Brewer Public Affairs: 2025 Legislative Session Preview

Washington gears up for major transitions, big budget concerns on the eve of the 2025 Legislative Session

With its annual committee Assembly Days wrapped up last week, and bill pre-filing underway, the Legislature is preparing for the start of the 2025 session. With big transitions happening in both the executive and legislative branches, much of the early focus is on strategies to address multi-billion dollar deficits in the state’s general fund and transportation budgets. The 2025 session gets underway at noon on Monday, January 13^th, and runs for 105 days until Sunday, April 27^th.

State Executive Transitions

For the first time in over a decade, Washington will have a new Governor, Attorney General, Insurance Commissioner, and Public Lands Commissioner in January, with Governor-elect Bob Ferguson, Attorney General-elect Nick Brown, Insurance Commissioner-elect Patty Kuderer, and Public Lands Commissioner-elect Dave Upthegrove all in the process of setting up their new administrations. Ferguson, in particular, has the additional need to appoint new leadership in cabinet agencies where a vacancy has arisen or transition desired. While a handful of new agency directors have been named in recent weeks, there appears to be continuity planned for the time being in agencies of interest such as the Department of Financial Institutions, Department of Labor & Industries, and Employment Security Department.

Significant Legislative Turnover and Increased Majorities

When the session convenes, there will be over twenty new legislators joining their respective caucuses in the House and Senate. There will be seventeen new House members, a majority of whom are Republicans, and four new Senators, all of whom are Democrats. Senator-elect Adrian Cortes (D-Battle Ground) flipped the traditionally Republican 18^th District Senate seat, while Tina Orwall (D-Des Moines) was appointed from her House seat to replace retiring Senator Karen Keiser in the 33^rd District, Deb Krishnadasan (D-Gig Harbor) was appointed to replace Emily Randall, who was elected to Congress, in the 26^th District, and an appointment still looms in the 48^th District, where current House members Vandana Slatter (D-Bellevue) and Amy Walen (D-Bellevue) have both applied to serve in the Senate. At the end of the day, with one flip each in the House and Senate, majority Democrats will hold a 60 percent supermajority in both chambers at 59-39 in the House and 30-19 in the Senate.

In terms of leadership, Senator Jaime Pedersen (D-Seattle) was elected as the new Senate Majority Leader in November. Key committee transitions, particularly on the Senate side, include Senator Rebecca Saldana (D-West Seattle)  taking over as Chair of the Labor and Commerce Committee, and Senator Claudia Kauffman (D-Kent) taking over as Chair of the Business, Financial Institutions, and Trade Committee. In the Senate fiscal committees, Senator Yasmin Trudeau (D-Tacoma) will be the new Ways & Means Committee Vice Chair for Capital Budget, and Senator Noel Frame (D-Seattle) is taking a new Vice Chair for Finance role on the committee, a position created to prepare for the likelihood of considering multiple new revenue measures.  

Bill Pre-Filing Underway

The pre-filing period for bills, which opened on December 2, serves as a reminder that legislative activity begins well before the first gavel drops in January. This early phase allows legislators to introduce proposals and set the stage for the upcoming session. Just under 200 bills have been pre-filed so far, about half from minority Republicans, covering a wide range of subjects and policies. It is still too early to determine which proposals will gain traction during the session. Notably, many major issues, such as tax, fiscal, and transportation policies, are exempt from session cutoff deadlines and are unlikely to appear in pre-filings. However, the volume and diversity of submitted bills are expected to increase as the session approaches.

Budget and Taxes

Washington’s budget outlook for the next two biennia presents a daunting challenge, with an anticipated shortfall ranging from $10 to $15 billion. This deficit arises from growing costs for state obligations, including education, healthcare, and social services, coupled with slowing tax revenues due to reduced consumer spending, stagnant home sales, and lower-than-expected capital gains collections.

On Wednesday, outgoing Governor Jay Inslee released his final operating budget proposal, outlining a mix of $2 billion in cuts and nearly $13 billion in new taxes to address the gap. His proposed cuts focus on corrections and rehabilitation facilities, delaying bonuses for certain teachers, pausing childcare and early learning expansions, and merging the LEOFF 1 and 2 pension systems. On the revenue side, Inslee has centered his tax plan on a one percent wealth tax on worldwide asset values exceeding $100 million, targeting an estimated 3,400 Washingtonians, alongside temporary and permanent increases to the state’s B&O tax. The initial proposal imposes an initial 20 percent surcharge on service-sector businesses grossing $1 million or more annually, with a broader ten percent rate increase across all B&O classifications beginning in 2027 as that surcharge on service companies sunsets.

This proposal sets the stage for the incoming administration of Governor-elect Bob Ferguson, as well as legislative negotiations between House and Senate leaders. While legislative Democrats appear willing to entertain numerous new or increased tax measures—including the wealth tax, a new statewide payroll tax on larger companies and higher earners, and increased real estate excise taxes on sales of more expensive homes—Republicans continue to advocate for fiscal restraint over new revenue. The rejection of three tax-related ballot measures by voters this fall has also emboldened Democratic leaders to argue the public appetite supports more progressive taxation.

Transportation Funding

Washington also faces mounting transportation budget shortfalls – estimated as high as $8 billion over the next ten years - due to declining gas tax revenue and skyrocketing inflation in construction project costs. The gas tax, which generated $1.6 billion last year, is forecasted to drop to just $300 million by 2050 as electric and fuel-efficient vehicles proliferate. To address this, state officials are exploring alternatives, including a road usage charge (RUC), a per-mile fee to replace the gas tax. While a small-scale voluntary RUC program could be implemented soon, concerns remain over privacy, cost, and administrative complexity. Meanwhile, Senator Curtis King (R-Yakima) has proposed gradually redirecting vehicle sales tax revenue from the general fund into the transportation budget, a measure that could generate up to $1.2 billion annually by 2031. Lawmakers have also been studying creation of a retail delivery fee (RDF) that would place a surcharge on a wide range of commercial and residential delivery of goods, potentially including groceries. A coalition of retailers, grocers, and delivery companies has formed to educate lawmakers that such a fee would generate relatively small amounts of revenue in the context of projected shortfalls while leading to higher costs and less choices for consumers.

Anticipated Business Issues

The legislative committees with jurisdiction over business and consumer protection typically entertain a wide gamut of proposed new regulations on commerce. Anticipated issues returning in this arena include regulation of how tickets to sporting and entertainment events are sold and re-sold, restrictions on “junk fees” in various industry sectors, a restriction on the online sale of sodium nitrate products, issues related to professional licensure and licensing fees, and return of a measure requiring all consumer contracts (including insurance policies) be written in “plain language.” Business issues outside of these committees are likely to feature renewed debates over rent control and landlord-tenant regulation in the housing-oriented committees as well as artificial intelligence and data privacy in the tech committees.

Anticipated Labor and Employment Issues

Our state’s major social insurance systems, from workers’ compensation to paid family and medical leave insurance, unemployment insurance, and long-term care insurance, are likely to receive continued action. In workers’ compensation, bills have already been pre-filed to extend novel coverage for post-traumatic stress disorder to even more occupations, as well as extend the “good faith and fair dealing” claims management standard to all private sector self-insured employers. An expensive bill to add the full value of employer-provided health care benefits to an injured worker’s disability benefits, as well as a moderate increase in the rate of those benefits for some workers, is expected. A return of the also controversial provision to provide unemployment benefits to workers who go on strike is anticipated. A couple bills have been pre-filed to address more opt-out capability in the long-term care insurance program, but in light of the failure of the citizen initiative on this topic, these bills face bleak prospects. Finally, in paid family and medical leave insurance, proposals are expected to remove or limit the small business exemption from payment into the system, as well as expanded coverage and benefits for workers, including the prospect of expanded continuation of health or other benefits during a period of job-protected leave. Elsewhere in employment law, a top priority of the trial bar will be the return of the requirement to provide workers with full copies of their employment records under strict timeframes, enforced by a private right of action. It is also likely that a bill will be introduced to increase Washington’s statewide minimum wage to as high as $25 per hour, and to require a certain number of days of vacation leave.             

Anticipated Insurance Industry Issues

Key insurance industry issues will include firearm-related regulations, such as mandatory liability insurance and disclosure requirements and wildfire-related issues including a working group around coverage transparency and property owner mitigation, as well as rules governing the liability of utility companies whose transmission lines may be responsible for initiating a wildfire. The aforementioned “plain language” for consumer contracts, including insurance, will be debated, as well as scrutiny of underwriting practices, particularly around dog breed considerations, potentially credit scoring issues, and drone usage. Regulations for autonomous vehicles, online insurance verification, and auto repair dispute resolution are also likely on tap. Finally, requirements for collector car coverage, standards for policies on pet insurance for pre-existing conditions, and OIC studies on improving coverage for adult family homes and low-income housing will all likely be in the mix.

Anticipated Liability Issues

The key liability reform debate the last few years has focused on a trial bar priority to impose prejudgment interest on civil awards dating from the accrual of a tort cause of action. With its primary champion, Senator Kuderer, having moved on, it is likely but remains unclear if it will return as a priority. Other liability issues that businesses and insurers must be vigilant about will likely include the recent trend of proliferating private rights of action or private Consumer Protection Act enforcement in most new labor and employment or business regulation bills proposed. An example that will feature in debates over new private rights of action will be the lawsuit abuse that has arisen by primarily out-of-state law firms bringing multiple class actions against Washington employers under the state’s relatively new salary transparency law, and an effort to curtail such claims by requiring notice and a right to cure may be proposed. Finally, on the proactive side, medical malpractice insurers are likely to seek an extension in the deadline for settlement demands to expire, in order to fully investigate complex claims and avoid bad faith exposure.