A closer look at the state's debt

GUEST EDITORIAL

GUEST EDITORIAL

MOSES LAKE - Last year, the legislature passed a bill to reduce our state working debt limit over time from 8.75 percent to 7.75 percent of general state revenues by 2020. It also created a Commission on State Debt to consider:

* How we can stabilize the amount of debt the state is taking on while planning for sustainable capital needs;

* How we can address economic cycles to maximize the use of debt;

* The types of debt which should be subject to a limit; and

* How we can maintain our credit rating.

I'm pleased with the outcome of these discussions and optimistic we can get our state back on the right track for responsibly using our credit to continue building needed higher education institutions, jails, local infrastructure and more.

Our state debt had been growing at an alarming rate over the last few biennia, and it affects our operating budget dramatically. In the current biennium, the state operating budget will pay $1.96 billion, or six percent of the entire general fund, in debt service payments created by the capital budget. In a ten year period, from 1999 to 2009, debt service payments increased 61 percent. Education spending, by comparison, grew just 39 percent in the same period. The increase in debt payments is affecting our ability to fund core priorities in the operating budget right now.

My highest priority for the commission was to find a way to prevent maxing out the credit card each biennium so we can have greater capacity for capital projects during economic downturns, when costs to borrow are low and work is most needed. In the 2012 fiscal year, we will have little to no bond capacity for additional projects as a result of the decline in expected tax collections.

One of the commission's recommendations is to require lower working debt limits during non-recessionary periods, and allow for higher debt limits during recessionary times. We suggest the legislature smooth bond capacity over time by calculating state tax collections over a six-year period rather than a three-year period. In addition, adding the state's portion of property taxes to the definition of state revenue will prevent the legislature from getting around the debt limit as has occurred too frequently in the past.

We recommend our current capital plan, which requires a ten year look forward, be enhanced by including estimated debt service payments for the current budget and for the life of the loan. Just like a fiscal note on a bill, this will help the legislature determine whether a project is worth its cost. We also decided it is important to look at all of the state's debt by coordinating the capital plan with the transportation plan.

A new Debt Policy Council, as recommended, would advise the governor and the legislature on the appropriate level of debt to balance costs with project needs and protect the state's credit in the national market. The council would also determine when recessionary and recovery periods occur in order to adjust the working debt limit accordingly.

I'm currently working with State Treasurer Jim McIntire and colleagues on both sides of the aisle to draft legislation with these recommendations. Stabilizing our debt capacity and reducing the growth of debt payments will lead to maintaining Washington's excellent credit rating. This will allow us to provide credit for critical infrastructure needs and capitalize on our bond capacity at times when we need it most. There is much work to do to address debt in our state, but together we can get Washington working again.

Rep. Judy Warnick, R-Moses Lake, served on the Commission on State Debt during the 2011 interim. She serves as the ranking Republican on the House Capital Budget Committee, and also deals with debt in her private sector job.