It's totally unserious to ask a candidate to negotiate against himself by providing a ceiling. As the candidate, just say $1M/year and move on to the next employer. If they're not asking a serious question they should not expect a serious answer.
A more generous interpretation is that they want to find out what the market salary is. How are they supposed to know what the market price is if they say their salary range first?
Normally I would agree, but they obviously already have a budget planned for this role as they turned candidates down for being "outside of budget", so I assume they are aware of the range a market salary should be in.
If this company meets the conditions so that the law applies to them, you can apply there, and then report them, and potentially collect a few thousand dollars when they get fined by Washington state.
I'd prefer to get that out there early in the process, rather than go through 5 interviews and then find out they're offering half of my minimum requirement.