Brief Summary of Bill

• The statutory definition of general state revenues used in determining bond capacity is changed to include the total state portion of the property tax.

Majority Report: Do pass. Signed by 14 members: Representatives Dunshee, Chair; Hunt, Vice Chair; Blake, Chase, Flannigan, Hankins, Kirby, Lantz, McIntire, Morrell, Murray, O'Brien, Simpson and Veloria.

Minority Report: Do not pass. Signed by 11 members: Representatives Alexander, Ranking Minority Member; Priest, Assistant Ranking Minority Member; Armstrong, Benson, Bush, Hinkle, Mastin, Newhouse, Orcutt, Schoesler and Woods.

Washington's indebtedness is limited by a statutory and constitutional debt limit. The treasurer cannot issue any bonds that would cause the debt service on the new plus existing bonds to exceed 7 percent of general state revenue averaged over three years; the constitutional limit is 9 percent.

Bond capacity, for a given biennium, is the amount of projects that can be authorized by the Legislature for which the treasurer can issue bonds to finance without exceeding the debt limit in the future, given forecasted variables and a stable capital budget level in future biennia. Interest rates, revenue, and other factors affect bond capacity.

For purposes of the debt limit, "general state revenues" is defined in the State Constitution and by statute. General state revenues traditionally has been defined to be more limited than revenue going to the state general fund; revenue identified in statute as being for specific purposes or going into dedicated accounts typically has not been considered general state revenues. The same definition is used for both the constitutional and statutory debt limits except that the statutory definition includes the portion of the Real Estate Excise Tax (REET) going to the general fund for support of the common schools and the lottery revenue going to the Education Construction Account while the constitutional definition likely does not. The lottery was added to general state revenues by Initiative 728, and the REET was added to the statutory definition of general state revenues in the 2002 bond bill.

Most of the state portion of the property tax goes to the general fund for support of the common schools; a portion goes to the student achievement fund and is distributed to local school districts.

The statutory definition of general state revenues used for debt limit purposes and determining bond capacity is changed to add the state portion of the property tax. This includes the portion going to the general fund and the portion going to the Student Achievement Fund.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.

Testimony For: This change is necessary to support a higher level of appropriations in the Capital Budget, particularly for K-12 and higher education capital needs.

Testified: Terry Teale, Council of Presidents; and Bill Robinson, The Nature Conservancy.