Bonds

The Washington state Senate’s capital construction budget would nix Gov. Jay Inslee’s plan to issue $4 billion in housing bonds to spur construction and expedite efforts to lessen the state’s housing crisis.

In December, Inslee released a housing proposal as part of his budget that included placing a referendum on the ballot for the bonds, which would have been allowed to exceed the state’s debt limit.

The $7.9 billion capital construction budget proposalthe Senate’s budget writers released Monday includes spending on affordable housing, behavior health, education and natural resources projects, but not the housing bond referendum.

Inslee’s fellow Democrats hold solid majorities in the legislature, but they are not marching in step with the governor.

“In the middle of a housing crisis, less is unacceptable,” Inslee said. “We need to go big, so people can go home. The problem is growing, not shrinking, so our response must match the moment.”

The underlying capital budget will fund approximately 2,200 housing units in 2023–25, the governor said, while his $4 billion proposed referendum would add approximately 5,300 units additional units during that time, and 19,000 in the next six years.

The governor said the Senate’s proposal would take the state backwards on housing, allocating less than what was approved during the last biennium.

The 2021-23 capital budget included about $290 million for the Housing Trust Fund and $419 million for a new type of housing called Rapid Capital Acquisition. In 2021-23, federal funding significantly boosted overall funding to more than $800 million. The Senate proposal doesn’t include funding for RCA and would reduce overall funding for housing unit investments back to $542 million.

It would put $400 million in the Housing Trust Fund. Additional funding would support land acquisition for the Housing Finance Commission, transit-oriented development legislation, and grants for the Connecting Housing to Infrastructure Program. In total, the proposal includes $625 million for housing-related investments.

The governor added that he appreciates the inclusion of the new behavioral health hospital and housing in the proposal.

The Senate will vote on its proposal next week, and the House will introduce its own. Lawmakers have until the end of April, when the session ends, to reach a budget agreement.

Sen. Mark Mullet, D-Issaquah, vice chair of the Senate Ways & Means Committee, said the Senate’s proposal would set a record for the largest-ever investment in the state’s Housing Trust Fund.

The budget outlines state infrastructure spending for the next two years and stays within the state’s constitutional debt limit — an important step to protect the state’s historically high Aaa credit rating from Moody’s Investors Service and avoid higher debt service payments that could financially hinder future state budgets, Mullet said. The governor’s proposal would have allowed the housing bonds to exceed the debt limit.

Fitch Ratings and S&P Global Ratings assign Washington AA-plus ratings. All three maintain stable rating outlooks.

“This is a strong budget that steps up to the scale of the challenges facing our state, and does so in a fiscally responsible way that we can sustain into the future,” Mullet said. “None of our challenges are going to be solved overnight, but this budget takes the steps necessary to meet our pressing needs while creating jobs and spurring economic growth.”

Washington is now expected to bring in about $483 million less in the 2023-25 budget period than projected last November, according to the revenue outlook presented Monday to the state’s Economic and Revenue Forecast Council.

The Senate also proposed $650 million for a new forensic hospital at Western Hospital and $141 million to increase behavioral health beds in the community. It would spend $120 million for conservation and outdoor recreation and invest in floodplain resilience and water supply projects.

It would provide $1.2 billion for university capital projects including funding for Washington State University’s new Engineering Student Success Building and its Knott Dairy Farm.

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