READ FIRST TIME 05/24/11.   

     AN ACT Relating to limitations on state debt; adding a new section to chapter 39.42 RCW; creating new sections; and making an appropriation.

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

NEW SECTION.  Sec. 1   The legislature intends to examine the various kinds of debt incurred by Washington state and the limitations that control the amount and use of debt. To assist in this examination, the legislature seeks the assistance and recommendations of a commission on state debt.

NEW SECTION.  Sec. 2   (1) The commission on state debt is created. The commission shall include the following members: The state treasurer, who shall chair the commission; the director of the office of financial management; one member each from the two largest caucuses of the senate, appointed by the president of the senate; one member each from the two largest caucuses of the house of representatives, appointed by the speaker of the house of representatives; six independent members, three appointed by the state treasurer in consultation with the state finance committee and three appointed by the governor in consultation with the state finance committee. These six independent members must not have a financial interest in debt-financed state expenditures and shall include appointees with experience in public or private finance, local government, or related academic or legal backgrounds. The members of the commission shall serve without additional compensation, but shall be reimbursed in accordance with RCW 44.04.120 for attending meetings of the commission. Staffing for the commission shall be provided by the state treasurer's office, the office of financial management, and legislative capital budget staff.
     (2) The commission shall examine the following:
     (a) Trends in the use of all kinds of state obligations including general obligation bonds; revenue bonds and other debt that supports the transportation budget; financing contracts; lease purchase agreements; and other forms of obligations including long-term liabilities such as pension liabilities and long-term leases. The examination of trends must also examine the impact of debt service payments on operating budget expenditures.
     (b) Major uses of state debt, the debt service expenditures associated with those major uses, and a comparison of the debt service expenditures and other operating budget expenditures that addresses similar policy objectives as the major uses of debt.
     (c) Existing limitations and policies on the use of various kinds of debt and how those policies and limitations compare with other states with similar or higher credit ratings. The comparisons will include an examination of relative debt burden and the relationship between state debt and debt incurred by local governments in the comparison states.
     (3) The commission must recommend improvements in state debt policies and limitations, including possible amendments to state constitutional debt limitations that will accomplish the following:
     (a) Stabilizes the capacity to incur new debt in support of sustainable and predictable capital budgets;
     (b) Reduces the growth in debt service payments to an appropriate level that no longer exceeds the long-term growth in the general fund expenditures;
     (c) Maintain and enhance the state's credit rating.
     (4) The commission must consult affected stakeholders.
     (5) The commission must report its findings and recommendations to the state finance committee and the appropriate committees of the legislature by December 1, 2011.

NEW SECTION.  Sec. 3   A new section is added to chapter 39.42 RCW to read as follows:
     The state finance committee must recommend a working debt limit for purposes of budget development for various purpose capital bond appropriations. Nothing in this section shall in any manner affect the validity of indebtedness incurred in compliance with the provisions of Article VIII, section 1 of the state Constitution. The working debt limit must be updated periodically following forecasts of the economic and revenue forecast council. The governor and legislature must develop capital bond budgets within the most recent recommended working debt limit. The working debt limit must be lower than the state constitutional debt limit in order to reserve capacity under the constitutional limit for emergencies and economic uncertainties. In order to begin to accomplish the objectives of stabilizing debt capacity and reducing the debt service burden on the operating budget, the state finance committee must recommend working debt limits of eight and one-half percent from July 1, 2015, to and including June 30, 2017; eight and one-quarter percent from July 1, 2017, to and including June 30, 2019; eight percent from July 1, 2019, to and including June 30, 2021; seven and three-quarters percent from July 1, 2021, and thereafter. The state finance committee may recommend modified working debt limits in response to extraordinary economic conditions. The state finance committee is authorized to reduce or delay the issuance of bonds if an issuance would result in exceeding the recommended working debt limit.

NEW SECTION.  Sec. 4   The sum not to exceed one hundred fifty thousand dollars, or as much thereof as may be necessary, is appropriated for the fiscal year ending June 30, 2012, from the state treasurer's service fund to the office of the state treasurer for the purpose of this act.