Editorial: Lowering debt limit strengthens state budget
As legislators in Olympia pore over the operating budget for major cuts, there is one growing expenditure that makes their job tougher: debt service for state capital projects. While the projects are embedded in the capital budget, the cost of financing them is tacked onto the same budget that is experiencing deep cuts in health care and education, among other key items.
The Senate unanimously adopted Senate Joint Resolution 8215, which would lower the state constitution’s debt limit from 9 percent to 7 percent of general revenues. It also would include state property tax collections as part of general revenue.
Why is it so popular? For one thing, the state carries the eighth largest debt load in the nation. The national median figure for 2009 was $936 per person. In Washington state, it was $2,226 per person. The percentage of the budget devoted to debt payments has risen 61 percent in the last 10 years. It is now 6 percent of the operating budget.
If the state could permanently lower the percentage of debt it can take on, it could potentially reduce debt payments and use the leftover cash to restore some of the painful budgets they’ve had to make in recent years. This would also put the state on firmer footing with credit rating agencies, which can yield lower financing charges.
Another feature of the revision is to use a 10-year rolling average of state revenues to determine the percentage that can be borrowed, Currently, a three-year average is used, which can limit the number of capital projects the state can undertake when the economy is going through a rough patch and revenues sag. This is precisely when the economy needs the stimulation these projects provide. The current formula encourages too much capital spending in good times, when construction prices are higher.
The governor’s office has testified in favor of the change, as have business groups, such as the Washington Roundtable. State Treasurer James McIntire is also supportive. All 49 senators have voted for this resolution. Because this is a change to the constitution, at least two-thirds of House members would have to vote for it. Then it would be placed on the state ballot, where a majority of voters would have to approve.
So what’s the hold-up? That would be Rep. Hans Dunshee, D-Snohomish, who, as chairman of the House Capital Budget Committee, hasn’t allowed the bill to be put to a vote. He worries about the unintended consequences of lowering the debt limit.
A goal of the resolution is to spend less on capital projects, and there is no question that would have an impact. But when spending on those projects results in cutting other spending, then it’s a matter of priorities.
Do we need particular construction projects more than we need extra money for health care and education? Oftentimes, the answer is no. Lowering the debt limit would make those priorities clear.
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