OLYMPIA — Democratic lawmakers rolled out a final budget package Saturday that would raise taxes by about $9 billion over four years while cutting areas of spending to shore up an estimated $16 billion budget shortfall.
The final plan, which lawmakers are expected to vote on Sunday — the final day of the legislative session — nixes some previous tax proposals floated by majority Democrats.
Lawmakers backed off a proposed wealth tax on the state’s richest residents and a payroll tax on high salaries paid by Big Tech companies amid pushback from Gov. Bob Ferguson and from businesses including Microsoft.
Instead, the budget proposal leans on more familiar taxes, raising state business and occupation tax rates on a variety of industries and applying an extra surcharge for businesses with more than $250 million in taxable state income.
The plan also would apply the sales tax to tech services and raise the state capital gains tax on wealthier investors. Democrats are also weighing one new tax aimed largely at Tesla, the electric car manufacturer owned by billionaire Elon Musk.
Some Democrats said they wish they could have used more progressive tax options, such as the wealth tax.
“This is not the tool in the toolbox that I wanted to use. But it is the tool we have,” said state Sen. Noel Frame, D-Seattle, during a debate on the business and occupation tax increases Sunday.
Facing Ferguson’s wealth tax opposition, Democrats have mulled passing a much smaller version of the tax to test its legality. But as of Saturday, the revised bill had not been voted on.
Republicans blasted the Democratic tax and spending plan as irresponsible, saying it will increase costs for all state residents.
Sen. Chris Gildon, R-Puyallup, also criticized majority Democrats for negotiating the final spending package behind closed doors and releasing it to the public with only a day left in the session.
“I honestly believe that it brings shame on the Legislature for doing it this way, and it brings shame on the people of Washington state,” he said after the plan’s release at a conference committee Saturday morning.
The final operating budget proposal, Senate Bill 5167, totals nearly $78 billion in spending for the 2025-27 biennium, about $6 billion higher than the current two-year budget.
Lawmakers are proposing about $5.9 billion in cuts and $7.4 billion in new spending and are relying on $9.3 billion in new revenue spread out over a four-year period.
In addition to the operating budget taxes, lawmakers also agreed to raise the state’s gas tax by 6 cents starting July 1, raising $3.2 billion for the transportation budget to keep highway and ferry projects on track amid rising inflation.
The operating budget plan avoids furloughs for state workers and funds their recently negotiated pay raises. Ferguson and Senate Democrats had earlier contemplated furloughs, drawing angry protests from public-sector unions.
The budget plan includes an array of cuts to behavioral health services, including the closure of the Rainier School, a state-run facility in Buckley, Pierce County, for people with disabilities. However, it spares the Yakima Valley School in Selah, which also had been considered for closure.
The budget also includes $100 million to help cities and counties hire and retain police officers — a priority for Ferguson, who promised to seek such funding while running for governor.
Ferguson’s office has been kept apprised of the budget negotiations, Democrats said, but an air of uncertainty hung over the governor’s response to the budget plan.
“I cannot predict nor do I know what they will choose to do,” said state Sen. June Robinson, D-Everett, the lead budget negotiator for Senate Democrats.
A Ferguson spokesperson did not respond to a request for comment Saturday.
The Democratic-controlled Legislature is expected to vote on the budget Sunday, sending the plan to the governor, who can sign or veto the measure. Ferguson can also use his line-item veto authority to cut specific sections.
