This bill amends multiple Washington statutes to impose a temporary 4.98 percent base salary reduction for most state employees in the executive, legislative, and judicial branches for the period July 1, 2025, through June 30, 2026, while excluding specified employee categories. It directs the Office of Financial Management (OFM) to adopt procedures to avoid reducing any employee’s base pay below applicable minimum wages, requires OFM to create rules for accrual and use of a new temporary salary reduction leave (up to 8.67 hours per month for employees entitled to leave), permits represented employees to follow collective bargaining agreements, and requires agencies that cannot implement the reduction because of collective bargaining to achieve equivalent savings by leave without pay, mandatory or voluntary temporary layoffs, reduced work hours, or other actions consistent with bargaining agreements. Elected executive-branch officials may voluntarily reduce their constitutional salaries by 4.98% for the same period and OFM must provide a payroll form to effectuate voluntary reductions. The act also amends retirement and leave statutes: it prevents the temporary salary reduction from reducing the monetary rate for the attendance incentive and separation remuneration for unused sick leave and provides that vacation payouts under certain statutes shall not be reduced by the temporary salary reduction. It adds or clarifies provisions in multiple retirement chapters (including a new section to chapter 41.50 RCW) requiring that certain compensation forgone during the 2025–2027 fiscal biennium (for example, due to reduced work hours, mandatory leave without pay, temporary layoffs, or reductions to current pay that are part of employer-certified expenditure reduction efforts) be included in calculations of earnable or final average compensation for retirement purposes; the text excludes certain types of reductions and requires employer certification for inclusion. The director-level authority is expanded to adopt separate manager personnel rules and OFM and the Department of Retirement Systems are required to adopt implementing rules. These are amendments and additions to existing law—procedural and compensation changes, temporary pay reductions, new leave accruals, and changes to retirement compensation calculations—not new criminal offenses or penalty changes. Important details are missing from the provided text: sections after Sec. 4 (beginning with Sec. 5), the specific employee categories excluded, the criteria or list for positions “designated by OFM as requiring backfill,” the exact compensation reductions to be achieved by institutions of higher education (referenced to the 2025–2027 omnibus appropriations act), and the content of section 8 and other referenced provisions needed to fully determine all retirement-calculation effects.

If enacted, most state employees in the executive, legislative, and judicial branches will likely experience a temporary reduction of about 5 percent in base pay for one year starting July 1, 2025, though many specific job categories are excluded and employers are required to avoid cutting pay below minimum wage. Employees who earn leave will get a new temporary leave accrual (up to 8.67 hours per month) to offset the cut; where collective bargaining prevents a direct pay reduction, agencies must pursue alternatives like unpaid leave, temporary layoffs, or reduced hours, and elected officials can opt in voluntarily. Institutions of higher education must meet cuts specified in the 2025-2027 budget but the exact reductions are not provided in the available text. Agencies will face added administrative duties and potential labor negotiations as OFM and the retirement systems director must adopt implementing rules, and retirement calculations may be affected because employers can certify that certain pay forgone during specific fiscal biennia be included in final salary calculations, which could change future pension benefits and employer contribution obligations. Key implementation details are missing from the provided text—including the full list of excluded positions, the criteria for positions “requiring backfill,” the precise higher education reductions, and the contents of section 8—so exact budgetary and pension impacts are uncertain.