Gov. Jay Inslee's $4 Billion Housing Proposal Faces Hurdles in Legislature


OLYMPIA — Gov. Jay Inslee's swing-for-the-fences idea to borrow billions to accelerate housing construction got some pushback Monday from budget writers in the state Senate.

The state constitution limits how much money Washington can borrow. Inslee had proposed asking Washington voters for permission to go outside that limit to raise $4 billion over six years to build housing, in a state estimated to need 1.1 million more homes in the next 20 years.

But writers of the Senate capital budget proposal did not include that idea in their plan, unveiled Monday.

It's early yet. With about a month remaining in the legislative session, the contours of state spending are just beginning to come into focus. House budget writers are expected to release their capital budget plan next week, and lawmakers from the two chambers will negotiate to reach an agreement.

The capital budget outlines spending on building and infrastructure projects. That money largely comes from state borrowing, but also from the federal government and from auctions of greenhouse-gas pollution allowances.

Sen. Mark Mullet, D-Issaquah, vice chair of the Senate Ways and Means Committee and one of the lawmakers writing the capital budget proposal, said Inslee's plan of borrowing $4 billion outside the debt limit would mean Washington would be spending more than 5% of revenue to pay off its debts.

"I think the general thought process was, if we're already having a hard time staying underneath that threshold, don't put more money on the credit card," Mullet said.

And Inslee's plan would cost about $2.4 billion in interest payments on top of the $4 billion borrowed. That interest can eat up other parts of the budget, which could be spent on other things, including housing, Mullet said.

The Senate has proposed $400 million toward the state Housing Trust Fund, which provides loans and grants to pay for affordable housing projects.

In a statement Monday afternoon, Inslee said the Senate's proposal "would take us backward on housing."

"In the middle of a housing crisis, less is unacceptable," Inslee said. "We need to go big, so people can go home."

The capital budget is one of the major slices of the state's budget, which also includes transportation and operating budgets. Those proposals are due to be released in the coming weeks.

And according to a revenue outlook announced Monday, Washington is now expected to bring in about $483 million less in the 2023-25 budget period than projected last November. The forecast currently doesn't include money raised through the new greenhouse-gas allowance auctions.

That dip is driven by lower-than-expected real estate excise tax collections and personal income, and higher interest rates, said Steve Lerch, chief economist and executive director of the Washington State Economic and Revenue Forecast Council.

The expectations around how much money will come in over the next two years form a key part of the equation as lawmakers begin to hammer out the state's budget.

"We have spent the last few days readjusting our budget to this economic news and the budget the Senate releases on Thursday will still reflect the strong position of the state economy and our strong revenue forecast," said Sen. Christine Rolfes, D-Bainbridge Island, chair of the Senate Ways and Means committee.

The Senate's operating budget proposal is slated for release Thursday.

"But it will be slightly smaller than the budget that the governor released a few months ago," Rolfes said. Inslee released a proposed budget in December that included the housing referendum.

Sen. Lynda Wilson, R-Vancouver, Republican budget leader, said that state government was in "a sound budget position."

"Between our robust rainy-day fund and other money in reserve, there is more than enough to cover all of state government's required expenses," Wilson said.

But she urged "a more cautious approach to spending in the upcoming operating budget."

"State agencies have grown used to big spending from the majority Democrats in the past half-dozen years," Wilson said. "That rate of growth simply can't continue if we are to remain in a sound budget position and be prepared for an extended economic downturn."