Bring On the Budgets (and the Revenue Ideas!)

By Marie Sullivan, legconsultant@wastatepta.org

Be sure to check out our comprehensive Week 11 Bill Tracker to see how bills we support have fared.

Last week the Economic and Revenue Forecast Council reported that anticipated revenue collections would be down by nearly $900 million over the next four fiscal years: $479 million in 2025-27, and $420 million in 2027-29.

The news provided the information budget negotiators needed to finalize their budgets, four of which will be released Monday, March 24th. Senate Democrats will unveil their operating and transportation budgets at 10 AM and House Democrats will release their proposals at 12:30 PM. The 2025-27 capital budgets will be released the following week on March 31st.

The Senate Ways and Means Committee, the House Appropriations Committee, and the two Transportation committees will hold public hearings on Tuesday, March 25th, beginning at 4 PM. Committee markup and a vote will take place Thursday, March 27th, sending the two-year spending plans to the Rules committees and then to the floor. In the Senate, floor action is scheduled for the operating budget on Saturday, March 29th; the House will hold floor action Monday, March 31st.

The most likely scenario is that the Senate will pass SB 5167 over to the House, and the House will “catch it on the fly,” which means they don’t need to bring the budget bill back to a fiscal committee. The House Democrats will then replace the Senate language with the House budget proposal, thereby creating the formal setting to begin negotiations between the two chambers. The final day of the 105-day session is April 27th.

Democrats release revenue proposals

To close the projected budget shortfalls predicted over the next four fiscal years – estimated at $10 billion to $16 billion – Senate and House Democrats announced revenue proposals last week. The Senate’s package would generate more funding than the House proposals, and both budget writers have indicated some cuts, and savings will be needed to balance the operating budget over the four-year outlook.

On Thursday, March 20th, the Senate Democratic Caucus announced its revenue proposal to fund the 2025-27 state operating budget. The proposal includes five bills to increase revenues, create sales tax relief, and repeal certain tax preferences. Listen to their press conference here. Here’s a summary of the proposals and amounts generated, according to Senate Democrats:

Financial Intangibles Tax (Wealth Tax) – SB 5797 (Frame)
Projected to generate approximately $4 billion per year starting in fiscal year 2027

• 1% tax on the assessed value of certain financial assets held by individuals with more than $50 million of these assets.
• Estimated to impact 4,300 taxpayers.
• Applies to both financial intangible assets and nonfinancial intangible assets.
• “Financial intangible assets” would include cash, cash equivalents, and various financial investments like bonds, stocks, mutual funds, options, futures, commodities, and ownership units in business entities.
• “Nonfinancial intangible assets” would include intangible property beyond financial assets, such as trademarks, patents, copyrights, trade secrets, licenses, customer lists, goodwill, reputation, and private service or sports contracts.

Payroll Tax Paid by Employers – SB 5796 (Saldana)
Projected to raise about $2.3 billion per year once fully implemented

• 5% tax on payroll expenses above the Social Security threshold — currently $176,100 per year.
• Limited only to companies with $7 million or more in payroll expenses.
• Estimated to impact about 5,300 taxpayers.
• Includes full credit for businesses already paying Seattle’s “JumpStart” tax.

Removing the Property Tax Levy Lid of 1% – SB 5798 (Pedersen)
Expected to generate about $779 million in additional state funding over the four-year budget cycle

• Removes the 1% cap on the property tax growth limit for the state’s common schools levy and for cities and counties, as well as special purpose districts.
• The updated definition to “limit factor” would allow taxing districts to use the greater of 100% plus population change and inflation or 101% for their growth rate.
• Changes the definition of “Inflation” to the annual percentage increase in the CPI for all urban consumers in the western region, based on the most recent 12-month data from the U.S. Bureau of Labor Statistics, as of July 25th of the year before taxes are due.
• Adds definition for “population change”: The annual percentage increase in a taxing district’s population based on the latest two years of official estimates from the Office of Financial Management as of April 1st of the year before taxes are due. For counties, this would include both incorporated and unincorporated areas, except for county road funds, which only consider unincorporated areas. If a taxing district spans multiple areas, its population change is determined by the city, county, or county with the highest taxable assessed value. Population change is rounded to the nearest 0.1%.

Cutting the Sales Tax – SB 5795 (Krishnadasan)
Would decrease revenue by approximately $1.3 billion per year

• Reduces the state portion of the sales tax from 6.5% to 6% (local sales tax would remain as adopted locally).

Repealing Tax Preferences – SB 5794 (Salomon)
Expected to generate more than $1 billion over the full four-year budget cycle 

• Repeals various tax preferences, deductions, and exemptions across multiple industries, including transportation, agriculture, international commerce, healthcare, energy, and nonprofits, while updating job creation tax credits and clarifying public policy objectives for certain tax benefits.
• NOTE: These preferences were identified by the Joint Legislative Audit and Review Committee as failing to meet their public policy objectives, having unclear outcomes, or being legally obsolete.

The House Democrats didn’t hold a press conference, but rolled out their proposals on Friday, March 21st. Here is a summary of their proposals and projected revenues to be generated:

Financial Intangibles Tax (Wealth Tax) – HB 2046 (Berg, Street)
Expected to generate approximately $2 billion per year, starting in fiscal year 2027

• 0.8% tax on assessed value of certain financial assets held by individuals with more than $50 million of these assets.
• Estimated to impact 4,300 taxpayers.
• “Financial intangible assets” include cash, cash equivalents, and various financial investments like bonds, stocks, mutual funds, options, futures, commodities, and ownership units in business entities.

Property Tax Levy Lid Lift (1% to 3%) – HB 2049 (Bergquist, Pollet)
The Department of Revenue estimates the change will increase funding for state investment in K-12 schools by $50 million in fiscal year 2026 and $150 million in fiscal year 2027

• The title of the bill is: “Investing in the state’s paramount duty to fund K-12 education and build strong and safe communities.”
•  Allows for state and local property tax increases based on inflation and population changes, not to exceed 3%.
•  Changes the definition of “Inflation” to the annual percentage increase in the CPI for all urban consumers in the western region, based on the most recent 12-month data from the U.S. Bureau of Labor Statistics, as of July 25th of the year before taxes are due.
• Adds a definition for “population change”: The annual percentage increase in a taxing district’s population based on the latest two years of official estimates from the Office of Financial Management as of April 1st of the year before taxes are due. For counties, this would include both incorporated and unincorporated areas, except for county road funds, which only consider unincorporated areas. If a taxing district spans multiple areas, its population change is determined by the city, county, or county with the highest taxable assessed value. Population change is rounded to the nearest 0.1%.

B&O Surcharge on Large Corporations and Financial Institutions – HB 2045 (Fitzgibbon, Parshley)
Expected to generate nearly $600 million in fiscal year 2026 and nearly $2 billion in fiscal year 2027

• Beginning January 1, 2026, 1% Business & Occupations (B&O) surcharge on businesses with taxable income over $250 million.
  • Exemptions: manufacturers, semiconductor manufacturing, commercial airplane activities, alternative jet fuel manufacturing, aluminum manufacturing, and manufacturing solar energy systems.
  • Estimated to impact 400 taxpayers.
• Beginning July 1, 2025, would increase the B&O surcharge from 1.2% to 1.9% for financial institutions described in RCW 82.04.29004.
  • Estimated to impact 200 taxpayers.

In addition to revenue bills, over the past 60+ days lawmakers have introduced various bills that are expected to “save” the state money. In the early learning and K-12 space, these include bills to reduce local effort assistance to school districts that exceed 33% of student FTE enrolled in alternative learning environment (ALE) programs (SB 5772, HB 2050); eliminating or reducing bonuses for National Board Certified Teachers (HB 1475, SB 5737); delaying the state’s early childhood education and assistance program (HB 1489, SB 5752); pausing the Transition to Kindergarten program (HB 2012, SB 5769); eliminating depreciation payments on electric buses purchased with federal, state or local grant support (SB 5780); and something they’ve tried before – shifting around school district apportionment payments (HB 2050). State employees, with a few exceptions, also would face compensation decreases (SB 5792), with base salaries being reduced by 4.98% for all state employees of the executive, legislative and judicial branches, among other changes.

None of these revenue bills have been scheduled for a public hearing yet, but expect those to occur in the next few weeks. In the Senate, the Ways & Means Committee will be the venue, while in the House the Finance Committee will hear the bills first.

More on HB 2049

In addition to lifting the limits on property tax growth, HB 2049 would modify school district enrichment levies and local effort assistance. Section 2 would increase the per student amount by $500 in the 2026 calendar year and then 3.33 percentage points added to inflation each year from the 2027 and 2030 calendar years. This would specifically apply to school districts that are capped by the the $2,500 or $3,000 per student limits.

Under the bill, beginning with collections in the 2031 calendar year, the base would be set at $5,035, as increased by inflation beginning with the property taxes levied for collection in 2032, multiplied by the number of average annual full-time equivalent students enrolled in the school district in the prior school year.

For school districts receiving or eligible for local effort assistance, school districts would see the base rate increased by inflation plus “inflation enhancements,” which are defined as $200 per student in the 2026, 2030 and 2031 calendar years, and $300 in the 2027 calendar year. Not sure what happens in 2029, but there’s probably an answer.

Section 11 of the bill would direct OSPI to convene a “K-12 Funding Equity Work Group” to analyze K-12 funding formulas and explore options for revisions to the funding formulas that are responsive to student needs, including economic, demographic, and geographic differences in student and community populations. Annual reports and recommendations would be required in required, beginning November 1, 2025 through November 1, 2027. However, any changes to funding formulas or recommendations would not be allowed to exceed the estimated state revenue of the state property tax change proposed in the bill.

What’s going on with various bills?

School Construction

Sad to say, but the Senate’s simple majority for bonds bills have been relegated to the “X files,” which means they are likely dead for this session. The measures are SSB 5186 and SSJR 8200. However, perhaps there is an opportunity offered by HB 1796, which had a positive public hearing last week and is scheduled for a vote in the Senate Early Learning & K-12 Education Committee on March 27th.

HB 1796 would authorize school districts to contract indebtedness and issue bonds without a vote of the people, subject to the current indebtedness limit of 0.375 percent, for the purpose of erecting buildings and providing the necessary furniture, apparatus, or equipment. The new authority would only apply to school districts that have passed a capital levy, and only if the district hadn’t been in binding conditions during the previous three years prior to the contract.

Capital levies can pass at simple majority and can be used to purchase building sites and land; improve energy efficiency; provide major and minor structural changes and additions to buildings, structures, facilities and sites; and the purchase of real property, personal property, or property rights in connection with the districts’ duties. The bill concept has been introduced in the past couple of sessions but didn’t pass both chambers. Because simple majority for bonds continues to struggle to secure the needed supermajority to make it to the November general election ballot, this option for capital levies might offer another opportunity for districts that can pass a capital levy but not a bond.

Special education & MSOC

The House Appropriations Committee is still the spot to watch E2SSB 5263 (special education) and ESSB 5192 (Materials, Supplies and Operating Costs – MSOC). Both bills had a public hearing last week, with testimony running strongly in favor of maintaining or adding to the funding levels passed by the Senate.

As a reminder, the most recent fiscal note for special education estimates $915.5 million in the 2025-27 biennium and $1.07 billion in the 2027-29 biennium. The fiscal note on the MSOC bill puts new funding at $189 million in the 2025-27 biennium, and $240.7 million in the 2027-29 biennium.

Parent’s rights legislation

The Senate Early Learning & K-12 Education Committee held a public hearing last week on ESHB 1296. This is one of three bills this session that make changes to what is called the Parent’s Bill of Rights, which was adopted in the 2024 legislative session in response to I-2081, an initiative to the Legislature. It is scheduled for a vote on March 27th at 10:30 AM.

ESHB 1296 would direct OSPI to enforce and obtain compliance with certain state laws; make changes to reporting and notification requirements related to alleged physical abuse, sexual abuse, sexual misconduct, and assault of students; and require a statement of Student Rights be incorporated into educational and promotional materials including civics education. The bill also would make changes to certain rights of parents and legal guardians of children enrolled in public schools and prohibit adverse employment action for employees supporting students’ exercise of rights and performing work in a manner consistent with certain state laws.

The House Education Committee will hold a public hearing at 1:30 PM on Monday, March 24th on 2SSB 5179 (complaint process) and ESSB 5181 (changes to parent’s rights).

Rather than rolling the concepts into one bill as the House bill does, 2SSB 5179 would direct OSPI to establish a process to investigate complaints alleging “willful noncompliance” with certain state laws. The bill would require “compliance action plans,” and allow OSPI to impose certain consequences for willful noncompliance with these state laws. ESSB 5181 would make changes to the rights of parents and legal guardians, including specifying additional rights and removing rights related to notification requirements for medical services and treatments.

Preventing gun violence

E2SHB 1163, enhancing requirements relating to the purchase, transfer and possession of firearms, is scheduled for a public hearing in the Senate Law & Justice Committee on Tuesday, March 25 at 8 AM, and for a vote on March 27th.

E2SSB 5098, restricting the possession of weapons on the premises of state or local public buildings, parks or playgrounds where children are likely to be present, and county fairs and county fair facilities, had a public hearing last week in the House Civil Rights & Judiciary Committee. It is scheduled for a vote by the committee on Wednesday, March 26th at 8 AM.

New school year requirements

EHB 1393 would require school districts, charter schools, and state-tribal education compact schools to allow students to wear an item or object of cultural significance with or attached to their gown at high school commencements and other official graduation ceremonies and events. The bill would apply to the 2025-26 school year and beyond. The bill passed out of the Senate Early Learning & K-12 Education Committee by a vote of 5-2. It was not amended and has no fiscal impact, so will be sent to the Senate Rules Committee for further action.

SSB 5570 would require school districts to incorporate materials about the history, culture and government of their nearest federally recognized Indian tribe or tribes into their social studies curricula by September 1, 2026. The bill passed out of the House Education Committee unanimously and has been referred to the House Appropriations Committee.

Updates to graduation requirements

Bills to make computer science or financial education graduation requirements have been around the Legislature for the past four sessions but failed to pass due to concerns about adding new requirements without changing the existing 24-credit structure.

SSB 5327 would require the State Board of Education (SBE) to recommend adjustments to graduation requirements to ensure that students have an opportunity to demonstrate competency in the foundational skills established in the state learning standards for high school computer science and financial education. The bill incorporated the financial education elements of another Senate bill and would align more closely with the work being done by the SBE and with OSPI as it updates learning standards on the two topics. Recommendations by the SBE would be due December 31, 2026. The bill had a public hearing last week and is scheduled for a vote in the House Education Committee March 27th.

2SHB 1285 would make financial education a graduation requirement, starting with the class of 2031. The bill passed the House 94-3 but has stalled in the Senate education committee – not securing a public hearing and likely giving way to the Senate proposal described above.

New last week

SB 5799 and HB 2038 would place a tax on every person engaged in the operation of a social media platform. The additional tax would be equal to the gross income of the business taxable under RCW 82.04.290(2) multiplied by the rate of 0.4 percent. The revenues would be deposited in a newly created Youth Behavioral Health Account, which would be used to support behavioral health needs for people who are prenatal through age 25.

The companion bills would define what constitutes a “social media platform.” The bills would not apply to a website, application or internet-based service that predominately or exclusively facilitates electronic mail or direct messaging services, online gaming, reviews of businesses or products, technical support, academic research, or other services that do not predominately or exclusively facilitate social interaction.

The Senate bill is sponsored by Auburn Democrat Senator Claire Wilson and the House bill is prime sponsored by Issaquah Democrat Lisa Callan.

Advocacy in Action

The House Appropriations Committee held public hearings on SSB 5192 (MSOC) and ESSB 5263 (Special Education) on Tuesday, March 18th. WSPTA and parent/student advocates raised strong voices in support of the two bills that will help bridge some of the state’s funding gaps for our school districts.

Here are the many voices on SSB 5192:

• Angela Steck, Washington State PTA. Angela’s testimony can be found here.
• Malorie Larson, Shoreline Council PTSA. Listen to Malorie here.
• Paultoro Tanaka, an 8th Grader at Eaglestaff Middle School. Paultoro’s testimony is here.
• Danica Noble, Broadview Thomson K-8 PTA. Listen to Danica here.
• Lily Eakin, McDonald International Elementary PTA. Lily’s testimony can be heard here.
• Samantha Fogg, Seattle Council PTSA. Listen to Samantha here.
• Kaitlin Murdock, Pathfinder PTSA. Kaitlin’s testimony can be heard here.

And the voices on ESSB 5263:

• Angela Steck, Washington State PTA. Angela’s testimony can be heard here.
• Malorie Larson, Advocacy Chair, Shoreline Council PTSA. (with her son Luke) Listen to Malorie here.
• Samantha Fogg, Seattle Council PTSA. Her testimony is found here.

The Week Ahead – All hearings can be found on TVW – Schedule subject to change

The next cutoff is April 2, the deadline when bills must pass out of the opposite chamber’s policy committees. Check the Week 11 schedule for all of the bills up this week for public hearings or executive action.

Education (House) – HHR A and Virtual JLOB – 3/24 @ 1:30pm

• ESSB 5181 – Public Hearing – Amending the parents’ rights initiative to bring it into alignment with existing law. (Remote Testimony Available). (Monitoring)
• SB 5637 – Public Hearing – Promoting student access to information about media literacy and civic education. (Remote Testimony Available).

Appropriations (House) – HHR A and Virtual JLOB – 3/24 @ 4:00pm

• HB 2012 – Public Hearing – Funding the transition to kindergarten program. (Remote Testimony Available).

Ways & Means (Senate) – SHR 4 and Virtual JACB – 3/24 @ 4:00pm

• SB 5785 – Public Hearing – Modifying students’ share of the education costs at institutions of higher education. (Hearing is on the Proposed Substitute.) (Remote Testimony Available).

Law & Justice (Senate) – SHR 4 and Virtual JACB – 3/25 @ 8:00am

•  E2SHB 1163 – Public Hearing – Enhancing requirements relating to the purchase, transfer, and possession of firearms. (Remote Testimony Available). (Support)

Early Learning & Human Services (House) – HHR D and Virtual JLOB – 3/25 @ 1:30pm

• ESSB 5752 – Public Hearing – Modifying childcare and early childhood development programs. (Remote Testimony Available).

Environment, Energy & Technology (Senate) – SHR 1 and Virtual J.A. Cherberg – 3/25 @ 1:30pm

• 2SHB 1497 – Exec Session – Improving outcomes associated with waste material management systems.
• 2SHB 1503 – Public Hearing – Furthering digital equity and opportunity in Washington state. (Remote Testimony Available). (Support/Low)

Appropriations (House) – HHR A and Virtual JLOB – 3/25 @ 4:00pm

• HB 1198 – Public Hearing – Making 2025-2027 fiscal biennium operating appropriations.

Ways & Means (Senate) – SHR 4 and Virtual JACB – 3/25 @ 4:00pm

• SB 5167 – Public Hearing – Making 2025-2027 fiscal biennium operating appropriations. (Hearing is on the Proposed Substitute.)

Environment, Energy & Technology (Senate) – SHR 1 and Virtual J.A. Cherberg – 3/26 @ 8:00am

• ESHB 1483 – Public Hearing – Supporting the servicing and right to repair of certain products with digital electronics in a secure and reliable manner to increase access and affordability for Washingtonians. (Remote Testimony Available). (Support/Medium)

Education (House) – HHR A and Virtual JLOB – 3/27 @ 8:00am

• SSB 5123 – Exec Session – Expanding protections for certain students to promote inclusivity in public schools. (Support)
• SB 5177 – Exec Session – Considering the experiences of historically marginalized and underrepresented groups when identifying professional development resources on certain topics.
• ESB 5235 – Exec Session – Repealing and reorganizing outdated statutes concerning public schools.
• SSB 5327 – Exec Session – Concerning learning standards and graduation requirements. (Concerns/Monitoring)

Early Learning & K-12 Education (Senate) – SHR 1 and Virtual J.A. Cherberg – 3/27 @ 10:30am

• ESHB 1651 – Exec Session – Concerning teacher residency and apprenticeship programs.
• HB 1796 – Exec Session – Concerning school districts’ authority to contract indebtedness for school construction.
• ESHB 1296 – Exec Session – Promoting a safe and supportive public education system. (Concerns/Medium)

Early Learning & Human Services (House) – HHR D and Virtual JLOB – 3/28 @ 8:00am

• ESSB 5752 – Exec Session – Modifying childcare and early childhood development programs.