State lawmakers have short session to fix big WA budget problem

Published 1:30 am Wednesday, January 7, 2026

State lawmakers will return to Olympia on Jan. 12 for the start of their short session. With only 60 days to work, they must remain tightly focused on the most critical issue facing Washington: a $2.3 billion budget shortfall.

This is the second year in a row that lawmakers and Gov. Bob Ferguson must deal with spending that exceeds the state’s means. Last year, the state faced a four-year, $16 billion deficit. A combination of cuts and tax increases closed the gap, but it clearly was not even a short-term fix as the state stumbles into the new year.

Ferguson proposes closing this new shortfall with a combination of reduced spending and budget maneuvers. He wants to cut $800 million in spending, to withdraw $1 billion from the state’s rainy-day fund and to divert nearly $600 million from the greenhouse gas cap-and-trade program.

The first-term Democrat deserves credit for honoring his pledge not to raise taxes this year. Mostly, anyway. His plan would eliminate tax breaks for data centers and prescription drug wholesalers. If enacted, those businesses would pay higher taxes. Washingtonians should squint and give the governor a pass this time.

Lawmakers should scrutinize Ferguson’s ideas, not just rubber-stamp them.

Of particular worry is his plan to change how community health centers bill for services. Health care advocates warn that it would cost centers $100 million while saving the state only $7.5 million. At a time when federal cuts to Medicaid and the Affordable Care Act could leave hundreds of thousands of Washingtonians uninsured, undermining the safety net providers who serve vulnerable populations seems shortsighted. Maybe it is the right move, but Ferguson needs to make a stronger case before risking it.

Likewise, the plan to take money from the Climate Commitment Act (CCA) program to fund the Working Families Tax Credit could be problematic. The law technically allows the state to shift money from the cap-and-trade program, but Washingtonians might view it as a bait-and-switch.

In 2024, voters soundly rejected an initiative to repeal cap-and-trade. The campaign against repeal made the case that money paid by greenhouse gas emitters would go to fund climate initiatives and related expenses.

The Washington Research Council noted at the time, “Generally, CCA revenues must be used to reduce carbon emissions in transportation and other sectors, to mitigate the impacts of carbon emissions on communities, to deploy renewable energy, to increase building energy efficiency, and to increase climate resilience.”

Using that money to plug budget holes would stretch the spirit of what voters endorsed.

If lawmakers do reject some of the governor’s proposals, they will need to find other savings or new sources of revenue. A tax on millionaires, an idea Ferguson has recently endorsed, would take years to implement. It would not solve the current budget challenges.

Partisan politics will play an outsized role in Olympia, too. All House seats and half of the Senate are on the ballot in 2026. Democrats hold strong majorities in both chambers and can control the debate. Incumbents will not want to give ammunition for attack ads to their primary or general election opponents.

Washington has teetered on the precipice of budget catastrophe for years as spending growth outpaces revenue. The state is one recession away from disaster. If that happens, the consequences could be severe because Washington has drawn down almost all of its reserves. Under Ferguson’s plan, only $1 billion would remain in the rainy-day fund at the end of the budget cycle in mid-2027.

Washingtonians should not expect a grand solution to emerge in a two-month legislative session, but lawmakers should appoint a bipartisan committee to lay the groundwork for a much more comprehensive debate about state finances during the remainder of 2026 so that they can get to work immediately next year. Ferguson has given them a starting point for debate, nothing more.