Debt limit could derail plans

Washington's falling revenue has crimped state building-project plans, and this could lead to a halt on approved projects that are not yet under way.

Already, Gov. Chris Gregoire has put out a small capital-budget proposal that would allocate just $219 million in new projects; she thinks the proposal will generate 600 jobs over two years.

But some lawmakers say the state is too close to the constitutional debt ceiling that limits debt-interest payments to about 9 percent of state revenue. State Treasurer Jim McIntire won’t issue bonds that put the state over that limit.

“Right now we are at a point where we have no additional bonding capacity – unless there are projects that aren’t going to happen and you can make some room,” state Sen. Karen Fraser, D-Thurston County, said Friday. “So the big picture is quite grim. We might have to do some cutting, which could be difficult.”

Rep. Hans Dunshee, the Snohomish Democrat who writes the construction budget in the House, said as much as $530 million in bonding capacity for already-approved projects might have to be slashed unless lawmakers use some budgeting moves to create what budget writers call “capacity.”

Gregoire took away limits on some “dedicated” fund accounts to raise the state debt limit in her supplemental budget proposal, released this month. That move allowed her to add projects, and a slower-than-expected run of school- construction projects freed up more than $100 million in bonding capacity.

“This year we have programmed right up to the maximum, since money is cheap right now and capital projects create jobs,” said Gregoire’s budget spokesman, Glenn Kuper. “However, we believe we will stay under the limit.”

Kuper said the unused school-construction funds, new taxes that the Democrat-controlled Legislature might approve next year and other factors are giving them room.

“We will only be close to the limit if K-12 projects exceed current projections ... the Legislature doesn’t increase revenue, no projects are under budget, and revenues continue to decline,” Kuper said in an e-mail.

Major projects on Gregoire’s list include $6.8 million for two housing units and a kitchen at the Washington State Penitentiary, $42.8 million for reconstruction of the University of Washington’s Balmer Hall, $15 million for a student information system at Washington State University, and $7.5 million for a University of Washington-Tacoma addition.

Thurston County will get $3.4 million worth of projects if lawmakers agree to fund the governor’s request. The largest is a $2.5 million project to replace a 60,000-square-foot roof at the Labor and Industries headquarters in Tumwater. The 18-year-old building’s roof has begun to leak, and a consultant has recommended replacing it immediately, agency spokesman Steve Pierce said. The roofing is made of a rubber-sheet material.

Gregoire sought $440,000 for the cost of removing petroleum-contaminated soils associated with the Wheeler project, east of the Capitol, in August and October. A new state Information Services headquarters is being built there. About 4,255 tons of soil was removed from the former Legislative Service Center site. It was contaminated with petroleum hydrocarbons, most from heating oil tanks in use from 1900 to 1960, before the state bought the apartment building for use as an office.

Rep. Gary Alexander, R-Thurston County, said he is worried about moving “up against the debt-service limit,” which strains the operating budget. “I don’t know how much of a capital budget we can afford to have in the supplemental budget,” he said.

Alexander, the ranking minority member on the House Ways and Means Committee, said he had heard about the possibility of cutting $500 million in projects from the $1.9 billion in bonds lawmakers approved this year.

“I would start looking right away at which ones hadn’t started yet. Once they’ve started, it’s pretty darn hard to stop them,” he said.

Brad Shannon: 360-753-1688