Gov. Inslee’s 2024 supplemental capital budget proposal would increase capital appropriations by $1.321 billion (15.3%). Revised 2023–25 capital appropriations would total $9.982 billion. About 80% of the increase comes from new revenues from the capital gains tax and carbon allowance auction proceeds.

Any capital gains tax revenues that exceed $500 million in a year are deposited in the common school construction account (CSCA). (The CSCA also receives revenues from state timber lands.) When the 2023–25 capital budget was adopted, the March 2023 revenue forecast did not expect the CSCA to receive any capital gains tax revenues in FY 2023 (the last year of 2021–23) and it estimated that the CSCA would get $197.0 million in 2023–25.

As it turned out, the CSCA received $347.5 million for 2021–23. The November 2023 revenue forecast estimates that capital gains tax revenues to the CSCA will be $668.9 million in 2023–25. (Note that because the state has only one year of history with the capital gains tax and given the inherent volatility of capital gains taxes, the forecast of these revenues is highly uncertain.)

Gov. Inslee’s capital budget proposal would increase appropriations from the CSCA by $562.9 million (204.8%), so that revised 2023–25 CSCA appropriations would total $837.7 million. However, instead of being purely additive, the increase in CSCA appropriations would be offset by reducing public schools appropriations from the state building construction account by $450.8 million. Despite that offset, Gov. Inslee’s proposal would increase total capital appropriations for public schools by $130.6 million.

Total capital budget appropriations from the state building construction account would increase by $89.9 million under the proposal. Effectively, the governor would use the $450.8 million from the state building construction account (that is currently going to public schools) to fund the shift from the operating to the capital budget of community solar resilience hubs ($74 million), community solar projects ($39 million), and community electric vehicle charging infrastructure ($138 million). (This frees up $251 million in the operating budget for new policies.) The state building construction account reduction to public schools also helps to fund $100 million for rapid capital housing acquisition and $44.6 million to purchase and modernize Olympic Heritage Behavioral Health (for which $140.9 million in operating funding is included in the governor’s operating budget proposal).

Carbon allowance auction proceeds have also been higher than previously expected. The governor’s capital budget proposal would increase appropriations of auction proceeds (from the climate commitment account, natural climate solutions account, and carbon emission reductions account) by $489.4 million (68.2%). Revised 2023–25 capital budget appropriations from the auction proceeds accounts would be $1.207 billion.

Other major changes in the capital budget proposal include:

• A net reduction of $95.9 million for the school construction assistance program (SCAP). (The proposal would reduce funding from the state building construction account by $358.1 million, increase funding from the CSCA by $260.7 million, and add $1.5 million in federal funds.) The budget documents note that there was a decrease in eligible projects. Additionally, the proposal would increase the construction cost allocation that is part of the SCAP funding formula from $272 per square foot to $350. (This is a smaller increase than had been requested by OSPI.) Revised 2023–25 appropriations for SCAP from all funds would be $492.3 million.
• An increase of $176.9 million (from the CSCA, with a small reduction in federal funds) for the small school district and tribal compact schools modernization program. Revised 2023–25 appropriations from all funds would be $276.9 million.
• $136.5 million from the climate commitment account for green jobs and infrastructure catalytic funds.
• $100.0 million from the climate commitment account for clean energy community decarbonization.
• $31.4 million from the carbon emissions reduction account for electric school buses.
• $25.0 million from the natural climate solutions account for the salmon recovery funding board grant program.
• $22.0 million from the natural climate solutions account for the Brian Abbott fish barrier removal board.
• $25.0 million from the natural climate solutions account for Upper Green River Forest carbon storage.
• $38.9 million from the climate commitment account for the energy renewal program at the University of Washington.

(Previous posts on the governor’s 2024 supplemental budget proposals are here.)