News & Updates

Washington state is once again expected to face a budget deficit going into legislative session.

The Washington State Economic and Revenue Forecast Council’s September 2025 revenue forecast projects that state revenue will decrease by $903 million over the next four years from the June forecast. Washington uses a four-year projection because the budget must be balanced over that period.

For the current two-year state budget (2025-27), revenue estimates have declined by $412 million since June, bringing the total projected revenue decrease to more than $500 million.

The decline in revenue is largely attributed to lagging sales and real estate excise taxes, tariffs and trade controls, inflation, and a weaker-than-expected labor market.

As a reminder, during the 2025 legislative session, Washington faced a $12 to $16 billion budget shortfall. In response, the state approved $9 billion in new revenue and reduced spending. Among the cuts was a 1.5% across-the-board reduction to UW’s base funding and a decrease to the state’s share of UW’s “fund split,” which is the mix of state funding and tuition that supports employee compensation and central services.

The 2026 legislative session begins January 12, during which the state’s supplemental budgets will be decided. Washington operates on a two-year budget cycle, with biennial budgets passed in odd-numbered years (2025) and supplemental budgets decided in even-numbered years (2026). Supplemental budgets are intended to adjust or make corrections to the biennial budgets passed during the previous session. Before the final 2026 supplemental budgets are determined, the state will receive two more revenue forecasts—one in November and another in February—that will help guide budget decisions.

Given the challenging fiscal outlook for 2026, the UW did not submit any new operating budget requests and will instead focus its 2026 advocacy efforts on mitigating potential budget cuts. The UW submitted its budget priorities to the state earlier this month, as required by law. The University’s 2026 legislative agenda will be released later this Fall.

For questions about the state’s fiscal outlook or UW’s legislative priorities, please contact Morgan Hickel at mhickel@uw.edu.

Last week, UW submitted its 2026 operating and capital budget requests—known as “decision packages”— to the Washington State Office of Financial Management (OFM). As a public state agency, UW is required by law to submit these requests each September to help inform the state’s budget development process. These requests also shape the University’s legislative agenda.

Understanding the State Budget Process

Washington state operates on a two-year budget cycle, with the biennial operating, capital, and transportation budgets adopted in odd-numbered years (e.g., 2025). In even-numbered years (e.g., 2026), the state adopts supplemental budgets, which apply technical corrections or make adjustments to the adopted biennial budgets based on caseload changes, new fiscal conditions, or other emerging needs.

The Governor kicks off the state’s budget process by releasing proposed budgets in early- or mid-December. This timeline is why public agencies must submit their decision packages in September for consideration. The Governor’s budget proposals then serve as a starting point for legislative budget negotiations during session, which begins in January.

Looking Ahead to the 2026 Legislative Session

The 2026 legislative session will begin on January 12 and run for 60 consecutive days. During this time, lawmakers will decide the 2026 supplemental budgets before sending them to the Governor for his approval or veto. For context, sessions during which the biennial budgets are decided run for 105 consecutive days.

This year, Washington is projected to face another operating budget deficit. For context, the state faced a significant budget shortfall during the 2025 legislative session and addressed it through a mix of new revenue and spending reductions in the final 2025-27 budget. Given the challenging fiscal outlook for 2026, UW has not submitted any new operating budget requests. Instead, the University will focus its advocacy efforts on mitigating potential budget cuts and their impact to the UW’s education, research, and public service missions.

For the supplemental capital budget, the UW is requesting $47.5 million for the first phase of major decarbonization efforts for the Power Plant on the Seattle campus. This “proof of concept” project will deliver immediate reductions in greenhouse gas emissions and support the University’s path the compliance with the state’s Clean Building Performance Standards and decarbonization requirements.

What’s Next?

The UW’s 2026 legislative agenda will be posted to this website later this fall. In the meantime, the Office of State Relations is actively preparing for the 2026 legislative session in coordination with campus partners and key stakeholders. For questions about the UW’s state priorities or advocacy efforts, please contact Morgan Hickel at mhickel@uw.edu.

Yesterday, Governor Bob Ferguson signed into law the state’s 2025-27 operating, capital, and transportations budgets—just before the deadline to take action. By law, he was required to either approve the budgets, issue partial vetoes, or reject them in full no later than May 20.

The final two-year operating budget totals nearly $78 billion and is balanced through a combination of spending reductions and new revenue measures. These include increases to business taxes for various industries, an expansion of the sales tax to cover additional services, and a higher capital gains tax and estate taxes. Several business tax exemptions were also eliminated. While Gov. Ferguson did veto a number of sections in the budget, the resulting savings of about $25 million represents a small portion of the overall budget.

In addition to the operating budget, Gov. Ferguson signed the capital budget totaling more than $7 billion and the transportation budget totaling just over $15 billion. The transportation budget is funded in part by a gas tax increase that takes effect July 1.

In recent weeks, the Governor has also signed hundreds of bills into law, including several that were requested by the UW or UW Medicine, such as:

• Senate Bill (SB) 5239 concerns retention of hospital medical records.
• SB 5355 improves safety at institutions of higher education while supporting student survivors of sexual assault.
• House Bill (HB) 1755 exempts elective percutaneous coronary intervention performed in certain hospitals owned or operated by a state entity from certificate of need requirements.
• HB 1552 extends the fee on real estate broker licenses to fund the Washington center for real estate research and adjusts the fee to account for inflation.

For more information about this legislative session and the budget outcomes, see the session review posted in the News & Updates section of this website.

Questions?

The Office of State Relations was in Olympia every day throughout session advocating on behalf of the UW. For questions about the state legislative process or the UW’s advocacy efforts, please contact Morgan Hickel at mhickel@uw.edu.

The 2025 legislative session adjourned on time yesterday following the passage of the state’s 2025-27 operating, capital, and transportation budgets. Washington state operates on a two-year budget cycle, with the biennial budgets adopted during long 105-day sessions held in odd-numbered years.

This year, the state faced a significant operating budget deficit due to lower-than-expected tax collections and increased caseloads for state programs and agencies. To close the gap, legislators adopted a final compromise budget that includes a combination of new revenue and spending reductions.

The transportation budget also faced a shortfall, which was addressed through a bipartisan revenue package.

With session now concluded, the budgets have been sent to the Governor, who may sign them into law, veto them in full, or issue partial vetoes.

Operating Budget

For the UW, the final operating budget is an overall improvement compared to the earlier proposals from the House and Senate, but it still includes some difficult reductions. Like nearly all state agencies and programs, the UW will bear some of the burden during this difficult fiscal period.

The budget includes a 1.5% across-the-board reduction to UW’s base funding—an amount that splits the difference between the 2% cut proposed by the House and the 1% cut from the Senate. It also reduces the state’s share of the UW’s “fund split,” which is the mix of state funding and tuition used for employee compensation and central services. These reductions applied to all of the state’s public four-year and two-year higher education institutions. Fund splits still vary by institution.

Notably, the final budget does not include state employee furloughs or other cost-saving measures that had been in the House and Senate proposals. These omissions helped avoid deeper cuts to the UW’s overall budget.

However, most of the University’s legislative priorities were not funded. Given the state’s budget constraints, lawmakers had little appetite for supporting new initiatives or funding requests.

Regarding the Washington College Grant, the state’s flagship financial aid program, maximum awards will be provided to students attending public institutions with family incomes up to 60% of the state median family income (MFI). Preserving this commitment helps maintain access to the UW for Washington students.

Capital Budget

The 2025-27 capital budget includes a number of UW-related investments:

• $124M for the the construction of chemical sciences facilities and modernization of Bagley Hall on the Seattle campus. This was the UW’s top capital request.
• $3.9M (UW Building Account) for Phase 3 of UW Tacoma’s power infrastructure repairs.
• $1.7M for improvements to the UW’s soccer practice fields ahead of the 2026 FIFA World Cup.
• $8.05M via the Department of Commerce for the UW Sunbreak Tower affordable housing project.
• $3.25M via the Department of Commerce for the UW Medicine Airlift Northwest hangar in Chelan.

However, the budget does not include funding for decarbonization projects on the Seattle campus. The University requested funding from the Climate Commitment Account (CCA) for the first 10 projects outlined in its five-part energy decarbonization strategy. Due to limited CCA funds, lawmakers generally prioritized completing existing state projects rather than funding new ones.

Transportation Budget

The UW typically has more limited engagement with the transportation budget but this year, requested accelerated funding for access, safety, and efficiency improvements to the Burke-Gilman Trail on or near the Seattle campus. The final transportation budget fulfills this request, allocating $9.4 million in 2025-27 and $6.6 million in 2027-29.

The budget also includes funding for the UW’s sidewalk inventory and accessibility mapping project, the WSDOT-UW professional civil engineering master’s degree fellowship program, a SR 520 noise reduction study, and the UW Mobility Innovation Center.

Questions?

Throughout the session, the UW Office of State Relations has advocated on behalf of the University in Olympia, working to mitigate budget reductions where possible during this very challenging budget year. For questions about the session outcomes, please contact Morgan Hickel at mhickel@uw.edu.

A detailed summary of the UW’s portion of the 2025-27 operating, capital, and transportation budgets will be available in the coming days on the UW Finance, Planning & Budgeting website here.