The Office of Financial Management is warning Washington agencies that a “business as usual” approach won’t be enough to balance the ledger next year.
K.D. Chapman-See, director of the Office of Financial Management, wrote in a memo to agency heads this month, “To be direct, there will be significant budget shortfalls next biennium in both operating and transportation budgets. I want to be clear that we do not yet know precisely how significant the shortfalls will be.”
“Given our current reality, I am directing all agencies to submit operating and transportation budget requests that focus only on addressing mandatory increases while not expanding existing programs and services,” she wrote.
OFM usually sends a memo out during summer budget season, as agency heads plan their funding requests for the fall.
“It's not unusual for OFM to tell agencies it's a tough year, revenues are challenging,” State Superintendent Chris Reykdal said. “This definitely had a different tone.”
Reykdal criticized this year’s spending cuts, blasting the legislature and Gov. Ferguson for reducing funds for the state’s Transition to Kindergarten program, and now he’s worried education will lose more state funding.
OFM’s memo points to factors from economic uncertainty to federal cuts to population growth for the rising costs.
“In the past decade, inflation has increased by 39%,” Chapman-See wrote. “That means something that cost $100 in 2016 now costs $139 in April 2026. The rising costs for utilities, construction and materials, fuel, and other necessities are weakening the state’s purchasing power.”
Meanwhile, forecasts show revenue likely won’t cover maintenance of current programs, so the governor’s office is looking to tighten the state’s belt.
“Executive Cabinet agencies are directed to provide reduction options for efficiencies, program reforms, and other savings in non-essential services and programs,” wrote the OFM director. “While we are not requiring a specific or uniform reduction amount at this time, given the anticipated shortfall for fiscal year 2028 and the likelihood that shortfall will grow as forecasts and mandatory maintenance level costs are updated, reduction options should be significant and ongoing.”
“So my first thought was ‘They have huge cuts to make, and it's going to be really hard,’” Superintendent Reykdal told SPR News. “And secondly, ‘They can't touch basic education.’”
Much of the spending growth, Reykdal said, comes from the state backfilling human services that the federal government used to provide.
“They care about vulnerable people, they care about the elderly, they care about people not getting health care, they want cash assistance for people,” he said. “But this is becoming a crisis now where the feds are cutting back on those things. You can't touch the constitutional duties of basic ed, and I'm going to fight like hell that they not cut any more of it, even on the outside edges of it.”
He argued one way to cut overall costs while maintaining constitutionally mandated education spending is by asking counties to provide some of those human services.
“Because you have red areas that don't want to pay more taxes and you have blue areas that sometimes are willing to,” Reykdal said, “you're going to have to start regionalizing some of these opportunities. If 60% of our population lives in four counties and they're willing to do something at the local level, the legislature is going to have to give counties more revenue authority.”
The state Senate’s chief GOP budget writer had a different take.
“Republicans repeatedly warned the majority party that their new budget was like a house of cards built on a shaky foundation,” Sen. Chris Gildon (R-Puyallup) said in a statement. “We showed proof that more reckless overspending would lead to a massive deficit. They wouldn’t listen. This is the result. No one can say it’s a surprise.”
“The answer is to get spending under control,” Gildon said, “and make government live within its means just like Washington families must.”
Some of the first places agency heads can look for potential cuts are newer programs, said outgoing House Appropriations Committee Chair Timm Ormsby (D-Spokane).
“If it was something that was created in the very near past, let's take a look at those things first and get those right-sized, knowing that there could be a significant budget shortfall,” he said.
Other metrics that may play into whether a program keeps its funding include the number of people served and the cost per service model.
Revenue from the so-called “millionaires’ tax” will help the situation, but that money won’t hit state coffers until 2029—and only if the tax survives its legal battles.
Ormsby also said it’s possible the legislature could explore further taxes on the ultra-wealthy.
“Our finance chair, April Berg, has worked really hard over the last couple of years in her time as chair, really right sizing our upside down tax code. And I agree with Chair Berg that those that have the ability to pay should help their fellow Washingtonians as they need services just to be able to go on, carry on with their life,” he told SPR News.
Bringing in more funding isn’t the solution, Gildon argued.
“State spending has doubled in the past decade alone,” Gildon said. “As former Democratic Governor Gregoire recently pointed out, the budget went from $33 billion when she left office in 2013 to over $80 billion now. Even she agrees with Republicans that state government doesn’t have a revenue problem, it has a spending problem.”
Next year will mark the third legislative session in a row where Washington lawmakers have faced a significant deficit.
