Chapter 05: Budget Implementation

The Budget, Accounting, and Reporting System Act (Chapter 43.88 RCW) outlines the legal authority and responsibility of the Governor and OFM to allot public funds. OFM publishes allotment instructions that describe the agency’s responsibilities and requirements for submitting initial allotments, amended allotments, and special allotments to detail the plan of expenditures, revenue estimates, and related full-time equivalent (FTE) estimates for enacted budgets. (Visit OFM’s website for the allotment instructions after the 2027-29 budget is enacted.)

Once the capital budget is enacted, OFM Operations assigns agencies expenditure authority (EA) in The Allotment Management and Review System (TALS-AMR). After the EA code is assigned, agencies must submit allotments for expenditures, revenues, and FTEs.

Capital appropriations for the original construction of public buildings (including K-12 facilities) and, in the case of higher education institutions, renovations and remodels costing more than $200,000, require the purchase of public artwork and is calculated in the C-100 cost estimating form. Artwork acquisition and installation is coordinated in conjunction with the Washington State Arts Commission Art in Public Places program. Agencies should be prepared to coordinate with the Washington State Arts Commission for projects funded in the enacted budget beginning with the design appropriation.

Agencies administering a major capital project or projects specifically identified for reporting requirements by OFM, as required by RCW 43.88.160, must submit a major project status report to OFM each July 1 and December 31. Major project status reports are required for projects with a total anticipated cost of $10 million, regardless of the phase of the project (e.g., if only funded at predesign). “Total anticipated cost” means the sum of the anticipated cost of the predesign, design, and construction phases of the project. Email your OFM capital budget advisor and cc: your legislative contact.

After a major project is completed, an agency must also submit a major project final closeout report to OFM. Agencies must report project savings following the completion of projects to OFM. Agencies must use the report template posted on OFM’s forms page.

No later than October 1st of each even numbered year, agencies must submit to the governor, house capital budget committee, and senate ways and means committee, a list of minor works projects completed or in progress for the current biennium including: Project status, project cost, amount expended, and amount encumbered for projects not yet complete.

The Buy Clean and Buy Fair Washington Act RCW 39.116.020 (Chapter 344, Laws of 2024) requires reporting on certain construction products used for projects over 50,000 gross square feet.

Covered products include:

• Structural concrete products, including ready mix, shotcrete, precast, and concrete masonry units
• Reinforcing steel products, specifically rebar and post-tensioning tendons
• Structural steel products, specifically hot rolled sections, hollow sections, metal deck, and plate
• Engineered wood products, such as cross-laminated timber per ANSI form no. PRG 320, glulam beams, laminated veneer lumber, parallel strand lumber, dowel laminated timber, nail laminated timber, glulam laminated timber, prefabricated wood joists per ASTM D5055, wood structural panel per product standard 1 or product standard 2, solid sawn lumber per product standard 20, structural composite lumber per ASTM D5456, and structural sawn lumber

Effective July 1 ,2025, state agencies were required to report on all newly executed construction contracts larger than 100,000 gross square feet, and effective July 1, 2027, state agencies must require reporting on all newly executed construction contracts for projects over 50,000 gross square feet, including renovations where the cost is greater than fifty percent of the assessed value. The contractor for these projects must provide the required data for at least 90 percent of the cost of each of the covered products used in the project.

Data required includes:

• Product quantity
• A current environmental product declaration
• Health product declaration, if any, completed for the product
• Manufacturer name and location, including state or province and country
• Supplier code of conduct, if any
• Office of Minority and Women’s Business Enterprises certification (if any)

Buy Clean and Buy Fair (RCW 39.116.030) also includes a requirement that “By July 1, 2025, and to the extent practicable, specifications for a bid or proposal for a project contract by an awarding authority may only include performance-based specifications for concrete used as a structural material. Awarding authorities may continue to use prescriptive specifications on structural elements to support special designs and emerging technology implementation.”

More information, including a link to the reporting database, is available through Commerce’s State Efficiency and Environmental Performance (SEEP) program: https://www.commerce.wa.gov/seep/bcbf/ or by emailing seep@commerce.wa.gov.

Subject to certain restrictions, the Governor, through OFM, may transfer project savings to another project for which the appropriation is insufficient (RCW 43.88.145). An agency may request such a transfer by sending a letter from the agency director to the OFM director, copying Legislative staff. No expenditures may be incurred prior to OFM approval of the transfer request and allotment schedule. Please contact your OFM capital budget advisor before requesting a transfer.

Please check in with your OFM capital budget advisor to update them on reports and studies funded by the capital budget. This update should identify any risks to the successful, on-time completion of the study or report. For cabinet agencies, at least two weeks must be included in the project schedule for OFM budget and Governor’s Office policy review. Please submit completed reports and studies to PolicyEXO@ofm.wa.gov.

These life cycle cost analysis tools use a Washington-specific discount rate to estimate the present value of future costs. This rate is updated annually and is identified in both Excel workbooks available on OFM’s website.

During Predesign
For predesign projects (over $15 million), agencies must use OFM’s life cycle cost analysis model to compare the long-term costs of project alternatives (LCCM, RCW 39.35B.050). This model evaluates the tradeoff over time from increased capital investment in the purchase and/or construction of facilities. Please refer to the predesign manual for more information. The model and instructions are available on OFM’s forms page.

During Design
After a project enters the design phase, agencies must use Commerce’s life cycle cost tool (LCCT) to demonstrate how the building design contributes to energy efficiency and conservation. The LCCT is required for facilities with an area of 5,000 square feet or greater (Executive Order 13-03) or over $10 million (as required in the 2025-27 enacted budget, Sec. 8004). The LCCT evaluates the tradeoff over time from increased initial capital investment in high-performance energy system components that may include, but are not limited to, the building envelope, HVAC system, water-using fixtures and/or lighting. OFM will not allot construction funds until the analysis is completed. The tool, instructions and training webinars are located on OFM’s forms page.

The state efficiency and environmental performance executive order requires, subject to available funding, newly constructed, state-owned (including lease purchase) buildings be designed as zero energy or zero-energy capable and include consideration of embodied carbon. In unique situations where a cost effective zero-energy building is not yet technically feasible, buildings must be designed to exceed the current state building code for energy efficiency to the greatest extent possible (Executive Order 20-01). The State Efficiency and Environmental Performance Office provides guidance on zero energy projects through the Zero Energy Toolkit.

Since most state facilities are currently operating below their maximum feasible energy efficiency, agencies must also adopt and implement plans to reduce energy use in state-owned facilities. In most cases, agencies will choose to adopt tools to improve energy efficiency, operations, process management, and occupant behavior in the short term, while accelerating planning for deep facility retrofits and new construction in future years.

To accelerate the reduction of embodied carbon and improve the environmental performance of construction materials, agencies shall, whenever possible, review and consider embodied carbon reported in environmental product declarations when evaluating proposed structural materials for construction projects.

Any building project that receives over $10 million in funding from the capital budget must be built to sustainable standards. “Sustainable building” means a building that integrates and optimizes all major high-performance building attributes, including energy efficiency, durability, life-cycle performance, and occupant productivity, and minimizes greenhouse gas emissions.

RCW 70.235.070, requires all agencies, when distributing capital funds through competitive programs for infrastructure and economic development projects, to consider whether the entity receiving the funds has adopted policies to reduce greenhouse gas emissions.

The objective of the Clean Buildings Performance Standard is to lower costs and pollution from fossil fuel consumption in the state’s existing building stock.

Tier 1 buildings. The law requires that the Department of Commerce develop and implement an energy performance standard for Tier 1 buildings and provide incentives to encourage efficiency improvements. State agencies are eligible to participate in the incentive program if their buildings meet criteria required to participate. Mandatory compliance with the standard begins in 2026. Agencies should plan how they will comply with these standards and submit associated budget requests, as several biennia of improvements may be necessary.

Staged compliance timeline for Tier 1 buildings:

• June 1, 2026, for buildings over 220,000 square feet,
• June 1, 2027, for buildings over 90,000 square feet but less than 220,000 square feet, and
• June 1, 2028, for buildings over 50,000 square feet but less than 90,000 square feet.

Tier 2 buildings. This new law requires that Commerce develop reporting requirements for covered Tier 2 buildings including benchmarking, operations and maintenance planning and energy management planning. Reporting requirements will become effective in 2027 for Tier 2 buildings. Tier 2 buildings, including state-owned facilities, are also able to participate in an incentive program.

Compliance timeline for Tier 2 buildings:

• June 1, 2027 for buildings between 20,000 and 50,000 square feet and multifamily buildings over 20,000 square feet.

More information is available through Commerce’s Clean Buildings program: https://www.commerce.wa.gov/cbps/

Once the budget is enacted, OFM staff will contact agencies to answer a set of questions for the Office of the State Treasurer (OST), to ensure that tax-exempt bonds aren’t used for private activity, or other uses potentially disallowed by the Internal Revenue Service.

Conversely, a project funded using taxable proceeds may qualify for tax-exempt bonds, which are less expensive for the state to issue. In either case, a shift between tax-exempt and taxable funds may be recommended and can be completed outside of the budget with a shift letter request letter to OST for approval.

More detail on the questions that help OST determine the appropriate funding source from bonds can be found in Chapter 4.5 of these instructions.

OST conducts a regular survey to collect updated information on agency cash flow needs. This assists in planning the state’s bond sales. As requested by OFM or OST staff, requested agencies must complete and return the bond fund cash flow estimates form, expected use of proceeds form, and any supporting materials.

The federal Infrastructure Investment and Jobs Act, (H.R.3684; P.L. 117-58), continues to provide funding for some new infrastructure projects. Agencies should apply for these grants as they become available and request federal expenditure authority and any associated state match as part of the biennial budget process.

Under the Inflation Reduction Act of 2022 (P.L. 117-169), new and expanded tax credits for clean energy technologies are available to tax-exempt and government entities. “Direct pay” (or “elective pay”) gives tax-exempt and governmental entities that do not owe Federal income taxes the ability to receive a payment equal to the full value of tax credits for building qualifying clean energy projects or making qualifying investments. State agencies can receive tax-free cash payments from the IRS for clean energy tax credits earned, when all requirements are met, including a pre-filling registration requirement.

H.R.1 (P.L. 119-21; One Big Beautiful Bill Act), that became law July 4, 2025, shortened the original 10-year program for certain direct pay tax credits. Additionally, H.R.1 changed the “Prohibited Foreign Entities” (PFE) requirement for qualifying projects to track their supply-chain to ensure components don’t come from specific countries or businesses owned by those countries (China, Russia, Iran, and North Korea).

Please note that direct pay tax credits for electric vehicle fleets and electric vehicle infrastructure are no longer available due to changes made in H.R.1. Credits for certain renewable energy projects such as wind, solar, geothermal, and energy storage are still available, but with some modifications. Wind or solar projects started after July 4, 2026 must be completed before December 31, 2027 to remain eligible for credits. IRS Publication 5817-G (6-2023) provides a brief description of tax credit provisions for direct pay. The 13 applicable tax credits fall into four categories:

Energy generation & carbon capture

• Production Tax Credit for Electricity from Renewables (45)
• Clean Electricity Production Tax Credit (45Y) 2025 onwards
• Investment Tax Credit for Energy Property (48) pre-2025
• Clean Electricity Investment Tax Credit (48E) 2025 onwards
• Low-Income Communities Bonus Credits (48(e), 48E(h))
• Carbon Oxide Sequestration (45Q)
• Zero-Emission Nuclear Power Production Credits (45U)

Manufacturing

• Advanced Energy Project Credit (48C)
• Advanced Manufacturing Production Credit (45X)

Vehicles

• Credit for Qualified Commercial Clean Vehicles (45W) [Expired 9/30/2025]
• Alternative Fuel Vehicle Refueling Property Credit (30C) [Expired 6/30/2026]

Fuels

• Clean Hydrogen Production Tax Credits(45V)
• Clean Fuel Production Credit (45Z) 2025 onwards

Funds received from direct pay tax credits for state-funded expenditures are to be deposited into the Inflation Reduction Elective Pay Account (Fund 28V). When depositing funds into this account, please notify your assigned OFM capital budget advisor.

On September 9, 2025, Governor Ferguson signed Executive Order 25-07, which requires cabinet agencies to conduct a review of capital projects with an estimated total cost over $35 million, to determine before issuing a request for proposals or bids whether any circumstances exist that would overcome the presumption that a project labor agreement (PLA) is in the best interests of Washington State and the state agency. If the state agency determines that the best interests of Washington State and the state agency would not be furthered by use of a PLA on the project, then the project may proceed without a PLA, and the agency shall notify the Governor’s Office of its determination. Absent such a finding, the state agency shall require the use of a PLA on that project and shall require every contractor or subcontractor engaged on the project to agree to become a party to that PLA, except where exclusions are permitted by statute or regulation.