The Economic and Revenue Forecast Council met on June 10 to review the latest Economic Review and adopt a new budget outlook. The Council includes members of the Washington State Legislature’s budget cabinet, along with Treasurer Mike Pellicciotti, Department of Revenue Director Drew Shirk, and Office of Financial Management Director K.D. Chapman See.
Governor Ferguson signed the state budget into law on May 20 and warned that Washington’s fiscal challenges are likely far from over. Lawmakers, agencies, and stakeholders now await the final budget outlook, scheduled for release on June 24. The next outlook will help clarify the supplemental budget environment ahead of the 2026 legislative session.
Council Adopts Budget Outlook Assuming No New Growth
During the meeting, Council staff presented two versions of the budget outlook for the recently adopted 2025–27 biennial budget. One version assuming 4.5% revenue growth and the other assumed no new growth. The Council voted to adopt the version that assumes no new growth, which projects a $291 million net reduction in Fiscal Year 2028 compared to earlier budget assumptions.
Council members also spent significant time discussing tort liability, which could cost the state between $500 million and $1 billion over four years. A recent article from The Seattle Times raised concerns about the absence of funding to cover growing liabilities amid ongoing litigation. Senator Gildon and Representative Orcutt urged the Council to reflect this liability in future budget outlooks. While the Department of Enterprise Services manages a self-insurance liability account to cover such costs, that account operates separately from the general fund and does not factor into the current forecast. Treasurer Pellicciotti and Director Chapman See acknowledged the growing liability, emphasizing that the Legislature must address it even though it lies outside the formal revenue forecast.
The economic forecast also painted a more cautious picture than what the Council projected in March. Since then, revenue collections have fallen $34.9 million, or 0.8%, below expectations, driven largely by continued uncertainty in federal trade and fiscal policy. Although job openings have returned to pre-pandemic levels and stabilized, the state continues to see slow activity in residential construction due to labor shortages and financing difficulties. Seattle’s housing market continues to grow at a modest pace (4.2%), and while personal income levels have risen statewide, growth remains slower than anticipated earlier this year.
What’s Ahead?
The Council will receive the final June revenue forecast on June 24. In the meantime, Governor Ferguson has directed state agencies to review their budgets. Agencies must plan for reductions, prioritize only emergent needs, and prepare for continued contracting and hiring freezes. The Governor has also asked agencies to monitor caseloads closely and submit decision packages for the 2026 supplemental budget by September 15.
Be Prepared
More fiscal challenges are likely ahead for Washington. For more information, view the Washington State Standard’s coverage or review the Economic and Revenue Forecast Council’s adopted outlook. If you’re navigating state policy through uncertain economic times, make sure to retain your Olympia lobbyist early ahead of the 2026 session.