How the WA Legislature Killed the Golden Goose

This is the sad history of the Washington State Public Works Trust Fund. In December, 1983, a Washington State Public Works report concluded that there were over 4 billion dollars of urgently needed local government public works projects in Washington state. They further found that local governments were able to finance less than half of these projects. Therefore in 1985, the Washington State legislature established the Washington State Public Works Trust Fund (which was also known as the Public Works Assistance Account or PWAA).

https://leg.wa.gov/CodeReviser/documents/sessionlaw/1985c446.pdf?cite=1985%20c%20446%20%C2%A7%2011

From 1986 to 2016, the Washington State Public Works Trust Fund was a revolving account that was used by local governments such as cities and counties to fund more than $2.8 billion dollars in 2,000 public works projects at an extremely low interest rate of one to two percent. The agency is/ was self sustaining and cost effective. This agency was the closest thing Washington State had to a Public Bank or a Public Trust.

https://www.washingtonpublicbankcoalition.org/how-the-washington-public-trust-can-save-the-2017-legislature/2-how-the-public-trust-can-save-the-public-works-trust-fund

Sadly, from 2005 to the present, the Washington state legislature has repeatedly swept or diverted hundreds of millions of dollars from the Public Works Trust Fund. These hundreds of millions of dollars were basically used to pay for the so-called Boeing and Microsoft Tax Breaks. This transfer was therefore robbing funds from local governments to pay two wealthy international corporations. This transfer made it much more expensive for local governments to finance local public works projects. The removal of this funding for Public Works projects is certain to result in system failures all across our state which will harm public health and safety for years to come.

History of the Public Works Trust Fund

For the first 10 years, the Public Works Trust Fund had a stable source of funding from Real Estate Excise and Solid Waste Taxes of about $100 million per year. By 1995, this created a total fund balance of nearly one billion dollars for Public Works projects. While there were small withdrawals during the second 10 years, they were offset by increases in the Real Estate Excise and Solid Waste Taxes so that by 2005, there was more than $2 billion in the Public Works Trust Fund. Here is a graph of these first 20 years:

Then the trouble began. The 2005-2007 legislature withdrew $120 million from the Trust Fund.

The 2007–2009 legislature withdrew another $100 million.

The 2009–2011 legislature withdrew another $470 million.

The 2011-2013 legislature withdrew another $210 million.

The 2013-2015 legislature withdrew another $370 million.

The 2015-2017 legislature withdrew another $200 million.

Source: http://www.pwb.wa.gov/Documents/10-07-2016-PWB-Agenda-Packet.pdf

Here is a table of funds going in and out of the Trust Fund in the past 12 years in millions of dollars per biennium:

These diversions of funds were in addition to transferring $250 million from the Toxic Cleanup fund since 2007. Thus, more than $2.2 billion has been diverted away from the Public Works Trust fund from 2005 to 2017 – leaving only about $660 million left in the Trust Fund in 2017. Here is a graph of funds diverted by the legislature away from the Public Works Trust Fund from 2005 to 2017.

Because of these transfers, the Public Works Board was $60 million in the red by May 2016. In addition, the state was forced to borrow $158 million at 4% so that the Public Works Board could fulfill their loan obligations.

This is thus a very expensive shell game that only benefits Wall Street banks – at a huge cost to Washington State tax payers.

Like a public bank, in addition to financing billions in local public works projects, the Public Works Trust fund generated about $200 million per year in additional revenue. But instead of leaving this revenue in the Public Works Trust fund to be used for future public works projects, the legislature has for the past six years withdrawn about $200 million per year from the Public Works Trust Fund for a total withdrawal of about $1.5 billion dollars. In addition, the legislature has diverted over $700 million in revenue away from the Public Works Trust fund for a total diversion of $2.2 billion. This only leaves about $660 million left in the Public Works Trust Fund in 2017. Sadly, the legislature has continued to sweep these funds each year meaning that at present there is almost nothing left in the trust fund.

Here is a chart showing the history of Public Works requests per biennium and approvals per biennium. Note that only half of the requested projects have actually been funded. During the 2010-2011 biennium, no projects were funded because the entire account was “swept” by the legislature in order to balance the budget.
http://www.pwb.wa.gov/Documents/08-21-2015-PWB-Agenda-Packet.pdf

In the 2013-2014 biennium, there were $967 million in requested projects. Only $350 million were approved by the Public Works Board. $350 million may seem like a lot. But when you divide it by our state’s 7 million people, it is only $50 per person per biennium or $25 per person per year. More important, there is virtually no actual cost to tax payers because the Public Works Fund uses the payments from previous investments to fund new investments.

However, the 2013 legislature failed to approve any of these projects. Instead, the entire amount of revenue was transferred out of the Public Works Trust Fund in order to pay for things like the billion dollar per year Boeing and Microsoft Tax Breaks. From 2013 to 2018, the Public Works Trust Fund was not able to fund any public works projects.

What does the future hold for the Public Works Trust Fund?
The 2016 legislature passed Senate Bill 5251 which moved the Drinking Water State Revolving Fund (DWSRF) from the Public Works Board to the Department of Health. This action required the Trust Fund to amend 800 existing contracts and resulted in the transfer of hundreds of millions of dollars in public works contracts to the Department of Health – which has never handled public works contracts in the past. According to the minutes of the July 2016 Public Works Board meeting, there was $285 million in revenue coming into the Public Works Trust Fund in the next two years. http://www.pwb.wa.gov/Documents/07-08-2016-PWB-AGENDA-PACKET.pdf

In 2016, the board proposed to use $10 million of this fund for their operating budget for the next two years ($5 million per year) and then loan out $254 million leaving an end fund balance of $29 million. However, the legislature swept the entire program, not fund any public works projects. Looking to the future, the loan repayments continue to drop each year until by 2026, the loan payments drop from the current $120 million per year to below $100 million per year. Thus, the total revenue available from 2017 to 2023 thanks to past Public Works loans was about $660 million. the interest rate from 1% to 6%.

2022 Update
The Public Works Board has been moved to the Department of Commerce and now has a new website: https://www.commerce.wa.gov/building-infrastructure/pwb-home-page/

There latest meeting was August 5, 2022. Here is a link to all of their most recent reports: https://deptofcommerce.app.box.com/v/2022PWBBoardMeetingAgendas

Here is a link to the 2022 Report to the Washington State legislature: https://deptofcommerce.app.box.com/v/2022PWBBoardMeetingAgendas/file/990441060809

In 2021, the Public Works Board provided $120 million in funding for 36 public works projects in Washington state. This left about $2 billion in unfunded public works projects.

As of August 2022, there was only $170 million left in outstanding loan repayments for the next biennium. The legislature has supposedly “Pinky Promised” to stop sweeping or diverting funds from the Public Works Trust Fund beginning in 2023.

Here is the annual loan repayment schedule for the next decade:

The dramatic decline in Loan Repayments is the direct result of the legislature’s diversion of public works funds during the past 15 years. Despite the legislature’s repeated promises to end these diversions, this important program is likely to end in the next few years – dramatically increasing the cost of local public works projects.

What is the solution to this problem?
One obvious solution would be creating a Washington State Public Bank. There have been bills in the legislature to create a public bank for the past 14 years. Sadly, the 2022 Washington state legislature once again refused to pass a Public Bank Bill – despite our state’s urgent need for job creation and housing creation programs. Due to the corrupting influence of Wall Street banks, it is possible that the legislature will never pass a public bank bill. It is also possible that in the next few years, the Public Works Trust Fund will go from meeting a tiny fraction of Public Works needs to going completely extinct.

We therefore need to consider other options that do not require legislative approval or public funding. One such option is the creation of a Non-profit Social Purpose Bank similar to that of the University of Washington. I will be writing more about this option in the coming months.

In the meantime, as always, I look forward to your questions and comments. Feel free to email me.

Regards,

David Spring M. Ed.

David spring at protonmail dot com