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. "