Legislative Session Update: Week 9 (March 9-12, 2026) Adjournment Edition

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

Tax on Income over One Million Dollars Dominated 2026

After more than 24 consecutive hours of floor debate, majority Democrats in the House approved the Millionaire’s Tax, Senate Bill (SB) 6346 (Pedersen, D-Seattle), on Tuesday evening one of the longest and most contentious floor sessions in recent memory. Republicans, joined by several moderate Democrats, mounted a sustained challenge to the measure, introducing 80 amendments in an effort to slow the bill and force debate on its key provisions.

The overnight debate centered on the tax’s impact on high-income residents and the reliability of the projected revenue stream. Despite the resistance, Democratic leadership ultimately secured enough votes to pass the bill. Several Democrats broke ranks and joined Republicans in opposition, underscoring divisions within the majority caucus. The Senate gave final approval the following evening, sending the centerpiece tax proposal of the session to the governor’s desk.

Budget Built on Temporary Fixes

Lawmakers released the conference supplemental operating budget, SB 5998 (Robinson, D-Everett), which would appropriate $80.2 billion in Near General Fund–State (NGF-O) and $157.3 billion in total funds for the 2025–27 biennium after the 2026 adjustments. At the maintenance level, the proposal adds $1.7 billion NGF-O simply to continue current services and meet statutory obligations. The largest cost drivers remain familiar: Medicaid enrollment and costs, Working Connections Child Care, and long-term care programs. The budget draws hundreds of millions from the state’s rainy-day fund, shifts money from other accounts, and trims spending across several programs. It also sets aside roughly $1 billion to cover rising legal obligations facing the state, one of the fastest-growing pressures on the budget. On top of that baseline, lawmakers added $621 million in new NGF-O policy spending and $3.7 billion in total funds.

Balancing the budget required a number of significant financial maneuvers. The plan assumes and $880 million transfer 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.

Looking ahead, the plan assumes $35.9 million in new NGF-O revenue during the current biennium, but $2.2 billion in new revenue in 2027-29, largely tied to the newly approved income tax proposal. Other notable revenue changes include $203.5 million over four years from repealing the data-center tax exemption under SB 6231 (more on that later). $165.6 million from prescription drug tax changes and $72.8 million from insurer tax changes. Those gains are partially offset by reductions tied to the before mentioned estate tax changes. 

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. Democratic leaders argue the approach protects core services during a difficult fiscal cycle, while Republicans describe the plan as budget gimmickry that postpones more difficult long-term decisions.

The Legislature also approved an $889 million supplemental capital budget focused on construction and infrastructure investments statewide. Major allocations include $200 million for housing and homelessness programs $123 million of which goes to the Housing Trust Fund and $109 million for school construction and modernization projects. The package also includes $41 million for flood recovery and prevention following the December 2025 storms, along with new investments in clean energy, tribal energy projects, and climate-smart agriculture.

A bipartisan $16.6 billion transportation package also cleared the Legislature. The plan contained in SB 6005 (Liias, D-Mukilteo), SB 6225 (Liias), and House Bill (HB) 2711 (Fey, D-Tacoma) funds projects through the year 2031 and prioritizes preservation of existing infrastructure. Investments include $1.3 billion for road and bridge preservation, $200 million for maintenance, ferry preservation funding, highway safety upgrades, and repairs to flood-damaged infrastructure. Lawmakers estimate the package could support up to 30,000 jobs statewide.

SB 6225 (Liias) allows for the issuance of up to $1.1 billion of bonds for the design, right-of-way, and construction of highway projects. It also authorizes the issuance of up to $400 million of bonds for certain Move Ahead Washington projects with unanticipated construction-related cost increases. The bond authorization increase also pays for $500 million in the State Route – 520 project.

Data Centers Fight Goes to the Wire

One of the final policy fights of the session centered on SB 6231, sponsored by Seattle Senator Noel Frame at the request of Governor Bob Ferguson. The legislation repeals a long-standing sales tax exemption for refurbishing data centers, a policy originally designed to attract the facilities, particularly to rural areas with inexpensive hydropower.

Supporters argued the industry no longer requires the subsidy and that the facilities consume enormous amounts of electricity and water while producing relatively few permanent jobs. Repealing the exemption is projected to generate roughly $63 million during the current biennium and more than $200 million over four years. Because that revenue was already assumed in the final operating budget, the bill effectively became must-pass legislation during the session’s final hours. Heavy lobbying pressure from technology companies, construction firms, and labor groups made its outcome uncertain until late in the process.

The politics were especially sensitive in Eastern Washington communities where data centers have brought jobs and property-tax revenue. During floor debate, Rep. Alex Ybarra (R-Quincy) highlighted what he called the “Quincy Miracle,” referring to the rapid economic growth in the Columbia Basin driven by the industry. In the end, the bill passed narrowly, with several Democrats joining Republicans in opposition. 

Rural Schools Face New Budget Pressures

Rural school districts, many already warning about deteriorating finances, will also feel the effects of several policy adjustments in the supplemental budget. Lawmakers trimmed funding for the Local Effort Assistance (LEA) program, a formula designed to help property-poor school districts keep pace with wealthier districts that can raise more money through local levies. While technically a reduction to last year’s increase, the change still saves roughly $25 million and highlights the continuing tension in Washington’s school funding system.

The state also pushed back the replacement schedule for school buses from 13 years to 15 years, a change that saves money in the short term but could create challenges for rural districts that run longer routes over rougher roads.

Finally, lawmakers reduced funding for the Transition to Kindergarten program by roughly $23 million, or about 12 percent. The preschool-style program helps prepare four-year-olds for school and often fills gaps in rural areas where early-learning options are limited.

Individually the changes are relatively small, but taken together they highlight an ongoing structural challenge in the state’s education funding system—one that previously triggered the landmark McCleary v. State of Washington ruling and could resurface in future sessions.

Cities and Counties Left Waiting

Local governments also saw their position weaken in the final budget negotiations. Earlier proposals tied to the millionaire’s tax would have directed a share of the revenue to cities and counties to help cover the rising costs of public defense. That earmark ultimately disappeared from the final agreement. Instead, lawmakers created a $200 million “city and county fiscal health” fund scheduled for the 2029–31 biennium, years after many of the new obligations are expected to take effect. For municipalities already constrained by Washington’s long-standing 1 percent property tax cap and facing rising legal costs, the shift leaves significant fiscal uncertainty heading into future budget cycles.

Bills, Lots of Bills

The 2026 Washington State Legislature adjourned their session having passed 267 bills, about par for the course in a supplemental, short session. Here’s a quick look at some measures shaping policy on climate, public safety, housing, health care, and consumer protections.

On consumer protection, Olympia lawmakers passed HB 2274 (Springer, D-Kirkland) which tightens the Commercial Electronic Mail Act (CEMA) by requiring intent for a violation and lowering statutory damages, balancing protection against frivolous claims. HB 2334 (Berg, D-Mill Creek) simplifies cash transactions now that the US government no longer mints pennies. The bill lets retailers round totals to the nearest nickel, reducing friction at checkout without affecting taxes. 

Environmental and climate policy saw significant movement: HB 2416 (Hill, D-Spokane) establishes a frame work for the Cap-and-Invest Program to allocate no-cost allowances to a pre-1992 waste-to-energy facility in Spokane, while limiting credits to electric utilities, and sets enforceable emission reduction and waste diversion plans by 2030. HB 2215 (Fitzgibbon, D-Seattle) lowers the emissions threshold for fuel suppliers, expanding program coverage, mandating reporting to the Department of Ecology, and excluding certain lubricant-related emissions, signaling a tightening of Washington’s climate accountability rules.

Public safety and oversight also advanced. HB 2320 (Salahuddin, D-Seattle) addresses emerging firearm technologies by prohibiting certain 3D-printed firearms and digital manufacturing code, aiming to reduce untraceable weapons. HB 2508 (Entenman, D-Kent) strengthens independent oversight of law enforcement, expanding the Office of Independent Investigations’ jurisdiction over deadly-force and fatal-use-of-force incidents. SB 6002 (Trudeau, D-Tacoma) introduces a regulatory structure for Automatic License Plate Reader (ALPR) systems, setting limits on data retention, sharing, and usage, addressing privacy and civil liberties concerns.

Health care access and equity were addressed through SB 5981 (Cleveland, D-Vancouver), which prohibits drug manufacturers from restricting 340B drug purchases by covered entities and clarifies permissible data collection, preserving access to discounted medications for vulnerable populations. Housing and land-use policy also shifted with SB 6026 (Alvarado, D-Seattle), limiting local barriers to residential development in commercial and mixed-use zones, supporting housing supply and affordability initiatives. Finally, SB 5925 (Hansen, D-Bremerton) strengthens the attorney general’s civil investigative powers over constitutional, labor, and law enforcement compliance, providing a sharper tool for state oversight.

Session Ends, Political Season Begins

The Legislature adjourned at 8:24 p.m. Thursday, closing one of the most turbulent sessions in recent memory. With the millionaire’s tax already fueling primary challenges and divisions within the Democratic caucus on full display, the political reverberations of 2026’s tax, budget, and policy battles are set to shape Washington’s debates and elections well into 2027.