Washington state lawmakers have ended their legislative session by sending a $78 billion dollar budget to Gov. Bob Ferguson’s desk. It includes nearly $6 billion in cuts and over $9 billion in taxes. Legislators also passed rent cap increases and a new gun permit system. Olympia correspondent Jeanie Lindsay joins us to share what the Washington Legislature accomplished this session.
Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Washington lawmakers ended their legislative session on Sunday after 105 days. Their $78 billion budget calls for nearly $6 billion in cuts over the next four years and close to $9 billion in new revenue. Lawmakers also passed a cap on rent increases and a new gun permit system. All of this now goes to Governor Bob Ferguson’s desk. Olympia correspondent Jeanie Lindsay joins us now. It’s great to have you back on the show.
Jeanie Lindsay: Yeah, happy to be here.
Miller: I want to start with the budget. Lawmakers were facing a $16 billion shortfall over four years. What kinds of cuts can Washingtonians expect for the coming two years?
Lindsay: So there’s a couple billion in cuts over the next biennium, and the big picture is that there’s gonna be delayed spending in childcare and behavioral health, so that includes some higher co-pays for state childcare services. There’s also gonna be less money going to higher education institutions, colleges and universities, and reductions in student financial aid at independent colleges. There’s a women’s prison that’s going to close and some Department of Corrections reentry centers will close as well. And the state is scaling back some of its spending for managed healthcare costs through Medicaid. And then just across the board, there are gonna be some administrative cuts for agencies, things like that.
Miller: What happened with the rainy day fund?
Lindsay: They left it alone. They didn’t drain it, which, it’s gonna be a couple of billion dollars at the end of this biennium. Initially, there was a proposal to sort of temporarily drain that fund and then pay it back, but they didn’t touch it and that came after pressure from the state treasurer’s office, Mike Pellicciotti, who was warning against that pretty aggressively this session. In addition to concerns from the governor just about risks of federal funding under the Trump administration, they really wanted to preserve the reserves, just in case something happens and they need to tap into that.
Miller: I want to come back to that point before we finish, but I want to turn to the other side of the spending cuts. What kinds of revenue increases did lawmakers approve?
Lindsay: Yeah, there were quite a few. So the biggest, I guess, revenue getter will come from increases to business taxes. There’s also going to be an expansion of the sales tax to services that previously hadn’t faced that tax, like digital and staffing services. Lawmakers also expanded the capital gains tax for people who earned the most from their capital gains, and they removed some tax breaks that Democrats said were outdated.
Then they’re just sort of a smattering of other tax or fee changes that don’t have as much of a dollar amount attached to them, as far as bringing in state revenue. But people will feel them when they try to buy nicotine pouches, passes for state parks, or their hunting and fishing licenses.
And a lot of the attention, most of it, has really been on the operating budget, but lawmakers passed a new transportation budget as well, which is a separate one. And that budget raises the state’s gas tax by about 6 cents, and it adds new fees and increases on things like car rentals and other stuff around vehicles. So there’s a little bit of tax and fee changes sprinkled all over, in addition to those major changes that I mentioned up top.
Miller: What happened with the wealth tax that some Democrats were talking about at the beginning of the session?
Lindsay: Yeah, there was a lot of momentum for this wealth tax, which would have been a tax on intangible assets, like people’s stocks and bonds, based off of how much they had in that value. So anything worth more than $50 million would be subject to that tax, but Governor Bob Ferguson really didn’t like that idea. He didn’t want the budget to be balanced on the wealth tax. He calls it untested and really pointed out that it could be overturned in court, so Democrats backed off of that. They scaled their proposal way down and didn’t weave it into their budget calculations.
Ultimately, the Senate on the final day of session did approve the wealth tax, but because it was the last day, it didn’t have time to make it through the House process. But really it could be setting the stage for passage or more movement on it next year, since the legislature does work on a two-year system.
Miller: But it wasn’t just that wealth tax that the governor spoke out against. Earlier this month, he expressed what seemed like general unhappiness with the tax increases that lawmakers in his own party were putting forward. So, do you have a sense for how he’s going to approach the budget that they put on his desk?
Lindsay: Not really. I mean, like you pointed out, he was really critical of the overall amount of tax revenue that they were seeking. He called it risky and unsustainable. But as far as how he’s going to approach the package that they just passed, it’s unclear. The governor decided not to meet with reporters after lawmakers adjourned on Sunday, which I thought was kind of weird. I mean, it was still pretty early in the day. There was still daylight.
But in a 900-word statement, he basically said thank you to lawmakers for including all the things that he wanted in the budget and the policies that he was advocating for that they did pass. But then when it came to revenue, he said he’ll be carefully reviewing that over the next few weeks and he’ll let us all know what he thinks about it then. So it pretty much amounted to a big old wait and see that comes with some pretty high stakes.
Miller: Right. He said in that statement he’s going to carefully review the budgets, line by line, over the next few weeks. How much power does he have to veto specific pieces of the budget?
Lindsay: I mean, the veto pen, the veto powers of the governor’s office are a fundamental part of his job. So if he comes in and he vetoes any of these really core aspects of the revenue package that lawmakers passed, lawmakers could attempt to override that veto, but it would take support from Republicans. I mean, Democrats have the majority in the legislature, but they don’t have a supermajority. So if Governor Bob Ferguson vetoes a really big critical tax bill or maybe even any of the tax bills, I doubt that there’s going to be Republican support to say, “Actually, yeah, we do want more taxes,” because they’ve been pushing back against them the whole time and don’t want to see any new taxes or tax increases.
Miller: Let’s turn to some policy bills. There was a lot of drama around the bill to limit rent increases in Washington. What would the final bill, which passed at the very end, do?
Lindsay: Yeah, the main highlight for that bill is that it caps annual rent increases at 7% plus inflation, or 10%, whichever is lower. So landlords wouldn’t be able to raise a person’s rent beyond that. But there are some exemptions, new construction would be exempt from that for 12 years, and those caps are set to expire in 2040. So that means any buildings that are finished this year or in the next three years won’t have to adhere to the rent caps for very long, if at all. There’s also a different, a lower cap, for people who live in mobile or manufactured home communities. Those are the folks who own their houses but rent the land that they live on. Those caps on rent increases will sit at 5% and those won’t expire under this legislation. So it’s pretty significant for those homeowners.
Miller: Is the governor in favor of rent control?
Lindsay: Unclear. He’s held very few press conferences about state issues, and when he has, he’s stuck with the message that he’s prepared to deliver without giving much more insight into the rest of it. When we in the press corps ask him, he usually says something about looking closely at the policies or having conversations. But he’s not really taking a stand on a lot of this stuff, at least publicly. And I don’t know how much he’s talking about it behind closed doors because, I mean, he just won’t tell us.
So we’ll have to see when it comes time for him to sign the bill if there are provisions of that legislation that he decides to veto or if he just signs off on all of it.
Miller: What changes did lawmakers make to the state’s parents’ rights law?
Lindsay: Right, so the legislature passed a bill that includes some revisions to this Parents’ Rights Initiative that was enacted last year, and essentially it rolls back some of the access that was granted through that initiative to school-based medical and mental health records. It also aligns the timeline for schools to respond to records requests with the Federal Education Privacy Law, FERPA, to 45 days.
Democrats have said that those changes are pretty essential to align education policies with pre-existing health care policies and privacy protections and clear up confusion that they were hearing from people at the school level, but Republicans are pretty unhappy and have said it essentially undermines the will of the people who sent the Parents’ Rights Initiative to the legislature in the first place last year. But it’s not the final word. The backers of the Parents’ Rights Initiative here in Washington are trying to move forward with a new ballot measure to repeal those changes the lawmakers just approved, so stay tuned on how all that pans out.
And the last thing that I wanted to add here, this bill does more than just revise the parents’ law. It also adds new anti-discrimination rules for students based on their gender identity, adds a list of student rights, and notably, it also creates a new complaint and enforcement process that could let the state’s schools chief withhold or redirect up to 20% of the school’s funding for violating those regulations, sort of as a last resort to enforce them. So certainly a lot going on there.
Miller: What happened with firearm regulation?
Lindsay: There were a few bills filed this year around firearms, but most of them were left behind. The one that did pass is the Permit to Purchase bill, so that would grant someone, I think, like a five-year permit after they pay a fee and take a safety training, but there’s still time before that would happen if the bill is signed, which is seemingly likely, but it could face court challenges. But even if all of that stands up and it holds together, that would take effect, I believe, about two years from now.
Miller: Finally, I want to go back to what you mentioned earlier in terms of some of the federal budget questions, because close to a third of Washington’s budget comes from the federal government. How much uncertainty is there about whether the budget that lawmakers passed will hold?
Lindsay: Yeah, the action at the federal level has sort of been looming over everything right now. I mean, especially not knowing what the governor is going to do with this revenue package that was just sent his way, but the way lawmakers have talked about it, throughout the session, was that they’re really focused on what they can control here in Washington state. But the reality is that you know if the federal government wipes out a third of the state budget, I mean, I don’t even know where they would begin. That would be truly a crisis for Washington officials, beyond the worst case scenario. And I don’t know if lawmakers know where they would start either, so it’s certainly a risk.
It’s certainly a question that they’re wondering, what could happen. If there are deep enough cuts, it could pull them back into a special session. But really it’s just a big question mark that everyone’s sort of keeping their eyes out for and [are] not really sure what’s going to happen next, and let alone how they would tackle that, because that, like I said, would be very, very significant.
Miller: Jeanie, thanks very much.
Lindsay: Yeah, you’re welcome.
Miller: Jeanie Lindsay is OPB’s Olympia correspondent.
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