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Washington’s budget basics
According to the National Association of State Budget Officers (NASBO), Washington’s total expenditures in fiscal year (FY) 2020 were $53.5 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.
Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.
Per the US Census Bureau, Washington’s combined state and local direct general expenditures were $78.6 billion in FY 2018 (the most recent year census data were available), or $10,444 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.
Washington’s largest spending areas per capita were elementary and secondary education ($2,344) and public welfare ($1,726). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.
Washington’s combined state and local general revenues were $82.7 billion in FY 2018, or $10,992 per capita. National per capita general revenues were $10,071. Washington does not levy an individual income tax or corporate income tax but does have a gross receipts tax. (Census counts this revenue as either general sales tax revenue or selective sales tax revenue.) Washington’s largest sources of per capita revenue were general sales taxes ($2,674) and charges ($2,296), such as state university tuition and highway tolls.
Governor Jay Inslee, a Democrat, was elected in 2020 with 57 percent of the vote. The next gubernatorial election is in 2024.
Democrats control both the House of Representatives (57 Democrats to 41 Republicans) and Senate (29 Democrats to 20 Republicans). Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Washington. All Washington House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2022, and the other half will be up for election in 2024.
Washington’s budget institutions, rules, and constraints
Washington uses a biennial budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. Washington further limits spending growth with a budget rule based on inflation and population growth. The rule is binding and requires a legislative supermajority to override it. Washington also limits total authorized debt incurred by the state but does not limit debt service.
(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)
Washington’s recent fiscal debates
- In 2019, Governor Inslee signed legislation creating the nation’s most generous long-term care program. When the program launces in 2025, eligible residents will receive a $100-a-day allowance that can go toward nursing home fees, in-home assistance providers, and family members who provide care. Medicare does not pay for long-term care. States pay for some long-term care through Medicaid; the Washington bill extends the state’s coverage and provides a new revenue source for this spending. The legislation created a new 0.58 percent payroll tax that will pay for the program’s costs, which the state estimates will total roughly $1 billion annually. Employees that demonstrate they have long-term-care insurance are exempt from the payroll tax.
- Washington is one of seven states that do not tax any type of individual income. Governor Inslee and some Democratic legislators have repeatedly proposed the state tax capital gains. In 2019, Governor Inslee proposed a 9 percent tax on capital gains earnings greater than $25,000 for individuals and $50,000 for joint filers. Slightly different capital gains tax legislation was also proposed in the Washington House and Senate that year. The governor’s office estimated his tax proposal would raise roughly $1 billion annually in new revenue. All legislation to date has failed, and opponents argue the bills are unconstitutional. The state’s constitution does not explicitly ban an income tax, but it requires all property be taxed uniformly, and the state’s courts have ruled that the state’s definition of property includes income. This is why the legislation calls the tax an “excise tax on sales and extraordinary profits of high valued assets.”
- Washington was one of the first states to legalize and tax marijuana. Originally, a ballot initiative created a 25 percent tax on producer sales to processors, another 25 percent tax on processor sales to retailers, and a further 25 percent tax on retailer sales to customers. In 2015, however, the legislature replaced this tax system with one 37 percent excise tax on marijuana sales. (Washington also levies its general sales tax and gross receipts tax on marijuana sales.) Washington now collects roughly $400 million in marijuana tax revenue annually.
Washington’s current budget
Washington passed its FY 2020–2021 biennial budget in April 2019. Over the two-year period, the budget allocated $53.0 billion in general-fund spending and $99.7 billion in total spending. Governor Inslee’s proposed FY 2020–2021 supplemental budget was released in December 2019. The governor’s changes did not significantly change general-fund expenditures.
Washington enacted its FY 2020–21 supplemental budget in March 2020, which included $53.7 billion in general-fund spending and $102.1 billion in total spending. However, following the outbreak of the COVID-19 pandemic, Governor Inslee used his line-item veto authority to cut $235 million in spending from the current budget. He also asked agencies to plan for additional spending cuts in the next biennial budget.
Governor Inslee released his FY 2022-2023 biennial budget proposal in December 2020 and gave his State of the State address in January 2021. The proposal includes $57.6 billion in general-fund spending over the two-year period. To pay for some of the new spending, Governor Inslee proposes instituting a capital gains tax (Washington does not have an individual income tax). The new capital gains tax is estimated to raise over $1 billion in its first full year in effect. Governor Inslee’s proposal also relies heavily on draining the state’s rainy-day fund to balance the budget.
For more on Washington’s budget, see
Washington’s economic trends
Washington’s per capita income (per the Bureau of Economic Analysis) was $68,322 in 2020, ranking sixth among the states. It was above the national average of $59,729, but below the Far West regional average of $68,603. The state’s median household income (five-year estimate) was $73,775 in 2019, ranking 10th among the states and above the national average of $62,843. Washington’s poverty rate was 10.8 percent in 2019 (five-year estimate), below the national rate of 13.4 percent.
Although Washington’s averages tell a story about the entire state, Washington is composed of diverse localities. For example, the city of Pullman’s median household income was $31,487, and its poverty rate was 35.9 percent; the city