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Panelists warn of boom-and-bust budget cycle, low reserves and business‑tax concentration
Summary
Panelists said Washington’s budget has expanded rapidly, with businesses and top earners funding a large share of revenue; they flagged a low rainy‑day fund, volatile high‑earner receipts and examples where tax changes altered siting decisions for major projects.
At a Bellevue forum moderated by Joe Fain, panelists spent significant time on the broader state budget and how recent tax changes interact with long-term fiscal stability.
Ryan Frost, director of budget and tax policy at the Washington Policy Center, said the state has historically had one of the most stable revenue bases but recent policies and targeted taxes have made forecasting and budgeting more volatile. "The number 1 state for budget stability over the last 5 years is Washington," he said while warning that moving toward top‑earner‑targeted revenue mixes risks increasing volatility comparable to states that rely on high‑income tax receipts.
Panelists agreed that business taxes form a large share of Washington revenue. Frost said post‑session figures put business and the top earners together funding roughly 88% of revenue, with business now about 53% after recent B&O changes. That concentration, panelists argued, limits where to look for additional revenue and increases sensitivity to business location decisions.
Frost also highlighted reserve concerns: after recent withdrawals, the state’s rainy‑day fund was described as covering only "12 days" of operating expenses, and he projected a potential $7–$10 billion shortfall for the 2027–29 budget cycle without policy changes. Representative Larry Springer urged restraint on automatic spending increases in good years and said he sees recurring boom‑and‑bust cycles driven by one‑time federal infusions and subsequent ongoing obligations.
Panelists gave concrete examples where tax changes changed investment choices. Springer said the legislature’s decision to remove a sales‑tax exemption for data‑center equipment prompted at least one operator to move a new build and associated jobs to Portland instead of Washington.
Panelists proposed several corrective approaches in broad terms: reducing growth in recurring spending during good years, coupling new progressive levies with reductions in regressive taxes, and reconsidering business tax design to avoid incentives that push investment out of state. No formal recommendations or votes were taken.
The panel closed by urging careful policy design to balance revenue needs, economic competitiveness and program accountability.
