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Published on Wednesday, July 12, 2017

Capital budget stalemate intensifies

Governor Inslee vetoed a tax cut for manufacturing businesses in the Legislature's budget deal, and with that, a new threat has emerged to the passage of the state's capital budget. A number of House Democrats signed a letter asking the Governor to veto this tax cut. Meanwhile Republicans immediately decried the veto as breaking a heavily-negotiated operating budget agreement while the Governor argued that no one asked to confirm whether he would sign the provision. Some Senate Republicans threatened that if the Legislature did not override the veto they would not pass a capital budget.

This new threat comes at a time when legislators struggle to find consensus on a controversial water rights fight that has held up the adoption of the state's capital budget. Capital budget negotiations have been postponed by the Senate majority until the water issues are dealt with to their satisfaction. The House Democrats and House Republicans sent over a new capital budget very early in the morning on July 1 that represented what a negotiated budget could look like. The Senate declined to take this budget up.

During negotiations on the final day of the fiscal year, a tentative deal fell apart in the early hours of the morning. The proposal would have permanently addressed the Hirst case and clarified that local governments can rely on the state to regulate water availability. The proposal included a significant new fee for well drilling that, combined with capital budget investments, would have resulted in major new permanent funding for stream flow restoration efforts.

The proposal regrettably did not include any resolution of the Foster case – leaving municipal providers who need to secure water for future growth in a precarious position, potentially unable to move forward. The effect of this dubious policy choice would be to make it much more difficult to secure new water in the areas of the state that the growth management act attempts to drive population growth: into our cities. Cities need real mitigation options or new water for growth will be almost impossible to secure for cities who don't already have it.

Tribal interests fought vigorously against this deal, arguing that the bills didn't fully recognize the unique and finite nature of water resources and for a greater measure of tribal control over how any money was spent. Ultimately the House again did not bring a water bill to the floor for a vote.

Our understanding is that the current House Democratic position is that they will only pass an 18 to 24-month short term "time out" or "pause" of the Hirst decision, and put the question to a stakeholder group to bring resolution to the issue. They believe that will allow waiting landowners to move ahead with drilling of needed wells while a more permanent solution can be found. Conversely the Senate Republicans oppose any solution that does not permanently address the problem. AWC, counties, utility providers, developers, bankers and others have opposed this temporary solution because it does not adequately address the problem. We believe a temporary resolution will only exacerbate the uncertainty facing development and lending on properties affected by the Hirst case. It will also create vexing planning challenges for local governments and under the most recent proposal, enshrine the policy that local governments cannot rely on the Department of Ecology's management of water after the timeline runs out. The proposed stakeholder process is heavily unbalanced, and does not even consider the issues facing water-short municipalities.

The path forward from here remains unclear. Somehow both chambers must figure out how to find common ground on this divisive topic or the state faces the very real risk of not passing a capital budget. Tensions are high and neither chamber or party is happy with the other.

Cities who want to get involved would be well-suited to send a balanced message and to encourage both sides to find common ground on all of these issues. Messages and tips to share:

  1. Cities need both a capital budget and a durable and fair solution to the pressing water issues facing the state.
  2. Articulate the value of any capital projects you are interested in.
  3. Encourage legislators to keep working together to find a balanced permanent solution to the water challenges and one that deals with both the Hirst and Foster cases. Temporary fixes are not solutions. Solutions that tilt water availability only to one set of users do not fix the problems facing the whole state.
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