Legislative Session Final Report

By Jim Hedrick, GSI WA State Lobbyist and Spokane Regional Advocate

2026 Legislative Session

The session ended on time, with the legislature adjourning “sine die” around 8:30pm on Thursday, March 12^th. Democrats continued to control the agenda in Olympia with majorities of 60 percent in both the House (59-39) and Senate (30-19). These large majorities enabled the Democrats to pass bills without needing the votes of every single member of their caucus, a dynamic which played out frequently on votes related to revenue and policy bills that divided opinion.

Between now and April 4th, the Governor will review bills passed by the legislature and choose one of four options: 1) sign the bill into law, 2) veto the entire bill, 3) partially veto the bill by removing entire sections (the Governor does not have “line-item veto” authority, meaning removing sentences or words is not allowed) or 4) take no action, and allow the bill to become law without signature. This year, 1,205 policy bills were introduced, and 268 bills passed the legislature and have now been sent to the Governor to be signed into law. In addition, more than 1,000 bills from the 2025 session were eligible for additional consideration this year. As a reminder, during the two-year biennium, all bills that do not pass during the 105-day session, are technically alive again for the 60-day session. Many did not advance but some were revised over the interim to improve their chances of passing.

Policy Bills Introduced & Passed

Income “Millionaire’s” Tax – SB 6346

The 2026 Legislature passed SB 6346, establishing a state-level income tax on high earners.

This proposal would impose a 9.9% tax on personal income over $1 million, potentially generating roughly $3.7 billion annually for the state. Supporters argue it makes the tax code more equitable and better funds education and public services; opponents worry it could drive investment and wealthy residents out of the state. Governor Ferguson has indicated he intends to sign the bill.

Trade-offs – Other than impose a 9.9% tax on individuals on the receipt of income exceeding $1 million beginning in calendar year 2028, SB 6346 also:

• Expands eligibility for the Working Families Tax Credit to include persons who are at least 18 years of age and who meet other eligibility requirements for the preference.
• Increases the business and occupation (B&O) tax credit for small businesses by increasing the B&O tax return filing threshold to $250,000.
• Provides a sales and use tax exemption for grooming and hygiene products.
• Expires the 0.5% B&O surcharge on businesses with gross income in excess of $250 million a year.
• Repeals the 0.5% B&O tax surcharge on health care providers.
• Repeals sales taxes on certain specified services, which were enacted in 2025 in ESSB 5814.
• Exempts the individual income tax from a statutory prohibition on state and local income taxes. 

SB 6346 raises significant questions about the Washington’s constitutional framework, tax equity, and the potential future of income taxation in the state. Most notably, the bill applies the same $1 million deduction to both single filers and married couples. The bill also establishes a formal income tax framework within Washington State law. This represents a significant structural development given the state’s long history without a broad-based income tax and the body of Washington court precedent interpreting income as property subject to uniform taxation requirements.

Washington has historically operated without a broad-based income tax throughout its history, and voters have rejected income tax measures at the ballot box on multiple occasions. SB 6346’s narrow focus on income above $1 million appears designed to address the constitutional considerations that have historically limited income tax proposals in the state, while establishing a framework that future legislatures could potentially expand or modify.

Washington is not alone in this approach. Massachusetts enacted a 4% surtax on income above $1 million in 2022, and states such as California and New Jersey have long maintained elevated marginal rates on high-income earners. If enacted, Washington’s proposed 9.9% rate would place it among the higher millionaire tax rates in the nation.

SB 6346 would represent a significant shift in Washington State’s tax landscape, with direct implications for high-income individuals, business owners, and investors across the region. Key planning considerations include how the new tax would interact with existing federal and state tax obligations, whether current business structures and compensation arrangements remain optimal, and how the marriage-penalty provision may affect filing decisions for joint filers.

Legal challenges to the bill are widely anticipated, meaning the situation could continue to evolve even after the governor signs the legislation.

Data Centers – SB 6231 Repeal of Tax Exemptions

Much of the afternoon and evening on the last day of session was consumed by negotiations over and ultimately floor action on SB 6231 (Frame, D-Seattle), legislation repealing a tax exemption for certain data centers, including the large facilities located in Quincy. The proposal drew fierce opposition from Republicans who argued the change would harm economic development in rural areas and undermine commitments previously made to local communities. The stakes were heightened because the operating budget relied on the roughly $63 million in revenue expected from eliminating the exemption.

Some lawmakers openly speculated that failure to pass the bill could force the governor to call a special session in order to rebalance the budget. In the end, however, SB 6231 cleared the Legislature, and the operating budget that depended on the revenue passed as well, allowing the session to conclude on schedule. In the end, Democrat Representatives Richards (D-Gig Harbor), Rule (D-Bellingham), Scott, (D-Seattle), Shavers (D-Oak Harbor), and Walen (D-Kirkland) joined Republicans in voting against 6231.

2026 Supplemental Operating Budget – The state’s $79.4 billion operating budget relies heavily on one-time fixes, reserve funds, and cuts to keep the current spending plan balanced through the end of the biennium. The budget withdraws hundreds of millions from the state’s rainy-day fund, shifts money from other accounts, and trims spending in several programs, including reductions tied to child-care subsidies and delays or cancellations of planned expansions. Lawmakers also set aside roughly $1 billion to cover rising legal obligations facing the state, one of the fastest-growing pressures on the budget. Democratic leaders said the approach avoids deeper reductions to core services but acknowledged it depends on temporary solutions rather than long-term revenue, while Republicans criticized the plan as budget gimmickry that postpones tougher decisions. 

Balancing the budget required $880 million in transfers from the Budget Stabilization Account (rainy-day fund), $766.5 million in reversions (i.e. money not spent ) and expenditure savings and $394.6 million from changes to the distribution of the capital gains tax (lowered rate to 20%). Even with those steps, the budget finishes the biennium with a $231 million NGF-O ending balance and $1.3 billion in total reserves, including roughly $1.0 billion remaining in the rainy-day fund, a relatively thin margin by Olympia standards.

This budget balances today, but future spending plans assume significant new revenue beginning in the next biennium, setting up a major fiscal debate heading into the 2027 session.

Spokane Operating – ADO Funding. The Legislature reduced the formula allocation to Associate Development Organizations (ADOs). ADO’s are designated in each county to coordinate business recruitment, retention, and expansion within their service area. GSI is the designated ADO for Spokane County. The budget reduction is an additional $152,000, lowering the total from $4.152 million to $4.0 million. This continues a downward trend from the 2024 maintenance level allocation of $5.0 million. Both the Washington Economic Development Association (WEDA) and Greater Spokane Incorporated (GSI) have formally requested that Bob Ferguson veto the relevant section of the operating budget to restore the $152,000 reduction. Beyond the immediate funding impact, the ongoing erosion of ADO funding raises broader concerns about the state’s commitment to economic development and whether the administrative cost to the Washington State Department of Commerce of renegotiating and re-executing ADO contracts outweighs the marginal budgetary savings achieved through the cut.

2026 Supplemental Capital Budget – Washington’s 2026 supplemental capital budget is an $889 million spending plan focused on construction and infrastructure projects statewide, with significant investments in affordable housing, school construction, flood response, and clean energy. The budget includes $200 million for housing and homelessness programs, including $123 million for the Housing Trust Fund, and $109 million for school construction, with funding for modernization, seismic safety upgrades, and a new pilot program to help property-poor districts afford building projects. In response to the December 2025 flooding, the plan provides $41 million for recovery and prevention work, including levee improvements, debris removal, and regional risk assessments. The proposal also directs Climate Commitment Act revenue toward environmental and energy projects, including $25 million to launch the Washington Builds revolving-loan program for clean-energy upgrades, along with grants for tribal energy projects, higher-education improvements, and climate-smart agriculture. Lawmakers described the bipartisan budget as a continuation of the state’s practice of using the capital budget to fund long-term community projects and local infrastructure across Washington.

Spokane Capital Community Projects ($s in 000)

Spokane Capital Higher Education Projects ($s in 000)

2026 Supplemental Transportation Budget – The Legislature approved a bipartisan $16.6 billion 2025–27 supplemental Transportation budget, a long-range plan funding projects through 2031 that focuses on preserving and maintaining Washington’s transportation infrastructure while supporting job creation. The package, which lawmakers say could generate up to 30,000 jobs is funded in part through a bipartisan bonding agreement, the budget includes $1.3 billion for road and bridge preservation, $200 million for maintenance, $28 million for ferry preservation, and $100 million for safety upgrades on highways, along with funding to repair flood-damaged infrastructure and replace the Fairfax Bridge near Wilkeson. The plan also continues funding for new ferry construction, terminal electrification, and expanded maintenance capacity, while supporting safety grants, youth transit programs, and other initiatives tied to the Climate Commitment Act. The budget, contained in Senate Bills 6005 and 6225 and House Bill 2711, now heads to the governor for signature.

Spokane Transportation  – North Spokane Corridor (NSC)

The final 2026 Supplemental budget maintains the expected completion date for the North Spokane Corridor. For US-395 please see the 3-way comparison (House, Senate, Conference) below on the NSC.

US 395 North Spokane Corridor (Dollars in 000)

2026 Bills of Interest to GSI  Passed by Legislature.  

HB 2416, Waste to Energy Plant – GSI Pro. Passed Legislature. Signing Letter Submitted.

E2SHB 2416 (Hill, D-3) – Establishes a process by which the Department of Ecology (Ecology) must allocate no-cost allowances in the Cap-and-Invest Program (Program) between 2027-2030 to a waste-to-energy facility constructed before 1992 that is in compliance with applicable laws and standards (WTE Facility). Prohibits Ecology from allocating no-cost allowances to an electric utility for greenhouse gas emissions associated with electricity produced by a WTE Facility for which the facility has a compliance obligation in the Program. Requires the owner or operator of a WTE Facility, by December 1, 2030, to provide a two-part plan to Ecology and the Department of Commerce, including a greenhouse gas emissions reduction component and a waste reduction and material recovery component. 

SB 5981, 340B Drug Pricing Program, GSI Pro. Passed Legislature.

E2SSB 5981 (Cleveland, D-49) – Prohibits a drug manufacturer from denying, restricting, or prohibiting the acquisition of a 340B drug by a covered entity or a pharmacy under contract with a covered entity unless federal law prohibits the receipt. Prohibits a drug manufacturer from requiring any claims, utilization, purchasing data as a condition for allowing the acquisition of a 340B drug by a covered entity or a pharmacy under contract with the covered entity unless federal law requires such data sharing. Requires certain covered entities and drug manufacturers to submit certain data related to the 340B drug pricing program. 

SB 5420 access to benefits veterans, service members, military spouses. Passed Legislature. GSI Pro. Signing Letter Submitted. SB 5420 (Lovick, D-44) – Expands the definitions used to qualify persons for particular benefits for military veterans and uniformed service members.

HB 2325, Tourism self-promotion assessment (TPA). Passed Legislature. GSI Pro. Signing Letter Submitted. E2SHB 2325 (Paul, D-10) – Authorizes the Washington Tourism Marketing Authority (WTMA) to develop by rule a self-supported assessment program to fund statewide tourism. Creates an oversight board within the WTMA to design the self-supported assessment program. Modifies the membership of the WTMA Board of Directors. 

2026 Bills of Interest to GSI that DID NOT Advance to Final Passage

• HB 2515, Data Center Regulation Bill, GSI Pro.
• SB 5901, school construction assistance on military bases, GSI Pro.
• SB 6289 state economic development plan. GSI Pro.