Association of Washington Business – Updated Weekly

Kicking into gear: The Washington State Legislature convened today for the 2025 legislative session, which runs through April 27. See AWB’s start-of-session statement.

A predictable budget crisis: The session begins with lawmakers facing a sizable budget gap — not due to an economic downturn, but because of legislative spending choices.

“Lawmakers chose to spend more money than the state expected to receive in tax revenue, leading — predictably and inevitably — to a shortfall,” AWB President Kris Johnson writes in his latest newspaper column.

Taxes aren’t the solution: Raising taxes to fill the budget gap will only make it more difficult for businesses to compete with other states, and more difficult for some of the state’s smallest companies to survive.

“It’s time — past time, really — for lawmakers to be champions for the economy, to support Washington employers and to adopt a pro-growth policy agenda. That means growing the economy by growing the tax base rather than the tax rate,” Johnson said.

Opportunities: AWB encourages lawmakers to expand energy production, support builders who can help meet our state’s significant need for new housing, protect programs like unemployment insurance and workers’ compensation from inappropriate expansions, and take other steps.

“There are hard decisions ahead. Employers are ready to help craft practical solutions and find common ground,” Johnson said.

First budget proposal: On Thursday, Gov.-elect Bob Ferguson released his budget priorities for his first term as Washington’s new governor, pledging to reduce spending before raising taxes and voicing skepticism over a wealth tax.

“I am focused on identifying opportunities for savings first and will only focus on revenue after we have scrubbed the budget for savings and reductions,” Ferguson said in his proposal.

Savings plan: Ferguson wants a 6% spending cut across most state agencies to save $4.4 billion over four years. The state faces a projected $5-10 billion budget shortfall over the next two bienniums.

• To achieve these savings, Ferguson wants to consolidate management positions, reduce administrative costs, restrict equipment purchases and reduce travel by state employees.

• His proposal would also boost K-12 schools spending and avoid cuts to public safety agencies.

‘Untested’ tax: Ferguson said he is “deeply skeptical” of a wealth tax, an idea backed by outgoing Gov. Jay Inslee and some Democratic lawmakers.

• In an interview with The Seattle Times, the incoming governor did not go as far to say that he would veto new taxes in general.

New spending: Ferguson also seeks $800 million in new spending, including $100 million to help police departments recruit officers and $600 million in the capital budget for housing construction.

Controversial bill returns: A hearing on a bill to enact statewide rent control received a hearing earlier today on the first day of Washington’s 2025 legislative session. AWB News has a full recap.

• Dozens packed the hearing in front of the House Housing Committee Monday afternoon, and more than 8,000 signed in “pro” or “con.”

• Thank you to all the AWB members who responded to our Action Alert email last week to register your opposition to the bill by signing in “con.”

Details: House Bill 1217 would set a 7% annual cap on rent increases and impose other requirements on housing providers. See AWB’s one-pager for more.

Taking us backward: Housing providers testified that increasing costs from higher property taxes, utilities, and insurance rates often exceed 7%; a cap would discourage investment in new and existing housing.

"We need to encourage people into Washington state to invest," said Government Affairs Director Morgan Irwin. "We think this bill will have the opposite effect."

Lot-splitting bill: At the same hearing, AWB testified in support of a bill that would increase housing options through lot-splitting.

Legislative road map: AWB’s Government Affairs Team laid out the biggest issues impacting Washington employers in the 2025 legislative session during a webinar last week. Watch it here.

Here are some of the top takeaways:

• The state faces a projected $5-10 billion budget deficit due to overspending, even with revenue at an all-time high.

• Potential tax increases include an across-the-board B&O tax increase, new payroll tax, and expanded capital gains tax. AWB will oppose tax increases and urge lawmakers to press pausing on spending.

• AWB will be playing defense with employment law bills, opposing efforts to extend unemployment insurance to striking workers and an expansion of Paid Family & Medical Leave benefits.

• Transportation funding will be another major topic of discussion, including addressing a $1 billion budget shortfall through new revenue.

Share your perspective: Personal stories about how legislation affects your business has a real impact on lawmakers. Get in touch if you would like to testify on a bill.

📊 Voter survey: In a new Cascade PBS/Elway poll, Washington voters said the Legislature should prioritize the economy and steer clear of new taxes. According to the poll:

• 34% of respondents said the economy was their top issue, including the cost of living/inflation and housing affordability.

• Taxes and public safety were the second top concerns, tied at 18% each.

• To solve a budget deficit, 66% of respondents favored cutting state programs, while a quarter supported raising taxes.

Consistent views: According to pollster Stuart Elway, voters have consistently favored cuts over new taxes since the first Elway Poll in 1992.

EMPLOYMENT LAW

Lindsey Hueer, AWB’s lead on employment law issues, is watching these bills:

• Banning noncompetes: House Bill 1155, sponsored by Rep Liz. Berry, D-Seattle, would ban all noncompete agreements, including retroactively. State law currently allows these agreements for employees who earn about $124,000 a year. AWB opposes the new proposed ban, which will create challenges for employers who use noncompetes for higher level talent. A hearing is set for 8 a.m. Wednesday in the House Committee on Labor & Workplace Standards.

• Overtime threshold exemption: House Bill 1184, sponsored by Rep. Suzanne Schmidt, R-Spokane Valley, would create a narrow exemption to state overtime rules. The bill would lower the salary threshold for overtime-exempt employees to 1.5X the minimum wage (about $52,000 a year) at nonprofits and small businesses. AWB supports this bill, which has a hearing at 8 a.m. Wednesday in the House Committee on Labor & Workplace Standards.

• Minimum wage increase: House Bill 1181, sponsored by Rep. Sharlett Mena, D-Tacoma, would raise the state’s minimum wage to $25 an hour by 2031. It would also mandate employers provide paid bereavement and vacation time, requiring 120 hours a year for a full-time employee. In total, the bill would add significant costs on employers. A higher minimum would also raise the salary threshold for overtime-exempt employees, requiring many more employers to start paying overtime, explains AWB Government Affairs Director Lindsey Hueer. AWB opposes this bill and will keep you updated.

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TAX & FISCAL POLICY

Max Martin, AWB’s lead on tax and fiscal policy, is engaging with ongoing budget discussions:

• Inslee’s budget proposal: The Senate Ways & Means Committee will hold work sessions at 4 p.m. today and Tuesday on Gov. Jay Inslee’s budget proposal. As he prepares to leave office, Inslee seeks to increase spending by 10.4% over the 2023-2025 budget. Amid a looming budget deficit, AWB is urging legislators to press pause on spending and adopt a sustainable budget.

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HOUSING

Morgan Irwin, AWB’s expert on land use and housing policy, is engaging with these bills:

• Rent control: Earlier this afternoon, AWB, housing providers and others testified against House Bill 1217, a fresh attempt to enact statewide rent control. The bill would impose a 7% cap on annual rent increases and would impose other requirements. See AWB’s one-pager for more about the issue.

• Energy labeling: House Bill 1015, sponsored by Rep. Davina Duerr, D-Bothell, requires property owners to obtain and advertise a home energy report prior to sale, which costs between $200 and $400. AWB opposes this bill, which creates a particular burden on lower-income home sellers and penalizes communities with lower energy scores. The bill has a hearing at 10:30 a.m. Friday in the House Local Government Committee.

• Streamlining permits: House Bill 1160, sponsored by Rep. Amy Walen, D-Kirkland, speeds up the permit approval process for housing developments. It would require a less rigorous design review, making it faster and cheaper to obtain permits. AWB will testify in support of this bill at a hearing at 8 a.m. Thursday in the House Housing Committee.

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ENERGY & ENVIRONMENT

Peter Godlewski, AWB’s expert on energy, environment and water policy, is watching these bills:

• Reducing ‘fast fashion’: House Bill 1107, sponsored by Rep. Sharlett Mena, D-Tacoma, had a hearing today in the House Environment & Energy Committee. This returning proposal seeks to create a reporting requirement for the fashion and apparel industry to monitor their environmental and labor practices through their entire supply chain. AWB has considerable concerns with the current version and will be working with a coalition of members to address concerns.

Hiring soars in final month of 2024

The U.S. economy added 256,000 jobs in December, surging past expectations, while the unemployment rate ticked down to 4.1%. Economists had anticipated a gain of just 155,000 jobs last month.

The hot jobs report could mean the Federal Reserve will hold interest rates steady, rather than proceed with additional cuts.

Washington's population growth is 6th highest among states

Washington had the sixth-fastest rate of population growth in the nation, according to the 2019-2023 American Community Survey conducted by the U.S. Census Bureau.

All but four of Washington’s 39 counties saw population growth in the survey. The highest growth rates were in Pacific County (11.6%), followed by San Juan County (10.9%), Clark County (9.7%) and Spokane County (9.3%).

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Ferguson appoints Julie Meredith as WA transportation secretary

Gov.-elect Bob Ferguson has named Julie Meredith secretary of the Washington State Department of Transportation. Meredith, a 36-year veteran of the agency, currently oversees massive road and highway projects.

Meredith will succeed Roger Millar, agency director since 2015.

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House lawmaker picked to replace Patty Kuderer in WA Senate

State Rep. Vandana Slatter, D-Bellevue, was appointed last week to the state Senate. She fills the seat vacated by Patty Kuderer, who was elected as Washington’s next insurance commissioner.

Osman Salahuddin, a Redmond City Council member, was picked as Slatter’s replacement in the state House. Both positions will be on the ballot in a special election in November, with the winners serving through 2026.

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Advertising opportunities available in Washington Business Magazine

AWB has once again partnered with Overland, Kansas-based Strategic Value Media, a leading nationwide provider of print and digital media solutions to the national, state and local trade and membership associations, to help put together the Spring 2025 edition of Washington Business magazine.

A representative from Strategic Value Media may contact you by email or phone to inquire if you want to advertise in the magazine. Please know this is a legitimate call and that SVM is partnering with AWB to provide you with this resource for advertising your products and services.

To learn more about advertising opportunities, please email info@svmmedia.com.

Session begins: As the Legislature kicks into gear today, your chance to speak up and engage directly with lawmakers is coming up on Feb. 5. Register now for the 2025 AWB Legislative Day & Hill Climb.

• Newly inaugurated Gov. Bob Ferguson will speak at a lunch keynote during a day of discussions and legislative meetings with lawmakers.

New reception location: The day will conclude with a made-in-Washington reception at a new location, Anthony’s Homeport in Olympia, from 5 p.m. to 7:30 p.m.

New ticket type: In addition to full-day tickets, attendees can buy a ticket for only the lunch keynote and the evening reception. Learn more and register here.

Hotel options: For those traveling from out of town, see nearby hotels.

“For many of today’s lawmakers, the budget gap confronting them this year is new territory. But history shows that new, higher taxes don’t have to be the solution. Let’s focus on creating a plan to grow the economy, not tax it more.” ~ AWB President Kris Johnson, writing in his latest newspaper column.