Gov. Bob Ferguson’s supplemental operating budget proposal (HB 2289/SB 5998) seeks to address the state’s budget shortfall by transferring $75 million from the Public Works Assistance Account (PWAA) to the state’s general fund in FY 2027 (beginning June 30, 2026), among other measures.

Estimates indicate that the sweep could leave the PWAA in the red for some 10 months in FY 2028 and result in $6.5 million in negative accrued interest, which could significantly limit the Public Works Board’s (PWB’s) capacity to meet future infrastructure funding requests from local governments, such as projects necessary to support housing development. In the wake of the atmospheric river events resulting in catastrophic flooding in numerous communities at the end of 2025, the new diversion also raises concerns about the availability of PWAA emergency funding to assist locals with recovery efforts.

The proposed diversion follows last year’s sweep of $288 million from the account and adds to a long list of other ongoing diversions:

• $114 million ($57 million/year) transfer to the Move Ahead WA Account
• $41 million for the Water Pollution Control Revolving Account
• $25 million for the Drinking Water Assistance Account
  • Plus an additional $7 million proposed in the Governor’s supplemental capital budget

The Legislature created the PWAA in 1985 to provide grants and low- and no-interest loans to cities, counties, and public utility districts to fund critical public infrastructure. Since its founding, the PWB has awarded over $3 billion from the PWAA to more than 2,000 local infrastructure projects in Washington. The account is a national model to fund crucial community needs and keep costs down for residents.

The PWAA was swept in the last round of state budget cuts during the Great Recession and the subsequent struggles to fund education in the wake of the McCleary decision. It finally achieved full funding in 2024 before it was subject to further diversions in 2025.

Now, cities need to rally again to protect the PWAA. AWC encourages you to:

• Oppose the Governor’s proposed $75 million diversion from the account.
• Tell your local legislators how critical the funding is for our cities and that current diversions may jeopardize not only current PWAA funding rounds but also future rounds, as well as emergency awards for flood recovery efforts.
• If the PWB has funded a project in your community, share the details with legislators and explain how PWAA dollars made a difference.
• For added help, refer to AWC’s 2025 infrastructure investment fact sheet or the PWB’s fact sheet for your legislative district.
• Remind your legislators that cities and towns across Washington are struggling with infrastructure needs. In the latest City Conditions Survey, 78% of responding cities reported infrastructure funding as a priority.

The proposed budget is a strong signal that the PWAA is at risk, with state revenues down and state agency budgets restricted in 2026. Gov. Ferguson released his budget priorities in late December. The legislative budget writers will spend the 60-day session working on a final plan.