A vote in support of Engrossed Senate Joint Resolution 8221 should be the easiest “approved” on the November ballot.
The measure will gradually – over 20 years – lower the share of state revenues that can be dedicated to debt service from 9 percent to 8 percent, and change the way the share is calculated. The limit is set in the Washington Constitution.
About 6 percent of general fund revenues is now dedicated to debt service; roughly $2 billion out of a $31 billion two-year budget. That’s among the largest shares for all states, and the share has gone up as spending on capital projects like roads and schools increased and the recession slowed the growth in state revenues. Completion of the Biomedical and Health and Sciences Center, which will house the University of Washington School of Medicine at the Riverpoint Campus, was on the bubble last spring in part because legislators were juggling the cost of additional debt against more cuts in health and education programs.
Anyone who has refinanced a mortgage to lower monthly payments can understand the benefits of this resolution. Lower payments free up more cash for other priorities: smartphones, maybe, or, if you are a legislator, keeping as many families as possible eligible for health care.
The change will also help Washington maintain its high, AA+ credit rating, which also lowers borrowing costs. State Treasurer Jim McIntire has exploited that rating, and the overall low interest rate environment, to save Washington taxpayers well over $1 billion by refinancing old bonds and selling new ones.
He strongly supports ESJR 8221, which came out of the Commission on State Debt that he chaired.
Another advantageous change, but one bill opponents dislike: The measure would calculate the debt load using the previous six years, not the three years now used. The change would enable the state to borrow more when costs are low, and put the extra money to work on road and other projects when they are most needed.
Union officials have argued that less borrowing means less, at any time.
Also, they argue, if the state is borrowing less to finance capital projects, local jurisdictions will have to borrow more, and without the benefit of the state’s high credit rating. But the state contributes little to local projects and guarantees school bonds, so districts get the same rating as the state.
Finally, they make the legitimate point that the math is fudged because property taxes are rolled into the formula, even though those revenues must be returned to local school districts.
Bottom line, though: The state will be using its credit card less, and paying less interest as a result.
Washington has maintained a good credit rating despite additional borrowing because creditors appreciate the Legislature’s willingness to make tough budget decisions. Note that only 14 out of 135 legislators who voted said nay to ESJR 8221.
Voters should approve the measure, too.