2025 Legislative Update: End of Session Review
The 2025 legislative session came to an end at 6:30 p.m. on April 27. In the final hours of the 2025 session, the legislature passed all three biennial budgets, the bills under the Democrat’s revenue package, and a few final NTIB (necessary to implement the budget) bills through the process.
A total of 423 bills passed the legislature during the 2025 session. This is fewer bills than is typical during a long session (for example, 474 bills passed in the 2023 session).
Bills that passed the legislature now go on to Governor Ferguson for consideration. Bill signing schedules and the list of bills that have been signed can be found here. As a reminder, any bill that hits the Governor’s desk within the last five days of session has 20 days (not counting Sundays) for him to act. If the governor does not act on a bill after the allotted number of days, it is as if it were signed. In other words, if the governor doesn’t sign a bill it doesn’t die, it defaults to passing.
Budgets
In addition to the work done to pass policy bills, this session also included the business of writing the 2025-27 operating, transportation, and capital budgets. Going into session the legislature faced a significant budget shortfall. At the start of the session, the shortfall was estimated at about $10-12 billion down over the four-year outlook.
The spring revenue forecast is one of the key budget landscape components that the legislature bases their budget on. On March 18, the Economic and Revenue Council (ERFC) released the spring quarterly revenue forecast, which showed a projected increase of $54.4 million in the current 2023-25 biennium, but also projected a decrease of $479 million for the 2025-27 biennium, and a decrease of $420 million for the 2027-29 biennium. The combined change in revenue projections compared to the November 2024 forecast is a decrease of $845 million over the period of the current biennium and the next two ensuing biennia (2025-27 and 2027-29). This decline in revenue projections combined with the other known budget factors brought the shortfall up to an estimated $15-16 billion over the four-year outlook.
Operating Budget
For the 2025-27 biennium, the operating budget spends $77.1 billion, which includes $4.4 billion for maintenance level and $1 billion in policy level spending (a.k.a. new changes to appropriations). Most of the policy level increases were in the areas of K-12 education and compensation & benefits. Other major issues saw overall reductions in policy level spending.
To balance the budget over the four-years, in addition to spending reductions, the budget relies on a combination of transfers from other accounts, and $4.3 billion in new revenue in the 2025-27 biennium (the four-year total for new revenue is just under $9 billion). The final revenue package includes the following revenue bills (note that there are several other smaller revenue proposals that also factor in the final balanced budget):
- HB 2081 - Modifying business and occupation tax surcharges, rates, and the advanced computing surcharge cap, clarifying the business and occupation tax deduction for certain investments, and creating a temporary business and occupation tax surcharge on large companies.
- Increases business and occupation (B&O) tax rates for certain existing activities.
- Creates an additional 0.5 percent B&O surcharge on taxpayers with a Washington taxable income over $250 million.
- Increases the tax rate for several existing B&O surcharges.
- Increases the annual cap for the Advanced Computing Surcharge.
- Modifies the B&O investment income deduction.
- Est new revenue: $2B in 2025-27; $3.6B in 2027-29
- SB 5794 - Adopting recommendations from the tax preference performance review process, eliminating obsolete tax preferences, clarifying legislative intent, and addressing changes in constitutional law.
- Repeals certain tax preferences.
- Est new revenue: $148.5M in 2025-27; $236.7M in 2027-29
- SB 5813 - Increasing funding to the education legacy trust account by creating a more progressive rate structure for the capital gains tax and estate tax.
- Applies an additional 2.9 percent excise tax on individual's Washington capital gains exceeding $1 million.
- Increases the estate exclusion amount to $3 million and provides an updated reference to the Consumer Price Index to allow for annual inflation adjustments.
- Increases the qualifying family-owned business interests deduction amount for the estate tax to $3 million and provides annual inflation adjustments.
- Increases the tax rates for Washington taxable estates of decedents dying on or after January 1, 2025.
- Est new revenue: $321.6M in 2025-27; $313.9M in 2027-29
- SB 5814 - Modifying the application and administration of certain excise taxes.
- Extends retail sales and use tax to certain specified services.
- Makes certain products containing nicotine subject to the other tobacco products tax.
- Imposes a one-time prepayment of retail sales tax collections for businesses with $3 million or more in taxable retail sales during calendar year 2026.
- Est new revenue: $1.15B in 2025-27; $1.53B in 2027-29
The final budget does not pull from the state’s emergency reserves (a.k.a. rainy-day fund), and it does not include the furloughs for state employees that were included in previous proposals. The budget retains $2.287 billion in reserves for the 2025-27 biennium.
Operating Budget Documents (additional documents can be found here):
Capital Budget
The 2025-27 biennial capital budget appropriates $4.5 billion in new debt limit bond spending and $7.5 billion in total funds, including cash and other revenue sources. Additionally, the budget reappropriates $4.9 billion in debt limit bonds and $11.6 billion in total funds to continue projects from previous budgets.
Some of the key capital budget investments are in the areas of:
- Education: $975M
- Natural Resources: $827M
- Housing & Homelessness: $772M
- Behavioral Health: $463M
- Human Services: $171M
- Environment & Energy: $375M (from Climate Commitment Account)
Capital Budget Documents (additional documents can be found here):
Transportation Budget
The final 2025-27 transportation budget provides $15.5 billion in spending authority for the 2025-27 biennium, with $9.2 billion for capital expenditures and $6.2 billion for operating expenditures. Spending in the 2025-27 biennial transportation budget relies on a mix of existing revenues and new revenues in ESSB 5801 & 2SSB 5802. E2SB 5801 includes increases in the state fuel tax, truck and passenger weight fees, the rental car tax, and the motor vehicle sales tax as well as a new luxury tax on certain higher priced vehicles. Over the next 6 years, these new resources total over $3 billion. SSB 5802 provides a permanent dedication of 0.1 percent of the current 6.5% sales and use tax, which provides additional resources of approximately $300 million per year starting in fiscal year 2028. Even with these additional revenues, some planned projects have been delayed, allowing for a balanced, 4-year spending plan.
Transportation Budget Documents (additional documents can be found here):
The Good, the Bad, & the Ugly
The Good
- Condominium reform (HB 1403) – reforms the state condo liability code to promote greater condo development
- Parking reforms (SB 5184) – reforms minimum parking requirements to allow for the market to dictate parking needs leading to greater housing development.
- Historic landmarks (HB 1576) – puts greater procedural clarity around designation of properties as historic landmarks, lowering costs for housing development and housing rehabilitation projects.
- Early learning provider qualifications (HB 1648) – helps address the child care crisis by extending the timeline for providers to meet qualification requirements.
- Siting of childcare facilities (SB 5509) – requires childcare centers to be permitted as outright permitted uses in all zones except industrial zones.
- Childcare centers in existing buildings (SB 5655) – aims to enhance childcare services by facilitating the use of existing buildings.
The Bad
- Transit-Oriented Development (HB 1491) – requires cities to allow for more residential density near transit but imposes unrealistic affordability requirements.
- PFML program (HB 1213) – expands eligibility while breaking the uniformity with federal FMLA requiring smaller employers to find replacement positions for employees who take leave.
- Personnel records (HB 1308) – requires a private employer to provide an employee or former employee with a copy of the employee’s personnel file within 21 days of a request.
- Solid waste management outcomes (SB 5284) – creates an extended producer responsibility (EPR) system in Washington which will raise costs for businesses and consumers.
- K-12 Education (HB 2049) – allows school districts to increase the school enrichment levies gradually over several years which will increase disparities between districts and lead to another constitutional education funding lawsuit.
- Eliminating certain tax preferences (SB 5794 ) – eliminates certain tax preferences and clarifies legislative intent.
The Ugly
- Rent stabilization/control (HB 1217) – Enacts statewide limits on rent increases which will lower investment in new housing and incentivize landlords to exit the market leading to shortages.
- PEBB/SEBB payment cuts (SB 5083) - Applies to public employee benefit board and school employee benefit board health plans, and reduces acute care hospital reimbursement to the lesser of contracted rates or 200% of Medicare rates beginning in January 2027, straining hospital's already beleaguered operating budgets.
- Difficult to discharge patients (HB 2051) – removes payment for ancillary services for complex discharge Medicaid patients during administrative day stays.
- UI for striking workers (SB 5041) – Allows striking workers to collect up to 6 weeks of unemployment benefits for voluntarily going on strike, will hike premiums for all companies in the UI pool.
- B&O taxes (HB 2081)- Increasing the B&O tax surcharges, rates, and the advanced computing surcharge cap, and creating a temporary B&O surcharge on large companies.
- Capital gains and estate tax (SB 5813) – Increases the capital gain tax and modifies the estate tax.
- Sales and use taxes (SB 5814) – Extends the sales and use tax to specified services like web design, data processing, digital advertising, IT support.