Washington state budget writers finally got some rosy news on Feb. 16 as they prepare to release their spending plans.

Revenue collections are predicted to increase $827 million in the current two-year budget compared to expectations from November, according to a forecast from the state’s Economic and Revenue Forecast Council. This 1.1% increase reflects early proceeds from the slate of tax increases the Legislature approved last year.

The latest forecast means projected collections for the current biennium are up $438 million from the numbers lawmakers used to craft the state budget last spring. This puts total revenue expectations at $75.3 billion.

Sen. June Robinson, the Democrats’ chief Senate budget writer, called it “absolutely good news.”

These are the final estimates lawmakers will get as they craft a supplemental budget, building off the $77.8 billion two-year spending plan they passed last year. Democratic lawmakers in the House and Senate are expected to release their budget proposals Feb. 23, said Robinson. 

“It makes our week a little easier,” said Robinson, noting lawmakers still have “a lot of moving parts” in crafting their proposals.

After budget legislation is released, lawmakers will have to hammer out further details and resolve differences between each chamber’s version. The legislative session is scheduled to adjourn March 12. 

Lawmakers are working off a framework Gov. Bob Ferguson announced in December. 

The Democratic governor proposed tapping Washington’s rainy-day fund, cutting $800 million in spending and shifting nearly $600 million from the state’s carbon auctions to pay for tax credits for low- and moderate-income families.

He has been warning of a $2.3 billion budget hole the state needed to fill. State spending to deal with expenses from the “big, beautiful bill” congressional Republicans passed last year made up some of that shortfall.

The governor’s budget director said, despite the good news on Feb. 16, “We are still in a challenging period as costs to maintain current state service levels are increasing, as are caseloads for essential programs families rely on.”

“But this forecast will hopefully relieve some pressure as the Legislature works to finalize and pass the supplemental budget,” K.D. Chapman-See said in a statement.

On social media, Ferguson agreed “we still have a budget challenge in front of us.”

“I look forward to continuing to work with the legislature to deliver a responsible, balanced budget,” he wrote.

The response to Ferguson’s plan to balance the budget, which included no tax increases besides the elimination of a couple tax breaks, was heavily negative, especially after billions of dollars in spending cuts passed last year. 

Ferguson proposed funding reductions for state services, including closing enrollment for the Working Connections Child Care program, cutting spending for the state’s higher education institutions and halting planned increases in state funding for struggling school districts. 

And environmentalists see the redirecting of Climate Commitment Act dollars as a de facto cut to climate spending. 

Democrats in the Legislature have been less keen on the idea of an all-cuts budget with no new revenue. 

Senators on Feb. 16 passed an income tax on million-dollar earners, but even if that withstands legal and ballot challenges, it would be years before the proceeds hit state coffers. 

More immediately, lawmakers have floated increasing tobacco taxes to raise some money to fill the projected shortfall. 

But senators that same day also voted to roll back sales taxes on services that lawmakers adopted last year. That proposed change was attached to the income tax bill. In addition, the Senate was set to consider a bill to drop estate tax hikes approved last year.

Whether the better-than-expected revenue changes majority Democrats’ calculus around tax policy remains an open question.

The income tax proposal includes a so-called “necessity clause” that says it’s necessary to support state government, despite its long implementation timeline. In Senate floor debate on the bill on Feb. 16, Minority Leader John Braun, R-Centralia, said the new revenue projection “more than obviates the need” for this provision.

The latest estimates add to a mild dose of good news the state got from the previous forecast in November, which showed revenue projections up $105 million. But even that little expected growth was expected to be offset by worse receipts in the next fiscal cycle. 

Looking forward to the 2027-29 budget period, Reich projected a more than $1 billion, or 1.3%, increase in revenue from the November forecast, pushing total expected collections for that biennium over $80 billion. 

Employment in the state grew just 0.3% in 2025, according to preliminary data. 

Inflation, personal income and gross domestic product also appeared to increase slower than in past years. But taxable sales grew through the first three quarters of 2025, a good sign for the state’s finances as these proceeds fuel much of the budget. 

Income and employment growth are expected to be stronger than predicted in November.

The next forecast is scheduled for June.

This story is republished from the Washington State Standard, a nonprofit, nonpartisan news outlet that provides original reporting, analysis and commentary on Washington state government and politics.