LOS ANGELES -- Washington State legislators have scuttled a 10-year, $1 billion capital proposal by Gov. Booth Gardner that would have entailed raising the state's statutory debt limit, but they exempted certain education programs from the debt cap to allow them to move forward.

Besides the regular biennial capital program, Gov. Gardner had proposed a new 10-year capital plan that would be divided evenly among higher education, schools, housing, and recreation or wildlife land acquisition.

Legislators balked at the long-term spending plan, however, because they "weren't sure they wanted to commit in those areas for the future," said Carole Cheatle, senior budget assistant to the governor for transportation and capital programs.

The governor's plan hinged on approval for increasing the state's statutory debt limit to 8% from the current 7%.

By statute, Washington cannot issue additional general obligation bonds -- with certain exceptions -- if maximum annual debt service would exceed 7% of the three-year average of general state revenues. Gov. Gardner's 10-year plan raised the possibility of the state exhausting its GO debt capacity under the current 7% limit.

Although legislators did not approve an increased debt limit, they did agree to some of the governor's spending plan by "in essence" removing certain funding that otherwise would be subject to the debt cap, Ms. Cheatle explained.

For example, rather than fund certain higher education improvements with bonds secured by general state revenues, the legislators chose to pay for the debt with tuition fees from state higher education institutions, Ms. Cheatle noted. This qualifies the debt as so-called reimbursement bonds under Washington law, therefore exempting it from the debt cap.

As a result, the exemption will permit Washington to fund three projects, totaling about $100 million, at separate state campuses, Ms. Cheatle said.

Separately, the legislators also approved dedicating property tax revenues to support about $120 million of common school facilities construction for kindergarten-to-12th-grade projects. The earmarking of revenues also allows bond sales for those projects to be excluded from the debt limit, Ms. Cheatle said.

Without the debt limit exceptions, the $220 million of education projects either would not have been funded or would have required other spending proposals to be cut, she added.

Gov. Gardner still hopes to develop a 10-year capital plan backed with a spending commitment, Ms. Cheatle said. This spring, however, legislators endured a long session and it was "difficult to get much through," she noted.

Washington has about $3.3 billion of general obligation bonds outstanding, and remaining GO debt capacity of about $700 million. The state expects to sell from GO bonds annually during the biennium that began July 1, but not all of that debt is subject to the debt limit.

Moody's Investors Service rates Washington GOs Aa. Standard & Poor's Corp. and Fitch Investors Service Inc. rates tham AA.

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