by Aspen Ford, Washington State Standard
February 19, 2026
Legislation to eliminate a Washington state tax break for large mortgage lenders and use the revenue to partially backfill wildfire prevention programs is making progress in Olympia.
House Democrats passed the bill last Friday, sending it to the Senate. If funding isn’t restored, the Department of Natural Resources says it will cut agency staff and grants for communities dealing with wildfire risks.
Last year, the Legislature cut the wildfire funding in half to help offset a the state budget deficit, effectively breaking a 2021 commitment to provide $500 million over eight years. The state had largely kept up with that funding target until last year. The department received $115 million in the last two-year budget and $130 in the one before that.
“It will have an impact on the upcoming fire season, and even more so in 2027 if we don’t get additional funding,” said Pat Sullivan, director of governmental and external affairs for the Department of Natural Resources.
House Bill 2089, sponsored by socialist Rep. Shaun Scott, of Seattle, would eliminate a tax break for high-volume mortgage lenders. Eliminating the break is estimated to yield around $20 million a year — less than half of what the Legislature cut from the wildfire account last year.
In 2021, the Legislature passed a tax deduction for the interest received by community banks on first mortgages. But in 2024, the Department of Revenue found that 65% of the tax savings went to “placeless financial institutions,” according to the bill.
Scott said his bill narrows eligibility requirements by eliminating the tax deduction for lenders that issue $10 billion or more a year in mortgages. Institutions like Rocket Mortgage, for example, would lose the tax break, he added.
“The connection between these two issues is that … these large financial institutions that tend to conduct a lot more of their business virtually or digitally — those transactions are going through data centers,” Scott told the Standard. “Data centers that gobble up large plots of deforested lands and lots of water, that exacerbate climatic warming trends.”
The bill says it is intended to save the state on costs tied to wildfires, such as wrecked infrastructure, insurance claims and adverse health outcomes.
Securing the funding is a top priority for the Department of Natural Resources in this year’s legislative session.
Sullivan testified in support of Scott’s bill on behalf of the agency.
The Department of Natural Resources says that preparing for and putting out wildfires is a core government responsibility. It is waiting to see if lawmakers’ budget proposals will include funding to make up for last year’s cuts, using the tax change proposed in Scott’s bill or other dollars.
Democrats in the House and Senate are expected to release budget legislation next week.
Lands Commissioner Dave Upthegrove has previously urged lawmakers to tap a state account for climate-related programs to come up with the wildfire money.
If the funding isn’t restored this year, the agency will have to start slashing resources.
According to the department, it could lose up to 21 full-time staff positions, have nearly 50 fewer firefighters during the upcoming season, eliminate 90% of first-responder grants and end a contract with Pano AI, a network of smoke-detecting cameras.
The agency also uses the money to award grants to communities prone to wildfires. The grants can help pay for equipment like fire engines, backhoes and tractors in jurisdictions that can’t afford them, Sullivan said.
Those on the east side of the state “live and experience wildfires,” but “there’s a growing risk on the west side as we saw with the Bear Gulch fire,” Sullivan added.
“With climate change, I think you’re going to continue to see bigger and worse fires here on the west side,” he added.
Brad Tower, lobbyist for the Community Bankers of Washington, said his organization can’t support a new tax where “we don’t see the connection between the tax and the beneficiary.”
“Wildfire mitigation is an important thing, but I don’t see why you’re taxing first mortgages, homeownership, necessarily to pay for that,” Tower told the Standard. “We’re neutral on it.”
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