the Senate Transportation Committee here, including mailing addresses and contact forms.

Respectfully,

Paul Groesbeck 
NYBA Board President
(425) 829-3551

Kevin Blake
NYBA Board Member - Chairman of Government Affairs
(360) 808-7120

As we wrapped up last week's Government Affairs work since the introduction of the Luxury Tax, we would like to send an update on where we are in the process.  A call to action email with instructions, contacts and messaging will follow this email shortly.

1.   Here is the latest from Jim Hedrick as of Saturday, April 5th:

"Earlier this week, Governor Ferguson laid out what he needs in a budget from the legislature. Essentially Ferguson said the legislature’s budget proposals depend too much new revenue and that the Wealth Tax (1% on financial assets of $50 million or more) probably would not withstand a court challenge and rejected it. Please understand, this is completely separate from the proposed luxury boat tax in the Senate Transportation budget and the provisions of SB 5801 remain intact and are still in play. SB 55801, passed by the Senate, is in the House Transportation Committee and at this time is still not scheduled for any action (i.e. public hearing).

Ferguson’s announcement essentially sends both the House and Senate back to the drawing board on their budgets; including the Senate Transportation which relies heavily on operating budget increases because of the sales tax diversion and general obligation bonding paid for with operating revenue.  The likely hood of the legislature finding additional budget reductions, additional revenue, and coming to an agreement prior to the constitutional end of the session on April 27 is dwindling. Special session is a very real possibility.

At this point, we must operate under the assumption that the legislature will end on time AND that the luxury boat tax will remain as part of the final package. Below are members of the Senate Transportation Committee, where the luxury boat tax was added, I recommend making contacts with the Senate Transportation Committee (where the luxury boat tax was added) with the message points delivered to House members. The onslaught of calls to House Transformation members was effective; we need to remain vigilant.” - Jim Hedrick, NYBA Lobbyist

YOU WILL RECEIVE AN EMAIL SHORTLY WITH THE SENATE TRANSPORTATION COMMITTEE CONTACT INFO AND SUGGESTED MESSAGING.  

2.    We want to thank all members who have reached out to us for providing letters, comments and supporting our membership with this awareness campaign.  This will take everyone in our Association as well as all of the others.  As we talk and strategize with other organizations across the country, we find an overwhelming sense of urgency as well as pride for our industry and its people.  While this drastically effects our brokerage industry, the impact is much larger on our great workforce of boatbuilders, boat yards, independent workers and so on. This is a jobs bill, pure and simple.  It affects everyone and we are very proud to have the powerful resources and commitment of the Northwest Yacht Brokers Association at our disposal.  

3.    There has been an overwhelming response to the "Wealth Tax" conversation that the Governor talked about last week (see above, in Jim's update). Please understand that the Wealth Tax is very different than the Luxury Tax. The Wealth tax will tax aggregated wealth, and the Luxury Tax will tax boats, RV's, airplanes, and cars.  These two are very different, which means the Luxury Tax is still a fight and we need to spread the awareness on how this effects our industry and its workers.  Call or email your representatives and make it clear your opposition on this Bill.  We do not want this attack on our industry ever again.  

4.    We sent out a survey/poll mid last week.  The response has been great!  Please take the time to complete the small survey as it helps us in our awareness for our Association.  If you have any difficulties or questions, please call the NYBA office as they are more than happy to help. We will be expanding this into next week due to some members having difficulties with their passwords or the email going into their SPAM folder. Poll is linked here. (you must login to vote, you can reset your password by clicking the "forgot password" link at the login screen)

5.    We have continued to move forward with our media partners.  Since the last update, more than 100 media outlets have been notified.  This list is too long to publish, so please, if you have a recommendation, reach out to us and we will contact them.  Further, there was a segment with Kevin on KVI 570 discussing the impact of the bill on our industry that went very well.  KVI is now wanting to focus on this further.  Also, Soundings Trade Only did an interview which should be seen shortly.  Lastly, our media strategist for the Boat Show is partnering with us to continue to add value to our awareness campaign.  

6.    Many of you asked about what the RV, Aircraft and Car industry is doing.  We are in the process of gaining those connections and contacts in which we would look to collaborate any ideas or partnerships. If anyone has a direct contact, please let us know as we would like to explore this avenue as well.  

To wrap up, our Lobbyist, Jim Hedrick, commended us on our efforts and indicated that the Northwest Yacht Brokers Association and its members are definitely being heard.  Jim indicated that we need to push the gas pedal to floor and keep the calls, letters and emails coming into the representatives. Please have everyone in your organization, friends, clients, family members and so on call, email and make your voice heard in opposition to this SB5810.  

Please find below letters from Fluid Motion LLC (the West Coast's largest fiberglass boat manufacturer) and Pacific Maritime Title, detailing their concerns regarding the impending luxury tax. These letters were sent to the House and Senate, sharing how the luxury tax will affect two very successful and growing businesses in the Northwest marine industry:

Fluid Motion LLC letter to Legislature (text copy)
Pacific Maritime Title letter to Legislature (official letter)

Please call us if you would like any other updates or have any questions or comments.  Not only are we available but all of our Board Members and Association Staff members are available.  Please do not hesitate to reach out.  

Paul Groesbeck 
NYBA Board President
(425) 829-3551

Kevin Blake
NYBA Board Member - Chairman of Government Affairs
(360) 808-7120