State treasurer visits Ephrata, discusses WA financial health

EPHRATA – Washington State Treasurer Mike Pellicciotti visited the Ephrata Rotary Club on Tuesday to discuss his role and the financial health of the state. He said he is trying to visit all of the local Rotary Clubs around the state to educate communities on state finance and answer questions from constituents.  

Pellicciotti said his top three concerns at the moment are the Washington state budget, federal funding reductions and tariffs.  

“There is no shortage of things to talk about,” Pellicciotti said. “There are challenges with budget stuff in Olympia, there are issues related to federal funding withholdings taking place in D.C., there are tariffs.”  

The treasurer’s role 

Pellicciotti said the Office of the State Treasurer has three primary roles: oversee investments for the state, manage debt and serve as the state’s banker.  

With approximately $35 billion in investments under management for various governmental entities, Pellicciotti said his office focuses on ensuring the fiscal health of local governments, schools and public services. 

One of the more complex duties outlined by Pellicciotti is debt management, particularly as it pertains to the state’s operating, capital and transportation budgets.  

“The legislature passes three budgets each year, and our job is to issue bonds for capital projects, which include schools and infrastructure,” he said.  

He detailed how the management of these bonds impacts the state’s financial stability. 

“People say, ‘We want that bridge, we want that road, that park, we want that school building,’ and your legislators figure that out on your behalf,” Pellicciotti said. “My job as treasurer is issuing the bonds with the best finance. We put bonds out on the market. We try to manage that in a way that has the lowest interest rate.”  

Maintaining the state’s credit rating with Moody’s. The state currently has an Aaa rating. Other ratings include AA+ with Fitch Ratings and with S&P Global. 

The third role, Pellicciotti said, is to handle the cash flow in and out of the state treasury. 

“I write most checks on behalf of the State of Washington,” he said. 

State budgets 

Pellicciotti said he has suggested the state legislature adopt a prudent approach to the upcoming budget amid significant projected shortfalls. Former Gov. Jay Inslee’s budget proposal exceeded revenue projections by $16 billion over the next four years.  

“It's crucial that we don’t touch the pensions or the rainy-day fund,” he said, highlighting these as cornerstones of fiscal stability. 

He noted that Governor Bob Fergusson inherited Inslee’s budget since governors in Washington generally take on their predecessor’s suggestion, though they may not agree with it entirely. 

Pellicciotti elaborated on the serious implications of underfunding government employee pensions, arguing that it creates “the most expensive debt you can have.”  

He urged lawmakers to respect existing commitments to state employees. 

“Pensions are promises that need to be honored. People have earned those benefits,” he said.  

Instead of compromising these obligations, he has urged the Legislature to consider reducing both new and old costs or exploring revenue increases through taxation. He said he understands that taxes are difficult and may not be the best solution, but they should be a part of the discussion. 

The treasurer expressed concern that with a balanced budget for the current fiscal year, pressures may mount to access reserves as a quick fix for the identified shortfall.  

“Using reserves may seem attractive, but it undermines our long-term financial health," Pellicciotti said. "We must prepare for storms that could emerge in the future rather than rely on quick fixes.” 

In a later interview, he said he was relieved that Fergusson has said he does not support tapping into the state’s rainy day fund. 

To ensure robust fiscal management, Pellicciotti called for three foundational recommendations: first, honoring pension commitments; second, maintaining a manageable debt service ratio; and lastly, reinforcing the state's reserves. He described reserves as essential for navigating financial struggles and protecting vital state services. 

“It’s easy for constituents to ask legislators to follow the governor's proposed budget, but we must be realistic about what that entails,” he said. “Legislators face three options: reduce spending, cut services or increase taxes. Each has its trade-offs, and we need honest discussions about these choices.” 

Rep. Tom Dent, R-Moses Lake, said he also has concerns about the state budget.  

“I think it's too much money,” Dent said. “I think that they need to trim more out of it. They want it to be five or eight or 10 million more than the one last time, and maybe we should just stay where it was last time. Why do we have to grow everything? We have a budget shortfall, while revenue looks good right now. Things are looking good, but (the state doesn’t) have enough for the additional money they want to spend.” 

Dent said he would like to see the budget’s spending cut instead of raising taxes for residents.  

“They're tired of taxes,” Dent said. “They don't want to see the property tax go up. They don't want to see any taxes go up. They want to get a grip on what's going on and get a handle on their own lives. So, and I think that's important we do that.” 

Sen. Judy Warnick, R-Moses Lake, expressed a similar sentiment.  

“During that hearing, especially the property tax one, people were afraid,” Warnick said. “They're afraid they're going to be taxed out of their home. There are, apparently, some exemptions, but you have to be at a poverty level to get the property tax exemption, and people are just very afraid.” 

She said she believes the state needs to consider spending priorities instead of raising taxes.  

Federal cuts 

Pellicciotti addressed the issue of potential cuts to federal funding that could significantly impact the state’s budget and local services. With federal financial support accounting for over $27 billion annually, concerns are mounting as lawmakers in Washington, D.C., consider budget reductions. 

He said there are two types of federal reductions, lawful and unlawful.  

"Congress wants to cut something. That's how it works,” he said. “The legislature passes it, the president signs it. That's the law. If Congress wants to reduce Medicaid funding, that is absolutely within their purview. This is lawful.”  

Pellicciotti said there is a lot of importance of federal funding for programs like Apple Health, which provides vital health services to many residents, particularly in rural areas. 

The treasurer outlined the process by which the state relies on federal funding to sustain essential services. Currently, Medicaid funding makes up a large share of revenue to rural communities, and any reductions could disproportionately impact vulnerable populations in areas like Grant and Adams counties.  

"Two out of three newborns in rural counties are funded through (the Apple Health) system,” he said.  

The second type of federal cuts is unlawful, according to Pellicciotti. He said this is what the country saw on Jan. 28 when the White House stopped payments of federal funds. He and his office have been preparing for this since August, he said, because they believed something like this might occur. Pellicciotti said that within 24 hours, Washington, along with other states, was able to get a temporary restraining order from a Rhode Island court that kept the funds flowing.  

“That took me a lot of preparation to be ready for that,” he said. “I think about those unlawful holdings a lot because when you say $27 billion a year in Medicaid dollars, it is an incredibly powerful tool if you're willing to coerce the state to try to do something, even if it's unlawful to do something. I'm always trying to prepare for that. That's why reserves are important as well.” 

Tariffs  

Pellicciotti said tariffs will likely have a significant impact on Washington, especially for the agriculture industry. He said 90% of the state’s fertilizer is from Canada, as one example.  

“The immediate impact is the rising costs of the product for consumers who generally benefit from growing produce,” she said. “There are various farmers that will have higher costs related to their trade. I would think the country realizes how trade dependence works on both ends, particularly with any agricultural export.” 

He said he is not opposed to targeted tariffs to stimulate the economy; however, tariffs across the board for every country the United States trades with, he believes, are a mistake.  

“Tariffs overnight have huge impacts on our agriculture,” he said. “Then you throw in the employment factor, and you talk about folks in terms of being able to have workers. You're getting hit on the import side, and you're getting hit on the export side. It is all interconnected (not just) within our state, but to Canada and Mexico as well.”  

    During the Tuesday meeting of the Ephrata Rotary Club, club President Ric Carlson led the meeting. The group had a guest lecture from Washington State Treasurer Mike Pellicciotti.
  

    Ephrata City Administrator Ray Towry said he was impressed with Pellicciotti’s presentation during the meeting with Rotarians in the county seat. He said he could tell that the state official understood the differing ideologies from the two sides of the proverbial “Cascades Curtain.”