Warning lights continue to flash red for Washington’s economy.

Employers are becoming more pessimistic about the state economy and increasingly looking outside Washington to expand. At this pivotal moment, Washington needs a long-term economic development plan that gives employers the confidence to invest, grow and build their future here.

In the latest statewide employer survey by the Association of Washington Business, just 10% of employers say the state economy is strong, while nearly four in 10 (38%) describe it as weak – up from 26% a year ago. Employer confidence in the state economy has steadily declined over the past few years.

Last quarter, the AWB survey showed a dramatic spike in relocation interest, with one in four respondents planning to move their business to another state. The finding generated headlines throughout the country, sparking discussion about the direction of the state’s economy. In the new survey, that number fell to 16%, but remains well above 11% a year ago.

It’s not surprising to see those numbers come down. While the initial shock over the state’s new income tax has faded, a growing number of businesses are still seriously considering relocation. Many employers considering a move are further along in the process, actively researching locations or developing relocation plans.

Employers are also eyeing other states to expand. One-third plan to expand outside Washington, compared with just 14% planning to expand here.

Washington’s tax and regulatory environment is the main reason employers are looking elsewhere. Seventy-one percent say taxes are a key challenge, up from 57% last summer. The number has continued to grow since the Legislature passed a record $9.4 billion tax package in 2025 and followed it up with a new income tax in March. Government regulations, healthcare costs, inflation and fuel costs also top the list of concerns.

There are some encouraging signs. More employers report that their businesses are growing, more expect to add employees over the next six months, and fewer anticipate a recession. But the long-term decline in confidence in the state economy – and heightened interest in relocating to other states or expanding elsewhere – should be a wake-up call for policymakers and elected leaders.

So, what can we do to change course? In July, AWB and the Washington Roundtable convened a group of policymakers and business leaders to answer the question: How do we make Washington a place where businesses can start, grow and expand with confidence?

Several themes emerged throughout the day. Former Gov. Gary Locke called for more budget discipline in Olympia, warning against relying on overly optimistic revenue forecasts that lead to a cycle of budget deficits and pressure for higher taxes. Former Gov. Christine Gregoire shared a similar message a few months ago at AWB’s Spring Summit. It was powerful to hear two former governors speak up about this issue.

Locke outlined practical ideas, including returning to results-based budgeting and ending the use of one-time funds for ongoing programs. Summit attendees echoed those priorities, calling for sustainable budgeting, a predictable tax environment and streamlining regulations. Boring stuff, really – or at least it should be. Unfortunately, these are ideas that have fallen out of fashion in Washington. A report this fall will outline specific actions and recommendations.

Washington's economy has been built on a solid foundation of low-cost power, a competitive tax climate and our highly skilled workforce. That foundation took decades to build, and it’s now at risk – as the state’s new income tax and rising relocation interest make clear. We need a plan to preserve it and grow the economy for future generations.

Kris Johnson is president of the Association of Washington Business, the state’s chamber of commerce and manufacturers association.