Washington Legislature must not raid the capital budget to solve budget crisis

WASHINGTON state's budget crisis has everyone scrambling to eliminate government waste, find savings and possibly, end entire state programs. Despite all the bleak days in Olympia, there is one ray of hope still left coming from the capitol dome — Washington's capital investment plan.

This plan — the capital budget — could mean nearly 62,000 new family-wage jobs and $6 billion in increased economic activity throughout the state in the next two years. Now, we just need to make sure the Legislature doesn't raid the state's seed corn and damage our future by using capital funds to patch up the general government budget.

What taxpayers get from the capital budget are things people expect from government — schools, universities, prisons, clean drinking water, sewage-treatment plants, parks and more. Every county in Washington benefits from capital investments. From a wastewater-treatment plant in Prosser to a water-main replacement in Port Roberts — infrastructure repair and replacement projects provide for the protection of human and environmental health as well as generating local tax revenue from the construction itself.

Funds from capital investments were diverted in the current 2009-11 biennium to the state's operating budget. It cost Washington a lot of jobs. Capital investments create more jobs and economic activity than general government spending. Investing $1 billion in capital projects rather than general government spending creates nearly 1,000 more jobs and almost $55 million more in wages, according to recent statewide study.

The Public Works Trust Fund makes loans to local governments for vital infrastructure. This exceptional program has not seen a single loan default during its 25-year history. It has loaned $2.3 billion to local governments in support of projects worth $4.8 billion.

The $225 million in the capital budget provided as assistance to local school districts, which provide their own matching funds, will make possible 60 school projects valued at more than $669 million in 30 school districts located in 15 counties across our state.

These are two prime examples of the tremendous leveraging effect that state capital investments have in generating jobs and economic activity.

When the Legislature raided the Public Works Trust Funds and other construction funds to help balance the general-fund budget, that cost jobs, economic development and the design of future projects. The Legislature backfilled some of that loss with added bond sales. With the downturn in tax collections, that leaves a lot less bond capacity for our coming two-year budget.

Traditional school-construction funds from timber sales have been down, and the Legislature had to also replace those lost bond funds with other operating-budget resources (like lottery proceeds). But there is greater pressure now to use those revenues for general government spending, placing even more pressure on available resources for capital investment. Steps must be taken to preserve our state's ability to make the capital investments we know will help fuel our economic recovery.

The new Washington state research study from American Institute of Architects (by Bellevue-based Hebert Research) shows that pulling money out of the design and construction of public-works projects costs more than you'd think.

As the capital budget has been cut over previous years, the economic benefits have fallen accordingly. The diminished level of investment in the current 2009-2011 budget means about 19,400 fewer total jobs than in the previous biennium.

On a dollar-per-dollar basis, capital-budget investments generate more economic activity, wages and employment than spending on the operating budget.

One billion dollars invested in capital projects creates 13,820 total jobs and $732.6 million in wages — 920 more jobs and $54.9 million more in wages compared with the same level of spending in the operating budget.

While Washington struggles with our current budget problems, there are other options for more stable sources of capital investment, including Tax Increment Financing (TIF). TIF financing allows tax revenue from expanded economic activity made possible by an infrastructure construction project to be invested back into that community. If Washington joined the 48 other states who use this well-established economic-development tool, it would provide local governments with more local economic investments without additional taxes.

We hope the Legislature approves TIF this year so we can expand our options to forge a more permanent path for capital investments. In the meantime, let's keep our seed corn in the capital budget and grow the economy to create jobs that will support our communities and provide us with valuable facilities for years to come.