'We know the shortfall will be significant': Ferguson warns of budget cuts

OLYMPIA - The state will again face "significant budget shortfalls" during the upcoming legislative session, according to a memo released by Gov. Bob Ferguson's office.

It's not yet known "precisely how significant the shortfalls will be," according to the memo, which was written by K.D. Chapman-See, director of the Office of Financial Management. But she said a " 'business as usual' approach will not meet the need of this moment."

Contributing factors to the budget deficit include inflation, federal funding cuts, population growth, economic uncertainty and court decisions, according to the memo, which was released Friday.

"We recognize reductions necessary to address this shortfall will come on top of billions in reductions adopted in the last 16 months, making these further savings additionally challenging without significant impacts to services the state provides," the memo states.

The memo signals the state again will face a challenging budget cycle after lawmakers plugged multibillion-dollar budget holes in the 2025 and 2026 sessions.

During the 2025 session, Ferguson's first as governor, lawmakers faced an estimated $15 billion operating budget deficit, which they filled through a combination of cuts, increases to the capital gains and estate taxes, and an expansion of the sales tax to include previously exempt services, among other changes.

Faced with a deficit in the transportation budget, lawmakers also opted to increase the state gas tax to 55.4 cents a gallon.

This year, lawmakers used $880 million from the state rainy day fund, cuts to child care funding and budgetary maneuvers to close another multibillion-dollar budget gap. Legislators also passed a new 9.9% income tax on personal income above $1 million a year, though revenue from the tax will not be collected until 2029.

With ongoing legal challenges and efforts to repeal the tax at the ballot box, Chapman-See warned that "agencies should not assume funds from the Millionaire's Tax are available" for their budget requests in the 2027 - 29 biennium.

Chapman-See directed state agencies to submit budgets that only include "mandatory increases" that don't expand existing programs and services, pause the phase-in of most new programs and not to propose new programs.

According to the memo, Ferguson also directed agencies to review programs created or expanded after Jan. 1, 2019, and examine "areas where Washington provides particularly high levels of service relative to other states" for savings.

"The Governor is committed to equity and requests that agencies be mindful and carefully consider disproportionate impacts reductions may have on communities underserved by state services," the memo states.

In a social media post on Friday, Ferguson said there was "a lot of information still to come" before he proposes a budget in December, including multiple revenue and caseload forecasts, which he said, "will give us a better sense of the scale of the challenge."

"That said, we know the shortfall will be significant," Ferguson wrote.

The governor said he is meeting with state agencies to communicate his goals in the budget process, which include preserving core services, not raising taxes, addressing "structural challenges" in the state budget and protecting the state's AAA bond rating.

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This story was originally published June 8, 2026 at 7:03 PM.