Amid a difficult fiscal climate, the 2025-27 biennium transportation budget met some city priorities, providing direct distributions and grant opportunities, but did not adopt a sustainable transportation revenue source with funding for local preservation, maintenance, and operations.

Heading into the legislative session, the Legislature faced an estimated $1 billion shortfall in the 2025-27 biennium, with the gap growing to $8 billion by 2031 due to declining gas tax collections and insufficient resources for projects already planned or underway. As a result, transportation budget leaders were on the search for new revenue sources—while also committed to limiting new spending—to meet existing obligations and support their priorities of safety, preservation and maintenance, the ferry system, and fish passage barrier removal.

The final $15.4 billion transportation budget, a three-bill package (SB 5161, SB 5801, SB 5802), largely relied on tax and fee increases to generate new revenue. Cities will receive an estimated $36.2 million in additional funding over the next three biennia from a six-cent increase in the state’s fuel tax. To infuse a degree of sustainability into the budget, the new six-cent tax will increase by 2% each year, accounting for inflation. In other positive news for cities, the package does not make a feared permanent diversion of dedicated funding from the Public Works Assistance Account (PWAA).

Other benefits to cities include:

• $310.8 million for the Transportation Improvement Board, including funding for preservation and maintenance, Complete Streets grants, and the Small City Pavement and Sidewalk Program. The $24.6 million in Complete Streets funding was accompanied by a pledge for $21 million more next biennium.
• $83.3 million for Safe Routes to Schools grants.
• $81.7 million for pedestrian and bicycle safety grants.
• $9.2 million to address homeless encampments on state-owned rights-of-way in coordination with, and directing funding to, local governments and social service organizations, focused on housing individuals, with specific allocations for Seattle, Spokane, Tacoma and Fife.

Cities will further benefit from funding to update the 2013 memorandum of understanding between AWC and WSDOT for construction, operations and maintenance responsibilities for city streets as part of state highways, and for the Joint Transportation Committee to update a 2019 assessment of city transportation funding needs and study alternative new methods for local governments to fund sidewalk improvements.

Notably the budget package does not include a road use charge policy (HB 1921/SB 5726), a concept that continued to be discussed as gas tax revenues decline amid rising use of electric and hybrid-electric vehicles and increases in vehicle fuel economy. Like this year’s iteration, versions of a similar policy in 2022 and 2023 failed to advance out of committee and it is not clear whether lawmakers will continue to try to move the concept forward in 2026 or pivot to exploring other ideas.

Traffic safety remained a focus of several bills before the Legislature this year. In an effort to make streets safer and facilitate use by pedestrians and bicyclists, SB 5595 expanded cities’ authority to designate certain roadways as “shared streets” with a 10 miles per hour speed limit. SB 5374, which did not pass but is likely to return, directs counties and cities to increase their engagement with impacted tribal governments when preparing transportation plans, given the disproportionately high traffic fatality rates affecting Native Americans. Other safety-related bills that did not move forward propose implementing more Safe System Approach strategies for transportation infrastructure, expand Complete Streets policies, and require coverings on vehicles hauling gravel or other aggregate materials.

The Legislature also passed bills related to future transportation needs. HB 1902 requires WSDOT to convene a work group of state, local, and tribal representatives to develop recommendations to streamline permitting of transportation projects, while HB 1733 increases to $200,000 the cap on reestablishment payments that public agencies must make to help relocate small business owners and non-profits displaced by a public project. Another bill to make utilities cover the costs of relocating their facilities to accommodate a project that benefits the public—even if the project is carried out by a private entity under a development agreement—did not move forward.

Finally, legislators also considered housing policy in the transportation context, passing HB 1774. The bill allows WSDOT, when it considers whether to lease any unused land that it holds for highways to an entity for a “community purpose” (such as housing, housing assistance, shelter programs, parks, enhanced public spaces, public recreation, salmon habitat restoration, or public transportation), to take into account the social, environmental, or economic benefits of that use.