Treasurer: Washington should put income boost toward debt
OLYMPIA, Wash. (AP) — Washington state’s top finance official wants to use an expected $1.3 billion revenue windfall to pay down the state’s growing debt pile. He’s finding few takers among lawmakers eager to give their constituents more tangible benefits of living in one of the nation’s fastest growing economies.
State Treasurer Duane Davidson says the money could go to repay a portion of the $21 billion the state has racked up in debt, making it the nation’s sixth-most indebted on a per-resident basis, according to S&P Global Ratings. He also supports putting the money in the state’s rainy day fund, or paying toward its $13.8 billion of unfunded pension obligations. Instead, Democratic and Republican lawmakers have proposed cutting property taxes that were raised last year to comply with a 2012 state Supreme Court order to fully-fund basic education.
“I’m not saying keep taxes where they are,” Davidson said in an interview on Wednesday in his office in Olympia, Washington. “I’m saying with the current talk about an adjustment, I think that money would be better spent paying down any debt, pick your debt.”
Washington’s economy was the fastest growing in the U.S. in 2016, posting expansion of 3.7 percent, according to the most recent U.S. Department of Commerce data . But the trade-off for being home to expanding technology companies such as Microsoft and Amazon.com has been rising debt levels. Bonds have been used to fund vital transportation projects, such light rail and over-water bridges in Seattle and Tacoma, needed to meet demand from its booming population.
“We were really more of a pay-as-you-go state long ago,” said Davidson. “I think one of the biggest contributing factors of our high debt now is attributable to extremely low interest rates. The unfortunate thing is we’ve been treating debt as cash flow; that’s not good.”
Transportation debt, which accounts for about a third of the state’s total obligations, has doubled since 2009. S&P affirmed this month its AA+ rating — the second-highest on its scale — for Washington with a stable outlook, which the state has maintained since 2007. The credit outlook may turn positive if the state finds a way to “permanently fix” its education funding problems, slow down the increase in its debt levels and show sustained revenue growth that keeps up with economic expansion, S&P said. A sharp decline in the housing market, slump in exports due to a strong dollar or change in U.S. trade policies or an underperforming Chinese economy could have negative implications for that outlook, according to the report.
Following the release of the state’s budget outlook by the Office of Financial Management, Republican Senator Doug Erickson introduced a bill that would cut property taxes by $1 billion. Democratic lawmakers — who control both chambers of the state legislature — released their proposed supplemental budget this week, calling for the return of $431 million to property taxpayers.
Since state law would prevent the application of that refund retroactively, the Democrats called for taxpayers to hold off on paying their obligations until their plan is finalized during the current legislative session that ends on March 8, in order to take advantage of the cut.