In November we will vote on Senate Joint Resolution 8221, a constitutional amendment to reduce the state debt limit over twenty years from nine percent to eight percent of average annual state revenues. The measure would also change how revenue is calculated for purposes of determining the debt limit.
The ongoing burden of public debt imposes real costs. Right now, just servicing the debt consumes nearly $2 billion of the $31 billion two-year operating budget, or about six percent of spending, money that is not available for schools, roads or health care.
Concerned about the growing share of the operating budget going to pay debt and therefore not available for other programs, lawmakers in 2011 created a Commission on State Debt. According to the Commission:
• Servicing the debt is becoming a larger share of the operating budget leading to concerns that it is crowding out other spending programs;
• Washington’s debt burden ranks in the top 10 nationally compared to other states (Washington ranks fifth or sixth highest, depending on the measure used), and;
• The state’s current debt limit results in a capital budget process that works against the capital needs of the state and leads to low debt capacity when unemployment is high and prices and interest rates are low.
The Commission says SJR 8221 is needed to “smooth the amount of bond capacity over time while maintaining a predictable and sustainable capital budget.”
That would allow the state to “reduce the amount of debt service as a share of the state operating budget over the long run.”
To avoid any financial shock, SJR 8221 would gradually lower the debt burden over several years. The Office of Financial Management estimates it would reduce the state’s borrowing capacity by a little over $1 billion by 2043.
State Treasurer Jim McIntire supports SJR 8221. He calls it “a sensible idea that helps protect taxpayers, lowers our constitutional debt limit and improves our ability to make investments during hard economic times.”
Opponents worry changing the debt limit would shift property taxes away from schools and increase school construction costs.
Treasurer McIntire points out that the measure would not change the dedication of property taxes to local schools, and that school construction bonds are guaranteed by the state, so they benefit from the same high credit rating. SJR 8221 would do nothing to change that arrangement.
Washington is a high debt state and has seen a growing percentage of the operating budget going to pay for debt service instead of funding other public services.
SJR 8221’s proposed phase-down of the state’s constitutional debt limit from nine percent to eight percent by 2034 would help reduce this problem while providing a more predictable capital budget cycle.
Washington Policy Center recommends adopting reforms like that proposed by SJR 8221 to help reduce the state’s debt burden on taxpayers. SJR 8221 would strengthen the state’s finances by implementing the recommendations of the Debt Commission and free up more of the state’s operating budget in the future for education and other important public programs.
Jason Mercier is the government reform director at Washington Policy Center, a non-partisan independent policy research organization in Washington state. For more information, visit washingtonpolicy.org.