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Published on Thursday, April 28, 2016

Public Works Trust Fund and Model Toxics Control Accounts face uncertain futures

What looked like a quiet year going into 2016 proved to be anything but when the final bell tolled on the session. AWC was approaching 2016 as an educational and building year, expecting the real fireworks on the future of the Public Works Assistance Account to take place in 2017. A last-minute raid attempt by the Senate as well as a session-long struggle to minimize the damage from huge shortfalls in the Model Toxics Control Accounts meant it was a challenging session on infrastructure after all.

Public Works Trust Fund (PWTF)

When it came to the Public Works Trust Fund (formally called the Public Works Assistance Account - PWAA) we concentrated on buttressing friendly legislators and making the case that we needed their support to ensure that the state, at the very least, develops an affirmative plan for the state/local infrastructure partnership. After several years of last-minute sweeps to balance the state general fund, it felt like the Public Works Assistance Account was going to wither on the vine, killed without any clear path forward. We argued along with our partners in the counties, PUDs and water/sewer districts that the state needed to stop letting this happen because of path-of-least-resistance budgeting and instead get the relevant parties together and develop a plan for where to go from here.

We worked with our partners on a budget proviso to create a small task force, convened by the Office of Financial Management (OFM), to work on a state infrastructure strategy. Normally we would have been happy to see something like that make it into the budget, but frankly it was overshadowed by the fact that the Senate had once again carried the day with their late-breaking proposal to balance the state’s four-year budget by raiding the Public Works Trust Fund. At that time it looked to many observers that the PWTF had reached its end. While there is still a significant stream of loan repayments yet to be paid back to the account, this budget signaled intent to continue sweeping until the account was bone dry. It’s simply infeasible to maintain a revolving loan fund when the resources to continue making loans are redirected to the general fund year after year.

Model Toxics Control Account

The MTCA situation was very dire. The Model Toxics Control Account is shorthand for the state accounts that finance local toxic cleanups, stormwater projects and solid waste programs. A perfect storm of challenges left the Legislature facing $100 million less to spend than they budgeted for in June 2015.

For several years the Legislature had moved environmental programs that were previously funded by the general fund to instead be funded by MTCA. In order to minimize the impact of those shifts they turned to more aggressive cash-management, attempting to fund just as many capital projects despite the new operational costs. They managed to do this by approving funding for more projects but assuming that some projects would move slowly, pushing actual spending out into future years. This worked for a time, until the dramatic downturn in oil prices (upon which most MTCA revenues are based) left nowhere near enough money to meet the obligations that had been promised.

Because of this, the name of the game this session was in minimizing the damage. We went into the session expecting that the logical thing for the Legislature to do was to take relatively equal reductions across the major MTCA spending categories. This would make sense for us as our two main priorities in the account are toxic cleanup funds and stormwater grants. Sen. Doug Ericksen (R-Ferndale), Chair of the Energy, Environment & Telecommunications Committee had other ideas. He drove the conversation from the very beginning with a proposal (SB 6570) to prioritize toxic cleanups over most other MTCA investments. Ports around the state put on a heavy push for this approach. For cities, this was concerning because it would have caused major reductions in funding for stormwater projects that cities were counting on, including some who were already spending money in expectation of having their grants finalized.

Meanwhile the House budget approach was almost entirely opposite, prioritizing stormwater projects and taking the brunt of the reductions from new cleanup projects. Up until the last weeks of the session it looked like the Senate position would win the day, but ultimately the House was able to balance things back up. Cities and the environmental community worked together quite well in trying to defend the stormwater investments, and kudos go to the Washington Environmental Council for all the work they did. The final budget, while slightly weighted towards protecting cleanups over stormwater, was significantly more balanced than either initial budget, and ultimately represents close to what we were looking for – a balanced approach to reductions.

At the end of the day, there remains a need for a serious and substantive reflection on how to keep MTCA focused on its core purposes so that revenue shifts are not endangering critical projects and pitting erstwhile allies against each other. There was significant vetting of MTCA capital expenditures this session, but there was little discussion of moving some operating expenses back to the general fund. Realistically that is what needs to happen, but the state’s continuing budget challenges make that highly unlikely.

There was a brief glimmer of hope this session when a bipartisan bill (SB 6660) emerged late in the session from the Senate sponsored by Sen. Karen Keiser (D-Kent). It would have smoothed MTCA revenue collections by instituting a surcharge on top of the existing tax when revenues drop. While AWC and others supported the bill, it did not gain traction. We hope there may be another attempt to explore this promising concept.

Governor vetoes PWTF sweep

Somewhat surprisingly, Governor Inslee vetoed both the sweep of the PWTF and the funding for the OFM infrastructure task force. We applaud his leadership on providing a stay of execution for this important infrastructure funding program but we recognize that the true challenge in front of us has not changed all that much. The state has money problems and in the Senate, the Republicans in particular would prefer to address those challenges in part by sweeping funds from the PWTF. In the House, both Democrats and Republicans are more supportive of this program, but ultimately they have other higher priorities.

Infrastructure funding challenges remain

While we were saved momentarily by the Governor’s veto pen, we continue to have a lot of work to do to determine the future of the basic infrastructure partnership and to find a way to stabilize and restore the capacity of the MTCA accounts.

BillTracker Bill # Descriptive title Final status
Yes HB 2971 Clarifying conditions for use of REET funds for maintenance purposes Law; Effective 6/9/2016
  SB 5624 Authorizes loans for certain local capital projects from the proceeds of state issued bonds  Failed
  SB 6570 Prioritizing the expenditure of MTCA funds for the cleanup of toxic pollution Failed
  SB 6660 Increasing hazardous substance tax rate when revenue collections fall below $175 miion per year Failed