BILL REQ. #:  S-1983.1 

READ FIRST TIME 03/01/13.   

     AN ACT Relating to improving the management of state debt; amending RCW 43.88.030 and 43.88.031; reenacting and amending RCW 39.42.070; adding a new section to chapter 39.42 RCW; adding a new section to chapter 43.08 RCW; adding a new section to chapter 43.88 RCW; creating a new section; and repealing 2011 1st sp.s. c 46 ss 1 and 2 (uncodified).

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds that Washington state uses debt financing to meet many of its essential capital and transportation needs. This debt capacity is limited by the amount of discretionary state government operating and transportation revenues available to repay the debt. A comprehensive approach to manage the state's debt capacity will help guide Washington's policymakers' choices about the amounts, types, and uses of debt financing.

NEW SECTION.  Sec. 2   A new section is added to chapter 39.42 RCW to read as follows:
     (1) The state finance committee shall advise and make recommendations to the governor and the legislature on the levels and types of state debt to be authorized to fund essential capital and transportation projects while protecting the state's credit rating, maintaining financial market access, and also preserving future budgetary flexibility.
     (2) The state finance committee's recommendations must take at least the following into consideration:
     (a) The overall amount of all types of debt issued by or on behalf of the state as reflected in the debt affordability study prepared annually by the state treasurer; and
     (b) The impact of planned and proposed debt issuance on the state's ability to access the bond market and the cost of those borrowings.
     (3) On or before November 1st of each year, they must recommend the following:
     (a) The level of various purpose general obligation debt service payments as a percentage of general state revenue;
     (b) The level of various purpose general obligation debt to be authorized for the following biennium when taking into account:
     (i) Capital needs for that biennium;
     (ii) Projected capital needs reflected in the ten-year capital project plan;
     (iii) Debt capacity with respect to the constitutional debt limit for that biennium;
     (iv) Projected constitutional debt capacity for the following four biennia; and
     (v) The economic, revenue, and interest rate forecast;
     (c) The amount of other methods of financing, including but not limited to limited obligation debt backed by specific revenues and debt issued pursuant to chapter 39.94 RCW, that is available to fund capital projects when taking into account the factors set forth in (b) of this subsection;
     (d) The level of motor vehicle fuel tax general obligation debt service payments as a percentage of current and projected motor vehicle fuel tax revenues, taking into consideration the amount directed to local governments, the amounts needed to pay current debt service, and any other amounts directed to any other lawful source;
     (e) The level of motor vehicle fuel tax general obligation debt to be authorized for the following biennium when taking into account:
     (i) The transportation needs for the following biennium according to the transportation plan;
     (ii) The projected transportation needs as reflected in the transportation plan; and
     (iii) The motor vehicle fuel tax capacity available when taking into consideration the amount directed to local governments, the amounts needed to pay current debt service, and any other amounts directed to any other lawful purposes;
     (f) The amount of other methods of financing, including but not limited to limited obligation bonds and financings authorized under chapter 47.29 RCW, available to fund transportation projects when taking into account the factors set forth in (e) of this subsection. A maximum level of debt to be authorized in any bond authorization bill required under section 7 of this act for capital projects; and
     (g) A maximum level of debt to be authorized in any bond authorization bill required under section 7 of this act for transportation projects.
     (4) The state finance committee must evaluate and include in its recommendations, the following:
     (a) The combined impact of issuing the proposed debt as identified in the capital plan and transportation plan on the state's cost of capital;
     (b) The combined impact of issuing the proposed debt as identified in the capital plan and the transportation plan on the general fund and the motor vehicle fund; and
     (c) The percentage of general state revenues and motor vehicle fuel tax revenues to be obligated to the payment of debt service when taking into consideration all relevant factors.

Sec. 3   RCW 43.88.030 and 2006 c 334 s 43 are each amended to read as follows:
     (1) The director of financial management shall provide all agencies with a complete set of instructions for submitting biennial budget requests to the director at least three months before agency budget documents are due into the office of financial management. The budget document or documents shall consist of the governor's budget message which shall be explanatory of the budget and shall contain an outline of the proposed financial policies of the state for the ensuing fiscal period, as well as an outline of the proposed six-year financial policies where applicable, and shall describe in connection therewith the important features of the budget. The biennial budget document or documents shall also describe performance indicators that demonstrate measurable progress towards priority results. The message shall set forth the reasons for salient changes from the previous fiscal period in expenditure and revenue items and shall explain any major changes in financial policy. Attached to the budget message shall be such supporting schedules, exhibits and other explanatory material in respect to both current operations and capital improvements as the governor shall deem to be useful to the legislature. The budget document or documents must not set forth a proposal that relies on an amount of state debt that exceeds the bond authorization bill required under section 7 of this act. The budget document or documents shall set forth a proposal for expenditures in the ensuing fiscal period, or six-year period where applicable, based upon the estimated revenues and caseloads as approved by the economic and revenue forecast council and caseload forecast council or upon the estimated revenues and caseloads of the office of financial management for those funds, accounts, sources, and programs for which the forecast councils do not prepare an official forecast. Revenues shall be estimated for such fiscal period from the source and at the rates existing by law at the time of submission of the budget document, including the supplemental budgets submitted in the even-numbered years of a biennium. However, the estimated revenues and caseloads for use in the governor's budget document may be adjusted to reflect budgetary revenue transfers and revenue and caseload estimates dependent upon budgetary assumptions of enrollments, workloads, and caseloads. All adjustments to the approved estimated revenues and caseloads must be set forth in the budget document. The governor may additionally submit, as an appendix to each supplemental, biennial, or six-year agency budget or to the budget document or documents, a proposal for expenditures in the ensuing fiscal period from revenue sources derived from proposed changes in existing statutes.
     The budget document or documents shall also contain:
     (a) Revenues classified by fund and source for the immediately past fiscal period, those received or anticipated for the current fiscal period, and those anticipated for the ensuing biennium;
     (b) The undesignated fund balance or deficit, by fund;
     (c) Such additional information dealing with expenditures, revenues, workload, performance, and personnel as the legislature may direct by law or concurrent resolution;
     (d) Such additional information dealing with revenues and expenditures as the governor shall deem pertinent and useful to the legislature;
     (e) Tabulations showing expenditures classified by fund, function, and agency;
     (f) The expenditures that include nonbudgeted, nonappropriated accounts outside the state treasury;
     (g) Identification of all proposed direct expenditures to implement the Puget Sound water quality plan under chapter 90.71 RCW, shown by agency and in total; and
     (h) Tabulations showing each postretirement adjustment by retirement system established after fiscal year 1991, to include, but not be limited to, estimated total payments made to the end of the previous biennial period, estimated payments for the present biennium, and estimated payments for the ensuing biennium.
     (2) The budget document or documents shall include detailed estimates of all anticipated revenues applicable to proposed operating or capital expenditures and shall also include all proposed operating or capital expenditures, including debt service required to be paid from any fund for bonds, including payment requirements on projects financed by other methods for the full term of the financing. The total of beginning undesignated fund balance and estimated revenues less working capital and other reserves shall equal or exceed the total of proposed applicable expenditures. The budget document or documents shall further include:
     (a) Interest, amortization and redemption charges on the state debt;
     (b) Payments of all reliefs, judgments, and claims;
     (c) Other statutory expenditures;
     (d) Expenditures incident to the operation for each agency;
     (e) Revenues derived from agency operations;
     (f) Expenditures and revenues shall be given in comparative form showing those incurred or received for the immediately past fiscal period and those anticipated for the current biennium and next ensuing biennium;
     (g) A showing and explanation of amounts of general fund and other funds obligations for debt service for bonds and payment requirements for projects financed by other methods for the full term of the financing and any transfers of moneys that otherwise would have been available for appropriation;
     (h) Common school expenditures on a fiscal-year basis;
     (i) A showing, by agency, of the value and purpose of financing contracts for the lease/purchase or acquisition of personal or real property for the current and ensuing fiscal periods; and
     (j) A showing and explanation of anticipated amounts of general fund and other funds required to amortize the unfunded actuarial accrued liability of the retirement system specified under chapter 41.45 RCW, and the contributions to meet such amortization, stated in total dollars and as a level percentage of total compensation.
     (3) The governor's operating budget document or documents shall reflect the statewide priorities as required by RCW 43.88.090.
     (4) The governor's operating budget document or documents shall identify activities that are not addressing the statewide priorities.
     (5) A separate capital budget document or schedule shall be submitted that will contain the following:
     (a) A statement setting forth a long-range facilities plan for the state that identifies and includes the highest priority needs within affordable spending levels;
     (b) A capital program consisting of proposed capital projects for the next biennium and the two biennia succeeding the next biennium consistent with the long-range facilities plan. Insomuch as is practical, and recognizing emergent needs, the capital program shall reflect the priorities, projects, and spending levels proposed in previously submitted capital budget documents in order to provide a reliable long-range planning tool for the legislature and state agencies;
     (c) A capital plan consisting of proposed capital spending for at least four biennia succeeding the next biennium, including debt service required to be paid from any fund for bonds and payment requirements for projects financed by other methods for the full term of the financing;
     (d) A strategic plan for reducing backlogs of maintenance and repair projects. The plan shall include a prioritized list of specific facility deficiencies and capital projects to address the deficiencies for each agency, cost estimates for each project, a schedule for completing projects over a reasonable period of time, and identification of normal maintenance activities to reduce future backlogs;
     (e) A statement of the reason or purpose for a project;
     (f) Verification that a project is consistent with the provisions set forth in chapter 36.70A RCW;
     (g) A statement about the proposed site, size, and estimated life of the project, if applicable;
     (h) Estimated total project cost;
     (i) For major projects valued over five million dollars, estimated costs for the following project components: Acquisition, consultant services, construction, equipment, project management, and other costs included as part of the project. Project component costs shall be displayed in a standard format defined by the office of financial management to allow comparisons between projects;
     (j) Estimated total project cost for each phase of the project as defined by the office of financial management;
     (k) Estimated ensuing biennium costs;
     (l) Estimated costs beyond the ensuing biennium, including debt service required to be paid from any fund for bonds and payment requirements for projects financed by other methods for the full term of the financing;
     (m) Estimated construction start and completion dates;
     (n) Source and type of funds proposed;
     (o) Estimated ongoing operating budget costs or savings resulting from the project, including staffing and maintenance costs;
     (p) For any capital appropriation requested for a state agency for the acquisition of land or the capital improvement of land in which the primary purpose of the acquisition or improvement is recreation or wildlife habitat conservation, the capital budget document, or an omnibus list of recreation and habitat acquisitions provided with the governor's budget document, shall identify the projected costs of operation and maintenance for at least the two biennia succeeding the next biennium. Omnibus lists of habitat and recreation land acquisitions shall include individual project cost estimates for operation and maintenance as well as a total for all state projects included in the list. The document shall identify the source of funds from which the operation and maintenance costs are proposed to be funded;
     (q) Such other information bearing upon capital projects as the governor deems to be useful;
     (r) Standard terms, including a standard and uniform definition of normal maintenance, for all capital projects;
     (s) Such other information as the legislature may direct by law or concurrent resolution.
     For purposes of this subsection (5), the term "capital project" shall be defined subsequent to the analysis, findings, and recommendations of a joint committee comprised of representatives from the house capital appropriations committee, senate ways and means committee, legislative evaluation and accountability program committee, and office of financial management.
     (6) No change affecting the comparability of agency or program information relating to expenditures, revenues, workload, performance and personnel shall be made in the format of any budget document or report presented to the legislature under this section or RCW 43.88.160(1) relative to the format of the budget document or report which was presented to the previous regular session of the legislature during an odd-numbered year without prior legislative concurrence. Prior legislative concurrence shall consist of (a) a favorable majority vote on the proposal by the standing committees on ways and means of both houses if the legislature is in session or (b) a favorable majority vote on the proposal by members of the legislative evaluation and accountability program committee if the legislature is not in session.

Sec. 4   RCW 43.88.031 and 1991 c 284 s 2 are each amended to read as follows:
     A capital appropriation bill shall include the estimated ((general fund)) debt service costs from all funds associated with new capital appropriations contained in that bill for the biennia in which the appropriations occur and for the ((succeeding two biennia)) full term of the financing.

Sec. 5   RCW 39.42.070 and 2009 c 500 s 1 and 2009 c 479 s 24 are each reenacted and amended to read as follows:
     ((On or after the effective date of this act,)) The treasurer shall compute general state revenues for the ((three)) six fiscal years immediately preceding ((such date)) the effective date of this section and shall determine the arithmetic mean thereof. As soon as is practicable after the close of each fiscal year thereafter, he or she shall do likewise. In determining the amount of general state revenues, the treasurer shall include all state money received in the treasury from each and every source ((whatsoever except)), including moneys received from ad valorem taxes levied by the state and deposited in the general fund in each fiscal year, but not including: (1) Fees and other revenues derived from the ownership or operation of any undertaking, facility or project; (2) moneys received as gifts, grants, donations, aid or assistance or otherwise from the United States or any department, bureau or corporation thereof, or any person, firm or corporation, public or private, when the terms and conditions of such gift, grant, donation, aid or assistance require the application and disbursement of such moneys otherwise than for the general purposes of the state of Washington; (3) moneys to be paid into and received from retirement system funds, and performance bonds and deposits; (4) moneys to be paid into and received from trust funds ((including but not limited to moneys received from taxes levied for specific purposes)) and the several permanent funds of the state and the moneys derived therefrom but excluding bond redemption funds; (5) moneys received from taxes levied for specific purposes and required to be deposited for those purposes into specified funds or accounts other than the general fund; and (6) proceeds received from the sale of bonds or other evidences of indebtedness. Upon computing general state revenues, the treasurer shall make and file in the office of the secretary of state, a certificate containing the results of such computations. Copies of said certificate shall be sent to each elected official of the state and each member of the legislature. The treasurer shall, at the same time, advise each elected official and each member of the legislature of the current available debt capacity of the state, and may make estimated projections for one or more years concerning debt capacity.

NEW SECTION.  Sec. 6   A new section is added to chapter 43.08 RCW to read as follows:
     Each year, the treasurer shall cause to be published a debt affordability study that provides an assessment of the state's current debt portfolio and an analysis of the impact of future debt issuance. The study must include but is not limited to: An overview of the state's outstanding and projected debt; the structure of the debt portfolio; the state's credit rating and peer analysis; the cost of existing debt; sources of funds for interest, principal, or lease payments; and the purposes for which debt instruments and financing contracts are issued. To assist with this work, the office of the state treasurer shall convene and staff a work group to include staff from the fiscal committees of the state house of representatives and state senate and the office of financial management. A copy of the debt affordability study shall be provided to the governor, the legislature, the council on state debt, and the state finance committee.

NEW SECTION.  Sec. 7   A new section is added to chapter 43.88 RCW to read as follows:
     To the extent any budget document or documents set forth a proposal to issue debt, the governor shall also cause to be prepared a bond authorization bill that reflects the amount and type of debt proposed to be issued. In preparing the bond authorization bill, the governor shall take into consideration the state finance committee's recommendations with respect to the level of debt to be issued and not exceed such recommendations.

NEW SECTION.  Sec. 8   The following act or parts of acts are each repealed:
     (1) 2011 1st sp.s. c 46 s 1 (uncodified); and
     (2) 2011 1st sp.s. c 46 s 2 (uncodified).