PUYALLUP… Despite an unexpected infusion of money from the state’s capital-gains income tax, Olympia remains on track for yet another multibillion-dollar budget shortfall as it moves into the second half of the current budget cycle.
The second of the state’s four quarterly revenue forecasts for 2026 was adopted today by Sen. Chris Gildon, R-Puyallup, and other members of the state Economic and Revenue Forecast Council.
Compared to the first-quarter forecast, the state’s chief economist is now predicting revenue will be noticeably higher due to the increased capital-gains tax collection – but that doesn’t tell the full story, cautioned Gildon, who is budget leader for Senate Republicans.
He offered this reaction:
“The capital-gains tax is volatile, so this is a lucky break for the majority as it saves their budget from going into negative territory before it takes effect next week. But once you factor in the predicted drop in other ongoing revenues, the net increase is around $554 million for the remainder of the current biennium. That doesn’t change the recent prediction from the governor’s budget office that legislators will face the third multibillion-dollar shortfall in three years, in spite of record-breaking tax increases.
“The situation is still bleak, and it’s all due to the majority’s chronic overspending. The state economy is not going to suddenly catch fire and bail Olympia out. Our unemployment rate is second-worst in the nation and job growth is expected to be slow. There are still more new and higher taxes coming for both families and employers. You don’t make living here more affordable by continuing to make it more expensive.
“The governor says he won’t propose new taxes as a way out of this budget hole. Conveniently enough, state law already requires this of him. The taxpayers deserve better – a commitment that he will veto any tax increases that reach his desk. That would be a meaningful step toward restoring the fiscal discipline and sanity that hasn’t been seen in state government for almost a decade.
“There is nothing magic about dealing with a massive budget shortfall. Senate Republicans proved it in 2025 with our ‘$ave Washington’ plan – no new taxes, no cuts to existing services, no touching the ‘rainy day’ fund and no outspending the available revenue. But the majority said no to that responsible approach twice – and here we are, with another shortfall. The solution is for the majority Democrats to get spending under control, but they don’t seem able.”
Today’s forecast puts revenue for the 2025-27 budget cycle at $76.2 billion – still less than the $80.2 billion budget that takes effect July 1, which was balanced through raiding reserves and a pension for law enforcement officers and firefighters. The forecast for the 2027-29 budget cycle is now at $82.1 billion.