Gov. Bob Ferguson signs into law a state operating budget with more taxes
Gov. Bob Ferguson kept Washington guessing for weeks: Would he sign state lawmakers’ final $78 billion operating budget, or wouldn’t he?
May 20 finally brought answers — even if they didn’t make everyone happy.
Ferguson ultimately green lit the budget and a suite of new tax legislation, opting against vetoing much of what lawmakers delivered to his desk.
The Democrat emphasized that it wasn’t the budget that he would have written. But, Ferguson said, he had to work with the hand he was dealt.
“Inheriting a $16 billion budget shortfall was not the way I wanted to start as governor,” Ferguson said May 20 in the Governor’s Conference Room. “I feel that we worked hard to adopt a balanced approach that preserves core programs for Washingtonians.”
May 20 was the deadline for Ferguson to approve, veto or partially veto the operating budget that had to contend with a significant gap between spending and revenue.
Estimates of the size of that gap have varied wildly. Ferguson’s office put it at $16 billion, Senate Democrats at $12 billion and Senate Republicans at $7.5 billion following the March revenue forecast.
The governor at times locked horns with the state’s budget writers, who’d wanted to impose a new “wealth tax” on Washington’s richest residents. After Ferguson shot down that idea, lawmakers floated a new set of tax plans.
But the governor still wasn’t fully happy. He called that tax package too much of a risk as President Donald Trump’s administration pursues sweeping cuts to federal funding, programs and jobs.
For the past several weeks, Ferguson kept his cards close to the vest on where he’d land with Democrats’ final budget deal, approved on the final day of the 2025 legislative session. The governor said in an April 27 statement that he planned to go through the proposal “line by line” in the coming weeks.
He apparently kept true to that vow.
Here’s what Ferguson said upon signing.
New Washington taxes
Ferguson signed multiple new tax proposals into law on May 20, including:
House Bill 2077, nicknamed the “Tesla tax,” this legislation imposes an excise tax on the sale and banking of excess zero-emission vehicle credits. Critics have condemned the bill as targeting one car manufacturer in particular: Tesla, which is helmed by Elon Musk, a top Trump administration confidante.
Senate Bill 5813 enacts changes to the state’s capital gains and estate taxes to make them more progressive.
SB 5814 places a sales tax on particular services, such as various IT and temporary-staffing services, and subjects nicotine products like Zyn to the tax on other tobacco products.
SB 5794 nixes certain B&O tax exemptions, a move that Ferguson said will help create revenue needed to fill the budget hole. He did, however, veto a portion of the legislation that repeals a mortgage-interest deduction for community banks, noting that such banks need to stay competitive with larger lending institutions. The move will help preserve loan access for homebuyers in a difficult housing market, Ferguson said.
HB 2081 imposes new business and occupation taxes and boosts existing B&O tax rates in the state, despite businesses urging Ferguson to refrain from raising taxes on business.
Ferguson noted that hiking rates is always a difficult choice but said the bill would generate the revenue needed to balance the state’s budget and back public schools, social services, health care and more.
“We intend to continue discussing these tax increases with the Legislature and business community over the interim,” he continued.
He also said that he’ll be working until the next legislative session to make sure the revenue bills don’t have unintended consequences.
“So I would not be surprised if you see some changes, beyond technical changes, to those revenue streams in the supplemental budget,” Ferguson said.
Furloughs for WA public employees?
Ferguson previously suggested furloughing most state employees one day a month for two years to help save money. Those workers weren’t too pleased with the pay-cut idea.
Although Senate Democrats had also mulled furloughing state workers up to 13 working days, furloughs weren’t included in the final budget deal.
Asked about how he felt that lawmakers didn’t take up his idea, Ferguson explained that he doesn’t get to write the budget himself.
“I was under no illusion that (lawmakers) would accept every single thing that I proposed, obviously,” he said on May 20. “We have co-equal branches of government, right? This is a give-and-take process.”
Still, Ferguson said he deeply appreciates that lawmakers adopted most of his proposed reductions, which approached close to $4 billion.
Ferguson further acknowledged lawmakers’ work in bringing their initial idea of $21 billion in taxes down to roughly $9 billion over four years.
The Washington Federation of State Employees celebrated Ferguson’s signing as a victory. Public employees noted the budget’s inclusion of WFSE raises, the absence of furloughs and preservation of two state facilities for developmentally disabled Washingtonians.
“This win was made possible by the determined voices of WFSE members who want to continue to provide essential services that are enjoyed by all Washingtonians,” WFSE President Mike Yestramski said in a statement.
Response to Ferguson’s budget
Ferguson touted other political budget-wins on May 20.
The governor had long asked lawmakers to use “realistic revenue projections,” preserve the state’s rainy-day reserves, find billions of dollars in efficiencies and create a $100 million grant program to hire more law enforcement officers.
Other legislation delivered to his desk include increased investments in affordable housing and K-12 education.
“The budgets I signed today accomplish those goals,” Ferguson said, adding that core services will also be preserved.
Invest in Washington Now, a group that advocates for progressive revenue, said it was happy to see that Ferguson rejected more cuts. Executive Director Treasure Mackley said that thanks to the advocacy of Washingtonians, critical services were preserved.
“Too often lost in these discussions is that every dollar spent on services like education, child care, housing, and health care, has an impact on peoples’ lives,” Mackley continued. “These are not just numbers on a spreadsheet.”
Republicans, meanwhile, warned throughout session that many of the majority party’s proposals would hit working Washingtonians’ wallets. One legislator derided such taxes as a “full body slam on blue-collar joy.”
Following the May 20 signing, Republican leaders alleged that Ferguson had gone back on his promises to prioritize affordability.
Senate Minority Leader John Braun said in a statement that since day one, Ferguson has heralded fiscal responsibility. Yet the governor signed the largest tax spike in the history of the state, Braun said, calling that “disappointing.”
Senate Deputy Republican Leader Drew MacEwen blasted Ferguson’s budget-signing as a “fiscally irresponsible betrayal of taxpayers.”
And state Rep. Travis Couture, the House Republican budget lead, accused the governor of agreeing to a “reckless spending spree.” The Allyn Republican said in a news release that the path has been paved for working families to feel the fiscal effects.
“Ultimately, the governor folded to his party and signed off on an irresponsible and unsustainable plan,” Couture said. “Washington taxpayers will pay the price.”
Ferguson said on May 20 that he hears and understands the concerns of Washingtonians who are worried about what the tax hikes might mean for them. The budget preserves core programs, services and benefits in Washington, such as financial support for kids going to college, he said.
In addition, he referred to changes in how lawmakers do their budgeting, including basing the budget on the actual revenue forecast instead of the 4.5% allowed by law.
And Ferguson made clear that he didn’t want lawmakers to touch the state’s Rainy Day Fund. The economy, he said, could go south.
That reserve fund, he said, “will be really critical for us as we face challenges from the federal government that loom for us in our future.”
On Wednesday at noon, the governor is scheduled to deliver a press conference related to Trump’s tariffs on global trade.
This story was originally published May 21, 2025 at 5:00 AM with the headline "Gov. Bob Ferguson signs into law a state operating budget with more taxes."
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