The Senate and House released their proposed operating budgets for the 2025-27 biennium on Monday. The state is facing a budget deficit of nearly $13 billion over the next four years, caused by lagging revenue collections and increasing caseloads for state agencies and programs. To address this shortfall, both budgets use a mix of cuts and new revenue.
Both chambers propose spending reductions for the upcoming 2025-27 biennium. For the UW, the Senate proposal includes a 1% across-the-board cut, while the House calls for a 2% reduction. Additionally, both proposals reverse progress made on the University’s “fund split,” which refers to the blend of state and tuition dollars used to fund state employee compensation and central services. The proposals would reduce the state’s share of the split from 60% to 42%. Taken together, these cuts and the reduction to the “fund split” leave the UW with insufficient funds for the employee contracts and cost-of-living adjustments authorized.
To balance the budget, the Senate and House also rely on new revenue sources.
The Senate is considering five revenue measures:
- Financial Intangibles Tax: Imposes a tax on financial assets such as stocks and bonds at a rate of $10 on every $1,000 of assessed value for individuals with more than $50 million of these assets. Generates approximately $4 billion per year starting in fiscal year 2027.
- Employer Payroll Tax: Adds a 5% tax on payroll expenses above the Social Security threshold for companies with $7 million or more in payroll expenses. The proposal echoes Seattle’s “JumpStart” tax and would raise nearly $2.3 billion per year when fully implemented.
- Property Tax: Raises the current 1% cap on property taxes and allows the tax to grow based on population and inflation. Local governments have the option to take a lower growth rate. Generates about $779 million over the next four years.
- Tax Exemptions: Repeals 20 tax exemptions currently in law. Generates over $1 billion in the next four years.
- Sales Tax: Reduces the sales tax by half a percentage point from 6.5% to 6.0%.
In addition, the Senate budget includes a provision granting higher education institutions increased tuition authority to help offset the across-the-board cuts or cover additional state employee compensation costs.
The House proposal includes the following three:
- Property Tax on Intangible Assets: Imposes a property tax of $8 on every $1,000 of assessed value on certain financial intangible assets, such as stocks and bonds, with the first $50 million in assessed value exempt from the tax. Generates approximately $2 million per year beginning in fiscal year 2027.
- Business Taxes: Imposes a 1% Business & Occupation (B&O) tax surcharge on businesses with taxable income over $250 million. Also, increases the surcharge from 1.2% to 1.9% on specific financial institutions with annual net income of $1 billion or more. Generates nearly $600 million in fiscal year 2026 and $2 billion in fiscal year 2027.
- Property Tax: Maintains the 1% cap on property tax growth but allows for increases based on inflation and population changes, not to exceed 3%. The proposal also adjusts the levy equalization methods. Generates about $50 million in fiscal year 2026 and $150 million in fiscal year 2027.
The Senate and House will now collaborate to craft the final 2025-27 operating budget, which must pass both chambers and be sent to the Governor’s desk by the final day of session, April 27.
The 2025-27 capital budget proposals will be unveiled on Monday.
The UW Office of State Relations is working diligently in Olympia to preserve critical funding for the University, where possible, in this challenging budget environment. For questions about the budgets or legislative process, please reach out to Morgan Hickel at mhickel@uw.edu.
For a more in-depth review of the budget proposals, see the UW Finance, Planning & Budgeting’s briefs website.