2026 Budget Suggestions Is Here!

Local governments can now find the 2026 edition of Budget Suggestions on the MRSC website. In addition to discussing the budgeting requirement for cities, towns, and counties, this annual publication contains state shared revenue projections, legislation that may impact local budgets, and a discussion of economic factors and core revenues.

State Shared Revenue Estimates

Budget Suggestions includes a discussion of many of the state shared revenues that cities, towns, and counties receive. For some of the per-capita-based revenues, MRSC provides estimates based on forecasts provided by several state agencies.

Note that these estimates can also be found in our online Shared Revenue Estimator. Simply select your city, town, or county, and the Share Revenue Estimator will list OFM’s April 1, 2025, population estimate for your locality and the those per-capita revenues MRSC is able to forecast using data from state agencies.

MRSC provides calendar year 2026 and 2027 revenue projections for:

• Cannabis excise taxes,
• Fire insurance premium taxes (for certain cities),
• Liquor revenues,
• Motor vehicle fuel taxes,
• City-county assistance, and
• Criminal justice appropriations.

Legislation That May Affect Your Budget

Budget Suggestions highlights bills from the 2025 legislative session that might impact local government budgets, including HB 1791, HB 2015, SB 5801, and SB 5814.

More flexibility with REET revenue: HB 1791

HB 1791 gives cities, towns, and counties greater flexibility in use of Real Estate Excise Taxes (REET) revenues.

Local governments are now allowed to use REET 1 revenues for REET 2-eligible projects and vice versa. Additionally, cities and counties are no longer required to have a population under 5,000 in order to use REET for the purposes listed in RCW 35.43.040.

For a deeper discussion of HB 1791, check out Cheryl Grant’s recent blog, 2025 Legislative Updates to the Real Estate Excise Tax Program.

Local law enforcement programs sales and use tax: HB 2015

HB 2015 authorizes qualified cities and counties to impose a 0.1% criminal justice assistance sales and use tax. In order to impose the new tax, a city or county must meet certain requirements which include adopting specific law enforcement policies and practices.

Unlike other sales and use taxes, the 0.1% criminal justice assistance sales and use tax is stackable, meaning both the city and the county can impose the tax with no sharing requirements. The sales tax revenues must be used for criminal justice purposes, examples of which are listed in Part II Section 201 of the bill

Fuel tax increase: SB 5801

SB 5801 increased fuel taxes on July 1, 2025, by $0.06 per gallon and special fuel taxes by $0.03 per gallon. Rates and effective dates are as follows:

• Beginning July 1, 2026, fuel taxes are increased by 2 percent.
• Beginning July 1, 2027, the special fuel tax is increased by an additional $0.03 per gallon.
• Beginning July 1, 2028, the special fuel tax is increased by 2% annually.

Incorporated cities and towns will receive 2.5% of these new fuel taxes, and counties will receive 2.5% as well. These revenues will be distributed on a per-capita basis.

Update to retail sales and use tax: SB 5814

SB 5814 will extend the retail sales and use tax to several types of services that were not subject to the tax previously. Notable services include those related to IT, web design, security, temporary staffing, advertising, and live presentations. Local governments will need to look at their budgets to determine if this legislative change will have a significant impact on revenue.

For a full 2025 legislative update on sales taxes, sign up for the Washington State Department of Revenue’s (DOR) Local government partnership meeting on August 5.

Implicit Price Deflator

Budget Suggestions discusses the implicit price deflator (IPD), which is important to taxing districts with populations of 10,000 or more. These districts may only increase their regular property tax levy amount by 1%, or the percentage increase of the IPD, whichever is less.

If the IPD is less than 1%, those taxing districts must pass an ordinance or resolution of substantial need if they wish to get the maximum 1% increase. At this time, it appears the IPD will be above 1%, but the official IPD figure will not be calculated by the DOR until September 25. Once this happens, we will publish the updated IPD figure to our Implicit Price Deflator webpage and in our Weekly Insights e-newsletter.

Other Budget Resources

Many other budgeting resources can be found on our website, such as budget procedures, budget calendars, financial data, checklists, and more, and the best place to start is our Budgeting webpage.

For historical data, MRSC’s Tax and Population Data webpage has population, property, and sales tax information for each city and county in Washington for the past 10 years.

As always, please reach out to me with any questions you might have. Happy budgeting!