When Washington lawmakers returned to the Capitol last December to get a head start on the 2012 legislative session, they were treated to an astonishing sight. Rick Slunaker, lobbyist for Associated General Contractors (AGC), was seen in the company of Jeff Johnson, president of the Washington State Labor Council. And they were being civil to each other. They weren’t facing off like the combatants they often are at the statehouse on the never-ending business and labor disputes that arise every session. They weren’t gazing at each other from opposite ends of the marbled hallways like a couple of cowpokes waiting to draw. Instead, they were visiting lawmakers’ offices together, and pitching an idea on which both could agree. That by itself was enough to make people wonder if they were seeing double.
It was the quiet launch of a plan that has to be counted as one of the major accomplishments of this year’s Legislature—a billion-dollar public works construction effort that will put 18,000 people to work and touch every corner of Washington, accelerating projects the state was planning to get to someday. Classroom buildings, sewer and water systems, Puget Sound cleanup, energy-efficiency improvements, hospitals—you name it. About half will be paid for with general obligation bonds and the remainder with a complicated set of debt instruments secured against the state’s dedicated accounts. It took a full-tilt lobbying effort from an unusual coalition of players and more than a bit of backroom deal making to put it over. Also, a project list that sprinkled money across every legislative district. But while politics was a factor, it also seemed to be a rare time at the statehouse when a proposition might have succeeded on its merits alone.
By going into debt at a time when the economy is at its lowest ebb, Washington is taking advantage of some of the most attractive interest rates in recent history. Earlier this year, on its most recent round of bond refinancings, the state obtained a rate of 3.35 percent—the lowest in more than 50 years. At the same time, contractors hungry for work are sharpening their pencils and bids are coming in at least 20 percent lower than at the peak of the market, says House Capital Budget Chairman Hans Dunshee, D-Snohomish. “The numbers are so good,” he says, “you think, why wouldn’t you do it right now?”
Still, the prospects looked poor when Slunaker and Johnson started making the rounds with their scheme, which initially cost $2 billion. There’s a natural horror on the Republican side when it comes to massive debt—and it takes the votes of the minority Republicans to pass a bond bill in the Legislature because a 60 percent vote is required. Right now, nearly $2 billion of the state’s $31 billion biennial budget is used to pay for general obligation bonds, and Washington is a hairsbreadth from the debt limit established by its constitution. Two years ago, Dunshee was the prime mover behind a much smaller plan, a half-billion-dollar bond proposal to retrofit public schools for energy-efficiency projects. That plan required a public vote and Referendum 52 went down in flames, 54 percent to 46 percent. At the time, Republican critics derided them as “Hans bonds.” So when the new proposal started making the rounds this session, more than a few Republicans started calling it “Hans bonds, the sequel.”
Perhaps the biggest lesson of that 2010 flop was that it takes a bit more groundwork and planning to achieve something on a grand scale. A more appealing cause, perhaps, and a coalition. AGC and labor had backed Dunshee in 2010; this year, they took the lead. Labor’s Johnson offers an amusing anecdote. With Slunaker from the contractors at his side, no door was barred. “I’ve seen the inside of offices that I was never allowed into before,” he notes.
Labor and the contractors had an obvious stake. Both have been hammered by the recession and both stand to gain considerably when projects go to bid. But they gained considerable muscle when the state’s social services lobby threw in with them. After a jobs plan by the governor fizzled early in the session, suddenly they had the only solid proposal going. Democrats insisted that the “jobs bill” be included in any deal they struck with Republicans to end the session. Republicans had a list of big reforms they were demanding. And the measure became a small piece of the intricate compromise that came together in the final hours of the session, when everything might just as easily have fallen apart.
For a while, Slunaker had his doubts. “I’ve got on my desk one of those wooden three-dimensional puzzles where you can never figure out how to get it together or take it apart. That’s what this thing started to look like,” he says.
Republicans saw an opportunity to demand something they’d been seeking for years: a lower limit on state debt, made ironclad in the constitution. That became part of the package. A measure that will eventually lower it from 9 percent of the operating budget to 8 percent will be sent to the ballot in November. “Talk about holding things hostage,” says Rep. Judy Warnick, R-Moses Lake. “That was definitely part of it.” By the time the final gavel fell, nobody was calling them Hans bonds anymore.
Of course, one big reason for the proposal’s success is the fact that everybody got something. All 49 legislative districts have an item on the project list, from $1 million for Spokane’s 6th Legislative District to $65 million for Walla Walla’s 16th. The bulk of that latter appropriation is for the veterans’ hospital. Other big winners are the Washington State University health sciences campus in Spokane, the University of Washington branch campus in Bothell, as well as Tacoma Community College and school-district skills centers across the state. Perhaps not such a coincidence, the biggest critic of the deal is 6th District Senator Michael Baumgartner, R-Spokane, who points out that 43 percent of the money went to 12 districts where Democratic senators are up for reelection this year, and only 27 percent went to the 13 Republican districts. “A taxpayer might reasonably ask whether that’s due to prioritizing, or if there is some partisan electioneering behind those numbers,” he says.
However, other Republicans point out that they were at the table when the pie was sliced. Sen. Linda Evans Parlette, R-Wenatchee, notes that lawmakers took the highest-priority projects from lists forwarded from state agencies—things that were going to be done anyway sometime in the future. “It was a surprise to me that he [Baumgartner] was making an issue of that,” she says.
The key thing is that a good business case can be made for going into debt now, Dunshee explains. Bond interest rates are low. Construction costs are also low. Add the taxes that will be paid by contractors, the social benefit of putting people back to work and the long-term benefit of all the new construction, and it’s hard to see a downside, Dunshee says. “It’s not as if we’re digging holes and filling them back up again.”
Spending $1 billion
Where some of the money is going
Tacoma Community College for construction of a new Health Career Center:
Washington State University for Riverpoint Biomedical and Health Sciences Building: $37 million
University of Washington/Bothell to expand facilities for science, technology, engineering, math, and health studies: $63 million
Energy-efficiency grants for government and schools: $78 million
Helping local governments invest in sewer system improvements and water pollution control: $153 million
Natural resource improvements such as Puget Sound cleanup: $216 million