Washington State 2025 Legislative Session Wrap-Up

2025 Legislative Wrap-Up - Week of April 27, 2025

The 2025 session of the Washington State Legislature adjourned sine die at 6:30 p.m. Sunday night, after the House and Senate spent a full day on the floor passing the state’s operating, transportation, and capital budgets, and the final revenue and bonding bills necessary to support them. This brought to a close the dominant theme of the entire session: grappling with a projected four-year budget deficit, which at various points was estimated between $6 billion and $20 billion. Throughout the session, the challenge of balancing the budget — through spending choices and the pursuit of new and expanded revenue sources — loomed large, shaping nearly every major decision until the final gavel.

Session started in January with major transitions, as a new Governor and three new statewide executives were sworn in, along with nearly 20 new or newly promoted legislators in the two chambers. Last fall’s election created a 60 percent supermajority for Democrats in both the House (59D-39R) and Senate (30D-19R), and an overall more progressive lean to the two majority caucuses. A number of the new legislators were appointed to fill vacancies, and as described below, will be sitting for special elections this fall. The session was not without personal tragedies, as recently retired former House Speaker Frank Chopp, D-Seattle, Senator Bill Ramos, D-Issaquah, and the longtime spouse of Senator Chris Gildon, R-Puyallup, all passed away unexpectedly in the session’s final month, the latter news coming just the evening before adjournment.  

Over 2,500 bills were introduced this session, of which approximately 450 passed to the Governor’s desk. Now that the session is adjourned, the Governor has twenty days (not including Sundays) from the date bills are delivered to his office in which to act on them.   

Top outcomes of the 2025 session:

Budget & Taxes

By the time the final operating budget was hashed out between House and Senate negotiators, and adopted on a 52-45 vote in the House and 28-19 vote in the Senate on Sunday, it will spend $77.8 billion over the next two years, including $7.4 billion in new spending – a nine percent increase over the prior biennium. The budget spends heavily on the negotiated raises and benefit increases for state employees and does not include a previously announced plan to furlough state employees one day per month over the biennium. It adds several hundred million more in K-12 education and meets the Governor’s request for $100 million in funding for new law enforcement hires. Several recently created social service, early education, and childcare programs were delayed in the budget, in order to achieve some cost reductions. In all, it is projected to leave a $225 million cash reserve and $2.5 billion in the state’s rainy-day fund at the end of the biennium.

In order to balance, both in the immediate two years and over the legally required four-year outlook, the budget relies on approximately $9.4 billion in new or increased taxes, $3.7 billion in 2025-27 and $5.7 billion in 2027-29. Although substantially reduced from an original suite of tax bills projected to raise as much as $21 billion in four years, and not including major new taxes such as a wealth tax on intangible assets over $50 million, a Seattle-style payroll tax on higher compensated employees of high-grossing Washington employers, and an effort to triple the annual growth factor for property taxes. These are the major new and increased taxes that were ultimately enacted:

1. HB 2081, Business & Occupations Tax. This bill, passed 50-48 in the House and 26-22 in the Senate, increases the B&O tax rate for manufacturing, retailing, and wholesaling activities to 0.5 percent beginning January, 2027; increases the B&O tax rate for services to 2.1 percent for businesses over $5 million in gross receipts beginning October, 2025; increases the base rate for multiple other rate categories beginning January, 2027; imposes a 0.5 percent surcharge on Washington taxable income over $250 million from January, 2026 through December, 2030; increases the B&O surcharge on larger financial institutions to 1.5 percent; and increases the advanced computing surcharge to 7.5 percent, to an enlarged cap per affected taxpayer of $75 million. The bill is forecast to bring in $5.6 billion additional revenue through 2029.
2. SB 5814. Excise Taxes. This bill, passed 50-47 in the House and 26-22 in the Senate, started out as an ambitious extension of sales tax and retail B&O classification to many categories of services, prominently in the tech sector, an increase in the cigarette tax and taxes on non-tobacco nicotine products, and a requirement that many businesses prepay a month of sales tax collections in June, 2026. As adopted, it extends the sales tax and B&O retail rate to a smaller but significant list of services including IT support, website development, temporary staffing, and advertising, among others. The final bill exempts signage from the definition of advertising, does not include the additional cigarette tax, and does not require a prepayment of sales tax collections. It is forecast to bring in $2.7 billion in additional revenue through 2029.
3. SB 5813, Capital Gains/Estate Tax. This bill, passed 53-45 in the House and 27-21 in the Senate, increases the existing capital gains tax rate to 9.9 percent for gains over $1 million, and increases the estate tax rate progressively on taxable estates, with a top rate of 35 percent for estates of $9 million and up. The bill is forecast to bring in $680 million in additional revenue through 2029.
4. SB 5794, Tax Preferences. This bill, passed 53-45 in the House and 26-22 in the Senate, revises or eliminates a variety of preferential B&O tax rates. Notably, an effort to eliminate the preferential rate for insurance agents was amended out before passage. It is estimated to generate $386 million in new revenue through 2029.
5. HB 2077, Zero-Emission Vehicles. Dubbed the “Tesla Tax,” this bill passed the House 52-45, and Senate 28-19, and imposes excise taxes at various rates on the banking and sale of zero-emission vehicle credits toward regulatory emissions mandates by auto manufacturers. It is forecast to bring in just under $200 million through 2029.

While he weighed in with concerns with prior iterations of budget and tax bills, Governor Ferguson has not publicly commented whether he will sign this budget and revenue package. The Governor has line-item veto authority over specific appropriations in the budget, but only section veto authority on tax bills. Any gubernatorial vetoes of specific taxes will require commensurate vetoes of budgetary appropriations to meet balanced budget requirements.

Transportation

The Legislature adopted, with a 80-18 vote in the House and 34-13 vote in the Senate, a $15.5 billion budget plan for the 2025-27 biennium, with $9.2 billion for capital expenditures and $6.2 billion for operating expenditures. Major project areas funded are ongoing road and highway projects from past transportation packages, fish passage barrier removal, ferries, transit, driver safety, and the State Patrol workforce. The budget is supported by new revenue sources in SB 5801, revenue summary here, including a six cent per gallon increase in the gas tax, set to rise 2 percent annually with inflation after the initial increase, truck and passenger weight fees, a .5 percent increase in the motor vehicle sales tax, taxes on rental cars, a luxury vehicle tax, a luxury aircraft tax, and a $5 per tire fee on the sale of tires. This menu of taxes is calculated to bring in over $3 billion in the next six years. Notably, a plan in the Senate budget to charge a $1 per attendee transportation fee on large venues hosting concerts and sporting events did not make it into the final package. The budget is also supported by a 0.1 percent diversion of the state sales tax in SB 5802, providing $300 million per year starting in 2028. Additional revenue for the budget comes from federal funds, bond sales, and some pre-existing account balances. $2.5 billion in additional bonding capacity was provided in HB 1958 for the I-5 bridge project spanning Washington and Oregon.  SB 5804, authorizing issuance of up to $5 billion in bonds for fish passage projects, offset by new and increased taxes on light and power utilities, did not advance this session.

Capital Budget & Construction

The agreed-to capital budget passed the House and Senate unanimously on the last day of session, spending $7.5 billion over the next biennium on a variety of housing, education, natural resources, and other key areas (project list here). Among other items of interest to the construction industry, HB 1970, streamlining contracting options for the Department of Transportation, passed the Legislature and is before the Governor. HB 1183 on building code and development regulation reform, was signed by the Governor and goes into effect July 27. One of the most controversial bills passed this session, HB 1217, imposes rent control on residential units. As the bill was moved back and forth between the House and Senate, it ultimately landed at a 7 percent cap on residential rents, indexed annually to inflation. It passed the Senate 27-20 and the House 54-44 on the last day of session. Notable bills that did not pass this year include SB 5061, the prevailing wage escalator bill, and SB 5360, providing criminal penalties for even negligent accidents that lead to violation of environmental laws.   

Technology and Business Regulations

While a number of broad proposals to regulate technology or various business activities were introduced and considered, none ultimately passed. Bills in this space included HB 1671, a comprehensive consumer data privacy bill, HB 1168, regulating the data sets used in artificial intelligence platform development, HB 1170, requiring notice and detection tools for content created by artificial intelligence, HB 1613, regulating the sale and resale of tickets for sports and entertainment events, SB 5676, requiring immediate delivery of tickets purchased electronically, and HB 1739, regulating use of self-checkout stands in grocery stores. All are expected back in one form or another in 2026.

Labor & Employment

In all, 25 labor and employment bills passed this session, with many increasing costs and regulatory burdens on employers. Key measures among them are SB 5041, providing unemployment insurance benefits to workers on strike, one of the session’s most contentious bills. In its final form, it passed the House 51-45 and Senate 27-21, and if approved by the Governor will provide up to six weeks of UI benefits to workers who go on strike. HB 1213, which passed the House 57-38 and Senate 28-20, will substantially expand job protection benefits in the state’s paid family and medical leave insurance program to workers of smaller employers. HB 1308, giving workers a private right of action to enforce rights to request and review personnel records, passed the Senate 32-17 and House 56-40, with a minor amendment adopted to limit the amount of information that must be contained in the records. Other notable bills passing in this area include SB 5463, extending workers’ compensation “good faith and fair dealing” standards and penalties to private sector self-insured employers, HB 1788, increasing workers’ compensation disability benefits for unmarried claimants with dependents, and HB 1644, strengthening health and safety regulations for working minors. Notable bills that did not advance this session include HB 1764, increasing the statewide minimum wage to $25/hour over the next six years, and HB 1155, completely banning non-compete agreements in Washington.   

Insurance

Bills passing in this area include SB 5141, excusing disability income insurers from having to make single case filings for experience-rated groups,  HB 1006, expanding options for the financial backing of service contracts, SB 5721, requiring an auto repair appraisal policy term and creating an appraisal process for disputes over repair and total loss appraisals, SB 5419, governing reporting of fire losses to the Commissioner, SB 5262, making technical corrections to the Insurance Code, HB 1539, creating a wildfire mitigation working group, and HB 1516, creating a study of insurance options for affordable housing units. Notable bills not passing this session include SB 5331, creating uncapped $10,000 per violation penalties on insurers along with a statutory restitution process, HB 1078, regulating pre-existing conditions in pet insurance, and HB 1714, allowing self-insured risk pools for small businesses for property and liability coverage. Although SB 5589, creating a Commissioner-led study of credit history and other rating factors in personal lines of insurance did not pass, it was revived intact in as a proviso in the operating budget that passed, with a report due back in November, 2026.

Financial Services

In its second year introduced, HB 1285, requiring financial literacy education as a graduation prerequisite in high school, passed the House but was not taken up by the Senate. Most of the remaining action confronting financial institutions revolved around the risk of increased taxation, as discussed above. Banks and other competitors came close to removing the B&O tax exemption for credit unions, as an amendment to that effect was briefly adopted in the Senate Ways & Means Committee on the tax preferences elimination bill. But the matter ultimately became an extension of the B&O tax to credit unions if they acquire or merge with a commercial bank, similar in concept to HB 1506, which did not pass.  

Law & Justice

Notable bills passing in this area include HB 1403, providing new warranty options and liability protections for condominium builders and developers to promote affordable housing units, and SB 5408, providing an employer the ability to correct job postings’ salary disclosures prior to being sued over them. Bills considered but that did not pass include HB 1507, which would have prohibited non-disclosure agreements in medical malpractice settlements, HB 1527, which would have extended the expiration of an offer of settlement in a medical malpractice claim until after mediation, and HB 1518, creating new presumptive negligence standards for collisions involving cars and bicycles.  

Looking Ahead

As the Legislature adjourns, two items take prominence in the interim. First, agencies begin looking at implementation and administrative rulemaking for new laws passed, often holding stakeholder meetings or issuing data calls. Secondly, campaign season starts. Although this is not a standard legislative election year, the wave of retirements and gubernatorial appointments impacting the Legislature resulted in a number of appointed legislators, all of whom must stand for a special election in the August primary and, if successful, November general election. This will include Sen. Tina Orwall (D-Des Moines), Sen. Deborah Krishnadasan (D-Gig Harbor), Sen. Emily Alvarado (D-West Seattle), Sen. Vandana Slatter (D-Bellevue), Rep. Janice Zahn (D-Bellevue), Rep. Brianna Thomas (D-Seattle), and Rep. Osman Salahuddin (D-Bellevue). With the untimely passing of Sen. Bill Ramos this month, the King County Council will shortly convene to consider an appointment to that vacant seat, leading to another special election and, if the appointee is a House member from the 5^th District, another appointment to fill that vacancy. Filing week for candidates this year is May 5-9. The primary election this year is August 5 and the general election November 4.

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