WAWG State Legislative Report, Week 9: Legislature adjourns

By Diana Carlen
WAWG Lobbyist

The Legislature adjourned on the 60^th day of the 2026 Legislative Session on March 12 at around 8:30 p.m. In the final week of the session, the Legislature adopted the supplemental 2025-2027 operating, capital, and transportation budgets.

The Legislature also spent the final week passing bills. In total, the Legislature passed 267 bills during the short session. A final report will be forthcoming summarizing all major legislation passed during the 2026 session.

Once a bill passes the Legislature, it is delivered to the Governor to be signed into law, vetoed, or partially vetoed (he has the authority to remove entire sections of a bill, but not specific sentences). The governor has five days, excluding Sundays, to act on bills, unless the Legislature is within five days of adjournment, in which case the governor has 20 days to act.

Legislature Passes Income Tax

The main drama of the last week was the passage of the “millionaire’s tax” or the passage of the income tax. Legislators in the House began debating the bill on Monday, March 9 at 5:30 p.m. and did not finish debating and passing the bill until Tuesday, March 10 at 6:30 p.m. There were no extended breaks during this marathon debate. This is the longest debate on legislation that Olympia insiders could recall. Over 80 amendments were debated during floor action on the bill, but only six were ultimately adopted. Unfortunately, an exemption for farming equipment was not adopted.

During the debate, Democrats argued that a high earner tax would fix Washington’s regressive tax system and make it fairer. Republicans responded that the high-earner taxes would eventually be expanded to affect the middle class. They also argued an income tax is unconstitutional because the state constitution defines income as “property,” requiring a uniform tax rate, rather than a graduated one targeting specific income levels. Finally, Republicans argued that the income tax would make Washington a state that is no longer attractive to new business.

SB 6346 passed by a vote of 51-46 with eight Democrats joining all Republican members of the House voting nay on the bill. The final bill can be found here.

The final bill adopted by the Legislature imposes an income tax on individuals and pass-through entities with annual income of over $1 million beginning in 2028, with collection beginning in 2029. The final bill includes the following:

• Expands eligibility for the Working Washington Families Tax Credit to include individuals who are at least 18 years old but meet other eligibility requirements. Previously, individuals must have been at least 25 years old and under 65 years old or had a qualifying child in their household.
• Increases the B&O tax credit for small businesses. Specifically, the small business B&O credit amount is increased from $55 per month in the tax reporting period to $125 per month. For service businesses, the small business B&O credit amount is increased from $160 per month in the tax reporting period to $375 per month.
• Changes the repeal date of the changes to certain retail sales on services, excluding advertising services, enacted in chapter 422, Laws of 2025 (Engrossed Substitute Senate Bill No. 5814) from Jan. 1, 2030, to Jan. 1, 2029.
• Exempts any Washington taxable income attributable to wholesale sales of food and food ingredients sold by wholesalers to retailers not under common ownership from the business and occupation tax .5% surcharge implemented in chapter 420, Laws of 2025 (ESHB 2081).
• Adds a retail sales and use tax exemption for diapers and over the-counter drugs beginning Jan. 1, 2029.

The new income tax would impact an estimated 30,000 taxpayers and generate $3.5 million annually. Gov. Ferguson has indicated that he will sign the bill.

Washington is currently one of nine states without an income tax, and the passage of the legislation is expected to face a legal challenge and a ballot measure.

Several Lawmakers Announce Retirement

The Legislature is facing significant turnover this election cycle after several House and Senate members have announced that they are retiring or leaving the Legislature to seek a different public office. The following lawmakers have formally announced they will not be returning next session:

House members not returning:

• 4th LD – Suzanne Schmidt (R) – running for Spokane County Commissioner
• 6th LD – Mike Volz (R) – retiring to focus full-time as Spokane County Treasurer
• 6th LD – Jenny Graham (R) – retiring
• 15th LD – Jeremie Dufault (R) – running for Senate
• 24th LD – Steve Tharinger (D) – retiring
• 26th LD – Michelle Valdez (Caldier) (R) – retiring
• 29th LD – Sharlett Mena (D) – running for Senate
• 32nd LD – Cindy Ryu (D) – running for Senate to challenge her fellow Democrat seatmate, Sen. Jesse Salomon
• 49th LD – Sharon Wylie (D) – running for Clark County Auditor

 Senate members not returning:

• 8th LD – Matt Boehnke (R) – running for vacant seat by retiring Congressman Dan Newhouse
• 13th LD – Judy Warnick (R) – retiring
• 15th LD – Nikki Torres (R) – running for 8th LD Senate seat
• 29th LD – Steve Conway (D) – retiring
• 37th LD – Rebecca Saldaña (D) – running for King County Council
• 42nd LD – Sharon Shewmake (D) – retiring

These departures spark significant changes in leadership, committees, and the Legislature as a whole. We anticipate more announcements to be made within the next couple of months. Candidates will file to run for office the week of May 4-8, 2026.

Final Supplemental Operating Budget Adopted

Budget writers unveiled the final supplemental budget (ESSB 5998) the day before the session adjourned. The $80.2 billion supplemental operating budget adds more spending to the $77.8 billion 2025–27 biennium budget adopted last year.

The budget includes notable fund transfers:

• $750 million transfer from the state’s Budget Stabilization Account (the Rainy Day Fund).
• $375 million from the Public Workers Assistance Account.
• $ 4 billion from policy and firefighter pensions.

The supplemental budget relies in part on the following revenue:

• Millionaires tax (ESSB 6346).
• Repeal of B&O tax exemption for data center equipment (SB 6231).
• Repeal of B&O tax exemption for prescription drugs (SB 6228).
• Changing the insurance premiums tax exemption so the exemption only applies to the insurer paying the premium tax (HB 2487).

The operating budget passed the Senate by a vote of 30-19 (on a party-line vote with all Republicans voting against it) and the House by a vote of 54-31 (with all Republicans voting against it joined by five Democrats). The final budget can be found here, while more details can be found here. Additionally, Climate Commitment Act funding details can be found here.

Notable highlights from the final supplemental operating budget include:

• $350,000 is provided to the Department of Fish & Wildlife to complete the identification of offsets and opportunities for recreation associated with the potential draw down of reservoirs on the lower Snake River.
• Additional $300,000 to Commerce to complete analysis for new electricity generation, transmission, ancillary services, efficiency, and storage sufficient to offset those provided by the lower Snake River dams.
• $60 million from the CCA for the wildfire account to fight wildfires.
• $50,000 is provided to Ecology to develop a report to the Legislature to characterize and, to the extent feasible, quantify water and energy use for emerging large energy use facilities (specifically data centers) and estimate no cost allowances allocated to emerging large energy use facilities in Washington under RCW 70A.65.120. Ecology must submit the report to the legislature by Dec. 1, 2026.
• $140,000 to the Department of Agriculture to create program guidelines for a future green fertilizer grant program that aligns with the recommendations of the 2024 green fertilizer work group report.

Final Supplemental Transportation Budget

The Legislature adopted a $16.6 billion supplemental transportation budget (ESSB 6005) before adjourning. The Senate passed the final budget unanimously while the House passed it by a vote of 69-26.

The House and Senate versions of the supplemental budget initially differed not just on projects, but on bonding. The original House proposal did not authorize bonding, while the Senate initially authorized $1.1 billion in bonding. The final negotiated version includes $800 million in new bonding. Additionally, the negotiated version included $300 million in preservation funding, $40 million increase in maintenance funding, $65 million in federal matching for flood recovery, and increases the ferry system preservation by $28 million over six years, which ends up being $4 million for the 2025-2027 biennium.

The Legislature also passed ESHB 2711, which specifically impacts the supplemental transportation budget. The bill revised various provisions enacted in ESSB 5801, which passed during the 2025 Legislative Session. As a reminder, ESSB 5801 increased the fuel tax by 6 cents per gallon and diesel by 9 cents per gallon beginning in 2025. Diesel had an additional 3 cent increase beginning in 2027. Both diesel and fuel were then increased by an inflation adjustment factor of 2% per year beginning July 1, 2026. HB 2711 delays the second $.03 per gallon diesel tax increase from July 1, 2027 to July 1, 2029. The start date of the special fuel differential 2% inflation adjustment factor is also delayed until July 1, 2030.

The final transportation budget can be found here while more details can be found here.

Final Supplemental Capital Budget

The Legislature passed the bipartisan 2025-2027 supplemental capital budget (SSB 6003) unanimously on the last day of session. The $4.5 billion budget funds construction and infrastructure projects across the state. The total available bond capacity is $436.4 million, which is composed of $355.6 million in remaining bond capacity from 2025 session and $80.8 million in bond authority adjustments. The final budget appropriates $435.1 million in bonds, leaving a balance of $1.3 in bond capacity.

Notable highlights from the final supplemental capital budget include:

• $136 million for water conservation, climate resilience, and clean energy, including $3.2 million for the Columbia River Water Supply Development Program.
• $41 million for flood preparedness and response.
• $10 million for Anaerobic Digester Development.
• $2.186 million for WSDA Plant Services Lab, Prosser (both budgets).
• $4.636 million for Climate Smart Agriculture Equipment.
• $400,000 for Soil Health Research Infrastructure.
• $500,000 for Virtual Fencing and Climate Resiliency.
• $5 million for the Lower Columbia River Dredging Project (an additional $10 million is in transportation budget for total of $15 million).

The final budget can be found here, while the summary and project list can be found here.

Notable Action This Past Week:

 Fuel Emissions Compliance Thresholds (Second Substitute House Bill 2215), sponsored by Rep. Joe Fitzgibbon (D-West Seattle), lowers the threshold for fuel suppliers that began importing and selling fossil fuels after Jan. 1, 2023 (the date the state’s cap and trade law went into effect), to 500 metric tons, bringing additional gasoline, diesel, biodiesel, and propane suppliers into the cap-and-invest program and tightening greenhouse gas reporting and transparency requirements. There is a narrow exemption for distributors and fuel suppliers who got licensed during 2023 who can demonstrate to Ecology that the entity transports 100% of any combination of gasoline, diesel, biodiesel, or propane in a company-owned vehicle. The current version of the bill also exempts emissions from the combustion, oxidation, or other end use of lubricants from Climate Commitment Act compliance obligations beginning Jan. 1, 2027, which was a priority for agriculture. The bill was delivered to the Governor on March 12.

• Estate Tax Rate Rollback (Engrossed Senate Bill 6347), sponsored by Sen. Claudia Kauffman (D-Kent), rolls back the scheduled estate tax increases passed by the Legislature last year that made Washington state the top estate tax in the nation at 35%. SB 6347 restores the state’s estate tax rate structure to a 10% to 20% rate for those dying on or after July 1, 2026. The bill was delivered to the Governor on March 13.
• Hazardous Substance Tax Exemption Extension (Senate Bill 6244), sponsored by Sen. Nikki Torres (R-Pasco), extends the existing hazardous substance tax exemption for qualifying agricultural crop protection products that are temporarily warehoused but not otherwise used, manufactured, packaged, or sold in the state of Washington. The bill extends the scheduled sunset from 2028 to 2038. The bill passed the Legislature on March 12 and was delivered to the Governor.
• EITE Treatment under CCA: (Engrossed Senate Bill 6246), directs the Department of Ecology to provide recommendations to the Legislature regarding no-cost allowance allocation to Emissions-Intensive, Trade-Exposed (EITE) facilities (i.e. such as food processors) in the cap-and-trade program between 2035-2050. The revised bill no longer conditions the receipt of no-cost allowances to EITEs based upon submission of EITE plans. In addition, the onerous, expensive reporting elements in the earlier versions of the bill have been deleted. Instead, the bill now requires the owner or operator of an EITE facility, by December 2028 and then quadrenially, to provide information to Ecology regarding facility-specific greenhouse gas (GHG) emissions and an assessment of technically and economically feasible measures to reduce GHG emissions at each facility. A coalition of EITEs worked with the prime sponsor of the bill to perfect the bill. The bill was delivered to the Governor on March 12.
• Increasing Transmission Capacity (Senate Bill 6355), sponsored by Sen. Hunt (D-Issaquah), establishes a Washington Electric Transmission Authority run by a 10-person board of directors. The Authority has numerous duties outlined in the bill that include supporting the expansion of and upgrades to the electric transmission system as a state-wide resource for transmission. The bill establishes a tribal clean energy partnership work group to identify and evaluate opportunities for tribal participation in clean energy facilities and infrastructure. The new bill includes a $5,000 fee for petitions for the transmission authority to support a transmission project. The bill was delivered to the Governor on March 13.

Immigrant Worker Protection Act (2SSB 2105), sponsored by Rep. Lillian Ortiz-Self (D-Mukilteo), is attorney general request legislation. It would require an employer, beginning Oct. 1, 2026, to notify its workers within five days of receiving a federal Notice of Inspection of Employment Eligibility Verification Forms I-9 audit. The notice must be posted in conspicuous places on the premises of the employer where notices to workers are customarily posted. The employer must also transmit the notice directly to workers using the primary method of communication typically used by the employer, which must include at least one of the following: hand delivery to the worker; mail with proof of delivery; email with proof of transmission; or text message sent telephonically, which may include a link to a notice maintained on a web page, with proof of transmission. The bill authorizes both the Attorney General and a private right of action to concurrently enforce these protections through civil actions with escalating statutory damages. The bill imposes a $500 penalty for each missed notice, which can be doubled if the Attorney General determines that the violation was willful. Workers and former workers could also sue, with the court able to award actual damages or statutory damages equivalent to 40 times the hourly Washington state minimum wage per plaintiff per violation, whichever is greater. The bill was delivered to the Governor on March 12.