Ferguson’s proposed budget totals $79 billion and aims to address a projected $2.3 billion shortfall through a combination of cost-saving reductions and targeted spending in housing, education and infrastructure
Carleen Johnson
The Center Square Washington
See Grok’s analysis of this story
Washington state Gov. Bob Ferguson released his proposed 2026 supplemental budget on Tuesday, the deadline for presenting it.
Ferguson’s proposed budget totals $79 billion and aims to address a projected $2.3 billion shortfall through a combination of cost-saving reductions and targeted spending in housing, education and infrastructure.
“I want to be clear that what I’m presenting today is a two-year budget that takes us through June 30, 2027. As many of you know, Washington state adopted a requirement in 2012 that we enact a four-year balanced budget. Washington is literally the only state in the country that has that requirement,” Ferguson explained during Tuesday afternoon’s press conference. “When the Legislature passed that bipartisan law, they recognized there would be certain economic circumstances that, if met, would allow the Legislature to adopt a two-year budget.”
That law doesn’t prevent a two-year budget; rather, it mandates that the standard biennial (two-year) operating budget must be balanced not just for the immediate biennium, but also projected to be balanced over the subsequent biennium, creating a four-year balanced budget outlook, forcing lawmakers to plan and avoid future budget holes.
Ferguson said the conditions for a two-year budget have been met, including employment growth under 1% and the utilization of the Budget Stabilization Account, also known as the rainy day fund.
In his budget proposal, approximately $1 billion would be transferred from the state’s rainy day fund, leaving about $1 billion remaining in the fund.
Ferguson’s budget includes shifting Climate Commitment Act revenue to fund the Working Families Tax Credit.
“We’re using $569 million in Climate Commitment Act revenues to maintain the working families tax credit,” the governor said. “That tax credit puts up to $1,290 back into the pockets of thousands of Washingtonians with low incomes.”
The current budget gap is approximately $2.3 billion over two years, and Ferguson stated that cuts across state agencies will be part of filling that gap, totaling nearly $800 million, including cuts to administration.
“Agencies have to make some decisions there,” Ferguson noted.
Last week, the governor released proposals for the transportation and capital budgets.
Ferguson announced a $3 billion transportation plan covering the next decade, which includes the preservation of roads and bridges, as well as the construction of three new electric ferries.
He also released a $244 million housing plan that includes thousands of affordable housing units, aid for first-time homebuyers, and the repair of flood-damaged homes, and signed an executive order to form a task force dedicated to creating a cabinet-level Department of Housing.
Critics, including Rep. Mark Klicker, R-Walla Walla, argue that establishing a new state agency to address the housing shortage is not the solution.
Klicker got a bill passed during the 2025 legislative session that funded a study of housing experts, including builders, realtors, and other stakeholders, to produce solutions. The bill passed with wide bipartisan support but was then vetoed by Ferguson.
“It was the only bill that he vetoed in completion compared to everything else because of the fiscal note of $200,000 or so, and yet he is going to create an agency that we know will be millions of dollars,” Klicker told The Center Square.
Ferguson’s budget proposal serves as an outline for lawmakers as they craft changes to the current two-year, $78 billion budget signed earlier this year.
Rep. Travis Couture, R-Allyn, told The Center Square that Ferguson’s budget proposal, which was offered the day before Christmas Eve, is an attempt to avoid media coverage.
“He’s doing this on the very last possible day that he can, as close to Christmas as he can. And my view is that it’s likely because they don’t want anyone to really see it or look at it, because they’ll be so busy with their families and their friends during Christmas and celebrating the holidays,” he said. “And if I were the governor, I wouldn’t want anyone to see this budget proposal either. It is a complete joke.”
Couture conceded there are budget challenges.
“There’s a little over $4 billion [in the] deficit [over four years]. Once again, after the largest tax increases in state history that our state faces, a lot of them are due to the policies that the governor has signed into law recently,” he said.
Couture, who last week offered a House GOP budget proposal, said the most shocking part of the plan is that it is not a four-year balanced budget outline.
“I think that the top thing for people to know about the governor’s proposal is that he’s proposing to simply not balance budgets anymore. Instead of trying to solve that deficit and have structural budget reform, like the House Republican Affordability First budget framework does, instead, the governor just proposes to hell with it,” Couture said. “That’s not how the real world works. Only government apparently gets to do that.”
Washington State Republican Party Chair and state Rep. Jim Walsh, R-Aberdeen, told The Center Square, the proposal is “not a serious one.”
“It’s half measures from the princeling of half measures,” Walsh via texted. “He’s counting on Speaker [Laurie] Jinkins and Sen. [Jamie] Pedersen to do his dirty work, reject his unserious proposal, and raise taxes on working families in Washington.”
Ferguson also threw his support behind a proposed income tax on residents earning more than $1 million annually, adding he’s prepared to sign the policy into law next year.
Individuals and households would pay a 9.9% tax on adjusted gross income of more than $1 million. It could generate an estimated $3 billion from a projected 20,000 households in Washington.
“I think there’s a fair amount of momentum around this millionaire’s tax,” Ferguson said, noting that ultimately there will be a legal challenge and voters would get to weigh in as well.
Washington voters have repeatedly rejected income tax proposals.
This report was first published by The Center Square Washington.
This independent analysis was created with Grok, an AI model from xAI. It is not written or edited by ClarkCountyToday.com and is provided to help readers evaluate the article’s sourcing and context.
Quick summary
Gov. Bob Ferguson proposed a $79 billion supplemental operating budget to close a projected $2.3 billion shortfall through a mix of agency reductions, transfers from the rainy day fund, and shifting money among other accounts, while also backing a future income tax on earnings above $1 million. Republican lawmakers such as Rep. Travis Couture criticized the plan as unserious because it relies on a two‑year, rather than four‑year, balanced‑budget outlook.
What Grok notices
- Quotes from Ferguson explain how the proposal uses agency cuts, rainy day transfers, and fund shifts to close the gap, while Republican critics like Couture and Rep. Jim Walsh raise concerns about sustainability and timing.
- Clarifies Washington’s usual four‑year balanced‑budget requirement and the governor’s decision to invoke a two‑year exception, giving readers context for the procedural dispute.
- Notes that the plan would move Climate Commitment Act revenues to support programs such as the Working Families Tax Credit, and pairs that with a longer‑term proposal for a millionaire’s income tax.
- Indicates that readers may need to consult official budget documents to see the exact size of rainy day fund transfers and the remaining balance after withdrawals.
- Reflects competing perspectives on whether the proposal is a short‑term patch or a step toward broader changes in the state’s tax structure.
Questions worth asking
- How might relying on a two‑year exception, instead of planning for a four‑year balance, affect the state’s ability to navigate future economic slowdowns or revenue dips?
- Which agencies or programs are proposed for the largest reductions, and what services or staffing levels would those cuts affect?
- If adopted, how could a millionaire’s income tax change Washington’s overall tax mix, particularly its reputation for having a regressive system?
- To what extent do federal policy shifts or expiring federal supports contribute to the current shortfall estimates?
- Beyond shifting Climate Commitment Act revenues, what alternatives have lawmakers discussed for maintaining programs like the Working Families Tax Credit over the longer term?
Research this topic more
- Office of Financial Management – governor’s supplemental budget proposal, summaries, and agency detail
- Economic and Revenue Forecast Council – revenue forecasts, outlook documents, and budget assumptions
- Washington State Legislature – tracking of tax and budget‑related bills, including any millionaire’s tax proposals
- Governor’s Office – press releases, budget speeches, and supporting documents
- Legislative Evaluation and Accountability Program – fiscal notes, budget analyses, and long‑term outlooks
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