Brief Description: Providing for the sale of bonds for facilities for career and technical education.

Sponsors: Representatives Fromhold, Ormsby, Priest, Sullivan, McCune, Wood and McIntire.

Hearing Date: 2/5/08

Staff: Susan Howson (786-7142).

Background:

Washington periodically issues general obligation bonds to finance projects authorized in the capital and transportation budgets. General obligation bonds pledge the full faith and credit and taxing power of the State towards payment of debt service. Legislation authorizing the issuance of bonds requires a 60 percent majority vote in both the House of Representatives and the Senate. The State Finance Committee, composed of the Governor, the Lieutenant Governor, and the State Treasurer, is responsible for supervising and controlling the issuance of all State bonds.

Bond authorization legislation generally specifies the account or accounts into which bond sale proceeds are deposited, as well as the source of debt service payments. When debt service payments are due, the State Treasurer withdraws the amounts necessary to make the payments from the state general fund and deposits them into the bond retirement funds.

Washington's indebtedness is limited by both a statutory and a constitutional debt limit. The State Treasurer may not issue any bonds that would cause the debt service on the new, plus existing bonds to exceed 7 percent of general state revenues averaged over three years in the case of the statutory limit, and 9 percent under the constitutional limit. For purposes of the debt limit, "general state revenues" is defined in the State Constitution and by statute.

There are several categories of state general obligation debt that are excluded from the 9 percent constitutional debt limit including: (1) voter-approved debt; (2) bonds payable from the gas tax and motor vehicle license fees; (3) bonds payable from income received from the investment of the Permanent Common School Fund; (4) debt issued to meet temporary deficiencies in the State Treasury and debt issued to pay current expenses of state government; (5) debt issued in the form of bond anticipation notes; (6) debt payable solely from revenues of particular public improvement (revenue debt); (7) debt that has been refunded; and (8) state guarantee of voter-approved general obligation debt of school districts.

At statehood, the Enabling Act granted certain lands to the State to be held in trust for various public purposes. Article 9 of the State Constitution reflects the Enabling Act by establishing the Permanent Common School Fund and the Common School Construction Fund. There are also five other permanent funds.

The Department of Natural Resources transfers proceeds from the sale of stone, minerals, or property other than timber and crops for school and state land to the Washington State Investment Board for investment in the Permanent Common School Fund. Earnings of the Permanent Common School Fund are deposited in the Common School Construction Fund, which is appropriated for K-12 school construction.

Summary of Bill:

The State Finance Committee is authorized to issue $100 million in state general obligation bonds to finance capital improvements related to skill centers.
         
The State Treasurer is required to withdraw funds from that portion of the Common School Construction Fund derived from the investment income on the Permanent Common School Fund to make the principal and interest payments on the bonds.

The proceeds from the sale of bonds must be deposited into the Skill Centers Building Account, an appropriated account created in the bill. The bill specifies that it is the intent of the Legislature to appropriate these funds beginning in the 2009-11 biennium.

The bill exempts the state general obligation bonds authorized in the bill from the 7 percent statutory debt limit.

Appropriation: None.

Fiscal Note: Requested on 2/1/08.

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