Return to Governor Lowry's Proposed 97 - 07 Capital Plan Table of Contents

State Debt
Selecting Projects for Funding in the Capital Plan

T HE 1997-2007 CAPITAL PLAN charts a course for investments in capital facilities that are necessary for delivering essential public services, promoting economic development, and enhancing the quality of life over the next ten years. Development of this plan, and selection of specific projects to be funded in the 1997-99 Biennium, were guided by many of the same factors that affect operating budget decisions. These include:

The 1997-99 capital budget proposed by Governor Lowry recognizes all of these influences, providing $1.8 billion for new projects, with $934.2 million funded by the proceeds of general fund-supported bonds. An additional $1.4 billion in reappropriations are recommended to allow currently funded projects to proceed.

The capital budget from bond funds proposed for the 1997-99 Biennium must be viewed together with the 1997 supplemental operating budget proposed by the Governor. The supplemental budget includes funding for four capital items: $50 million for public school construction grants; $38.5 million for the Harborview Medical Center research facility for the University of Washington (UW); $21 million for construction of a Health Sciences facility at the Joint Center for Higher Education in the city of Spokane; and $2.6 million for the Building for the Arts program to meet the full commitment for state assistance to the Seattle Symphony.

The $112.1 million provided for these projects in the supplemental budget, added to the $934.2 million in new bond appropriations for the 1997-99 Biennium, brings total state bond and general fund commitments for capital purposes to approximately $1.05 billion.


Major projects and programs proposed in the 1997 supplemental and 1997-99 capital budgets are summarized below.


The capital budget proposed by the Governor for the 1997-99 Biennium includes $743 million in new funding for projects in the K-12 and higher education systems. Combined with funds provided in the Governor's 1997 supplemental operating budget, education will receive $801.5 million over the next two years. This represents the largest functional area to receive funds. Highlights of this funding plan include:

Human Services

The capital budget proposed by the Governor for the 1997-99 Biennium includes $271.5 million in funding for projects in corrections, juvenile rehabilitation, and other areas of human services. Highlights include:

Natural Resources

The capital budget proposed by the Governor for the 1997-99 Biennium includes $486.2 million in funding for projects administered by natural resource agencies. Highlights include:

Governmental Operations

The 1997-99 capital budget, together with funding for four capital construction projects funded in the Governor's 1997 supplemental operating budget, includes $323.9 million in funding for projects administered by general government agencies. Highlights include:


Most of the funding for transportation-related projects is contained in the transportation budget. However, the capital budget includes funding for facilities managed by the Washington State Patrol. Highlights include:

State Debt

There are two main funding sources in the proposed Ten-Year Plan: proceeds from general fund supported bond sales, and dedicated funds. Dedicated funds are limited by statute as to the sources of revenues and allowable expenditure purposes. Bond funds, however, can be allocated to any capital project to meet priority needs.

The bond-supported capital plan is constructed within two statutory fiscal limits:

General Fund Capital Appropriations and Debt Service
Dollars in Millions
New General Fund
Bond Appropriation
Debt Service Percent Growth
Debt Service
1993-95 952 721
1995-97 825 843 17%
1997-99 934 985 17%
1999-01 921 1,122 14%
2001-03 962 1,215 8%
2003-05 972 1,259 4%
2005-07 997 1,388 10%

The proposed ten-year capital plan recognizes these financial limits by putting forward a borrowing program that is well-managed and affordable. The State Finance Committee manages a borrowing program that commands attractive interest rates and pursues refinancing to reduce costs whenever possible. As a result, the state currently enjoys bond ratings of Aa, AA and AA by Moody's, Fitch Investor Services and Standard and Poor's, respectively. In a bond sale analysis issued in June 1996, Standard and Poor's described its rationale for the state's favorable bond rating:

The rating on Washington's debt reflects a strong and diversifying economic base, which is exhibiting less vulnerability to cyclical downturns in the aerospace industry; sound financial performance; and a moderate debt burden.
-- Standard and Poor's Ratings Group, June 21, 1996

A commonly used measure to evaluate debt service trends is the amount of debt service as a percentage of state personal income. This measure portrays the financial capacity of the state's economy to pay for the costs of previous capital investments. This measure has remained relatively stable in recent years. The total amount of new bond supported appropriations proposed for 1997-99 is $934.2 million composed of $925.9 million allowed under the debt limit and $8.3 million in bond capacity made possible by the elimination of appropriations for projects previously authorized that will not proceed. New bond-supported appropriations allowed under the debt limit in the 1999-01 Biennium are estimated to be $921 million, with new appropriation levels increasing in subsequent years. The structure of past bond sales allows increased new appropriation levels after the 1999-01 Biennium within the 7 percent statutory debt limit. Selecting Projects for Funding in the Capital Plan

There are three steps involved in identifying projects that are included in the Governor's capital plan. The first step is a technical review of agency capital budget proposals.

The second step is to compare the operating budget needs and decisions with the capital budget requests. Caseload growth in the operating budget may have capital budget implications. Decisions to expand or reduce operating programs often have a similar effect on the capital projects . Linking agency operating budget strategic plans to long-term capital plans is essential for ensuring that appropriate facilities are available to carry out agency responsibilities.

Capital project recommendations from the Higher Education Coordinating Board and the State Board for Community and Technical Colleges are also reviewed. These recommendations help set priorities within the community and technical college, and university systems for funding to accomplish the goals defined by these Boards.

The final step is to prioritize the various agency and university requests and select the final list of recommended projects. At this point, the choices between facility preservation versus new investments, new capacity versus improvements in quality, and completing previously funded projects versus new proposals, must be resolved. A final set of projects for each biennium across the Ten-Year Plan is identified so that progress is made on recommended projects in an orderly manner. To bring the cost of projects into balance with available resources may require that some projects are delayed, or completed in phases. The outcome of this process of balancing needs and resources is evident in the capital plan presented.

OFM implemented a new process for evaluating the financial implications of alternate financing proposals during this capital budget process. A standard methodology for calculating and comparing cash flow and the present value of a long-term investment was developed and applied to each proposal for alternate financing. The total costs for each proposed alternate financing project are now clearly presented in short-term cash flow and long-term present value investment terms. The full cost implications of each proposal are clearly displayed so that projects proposed on the basis of anticipated savings can be accurately evaluated. Similarly, the future cost/savings for projects proposed on the basis of program, service, or operational need can now be reviewed with more comprehensive and accurate financial information.