Legislature considering limitations on borrowing
JORDAN SCHRADER; Staff writer
Sen. Derek Kilmer ascended this year to an influential role in channeling state-borrowed money to local projects – and immediately set about tightening the purse strings.
“Occasionally, we need to constrain ourselves,” the Gig Harbor Democrat explained to fellow lawmakers Monday, “to foster greater sustainability. Regardless of who’s in charge, we generally max out the credit card.”
The debt burden tends to loom larger in the other Washington, where Congress can spend more money than is coming in, than in Olympia, where the state budget must be balanced. But the state does borrow money for construction and other projects, enough that state Treasurer Jim McIntire calls Washington a “high-debt” state.
Lawmakers are giving serious consideration to asking voters to change the state constitution to shrink that debt load. The debate offers a stark choice for state lawmakers:
Do they maximize state spending on construction, which uses government-backed bonds to provide Washington with better infrastructure and more construction jobs – and which has already fallen to 2003-2005 levels because of struggling tax collections?
Or do they address worries about the rising share of their budget – now 6 percent, or nearly $2 billion – that goes to making interest payments instead of running schools or maintaining the social safety net?
The amendment to the state constitution authored by Kilmer and his Republican counterpart, Sen. Linda Evans Parlette of Wenatchee, takes the latter approach. It would gradually lower the constitutional debt limit from its current 9 percent of state revenues to 7 percent by 2022.
It would also make borrowing levels more uniform from year to year by basing the debt limit on 10 years of tax collections. Right now, the limit is based on the most recent three years. And because of three years of skimpy tax collections in the case of the current budget, the state will likely borrow a quarter to a third less than in the previous budget, at a time when the construction industry needs those projects.
That would shrink further under the constitutional amendment: more than $8 billion in reduced borrowing over the next two decades.
“It leaves dollars on the table,” said Stan Bowman, executive director of the state chapter of the American Institute of Architects, testifying Monday to lawmakers, “and it leaves workers on unemployment.”
The upside: more than $6 billion less to pay in interest over that same period, money that can be put toward everything else in the operating budget, which funds most state programs.
“This debt service is higher and quickly growing,” Parlette said. “I think we owe it to our children and our grandchildren to get this under control.”
The estimates for lower borrowing and interest payments come from nonpartisan legislative staff members under an economic scenario that assumes a once-a-decade recession.
Senators, especially Republicans, are determined to see the debt addressed. Kilmer and Parlette are threatening to scrap their plans for bond projects this year if the House refuses to pass their constitutional amendment.
Democrats on the House Capital Budget Committee aren’t yet convinced. Chairman Hans Dunshee said time is needed to consider the proposal, while Rep. Laurie Jinkins of Tacoma said she has more questions about the trade-offs involved.
With a special legislative session looming, those trade-offs will likely be weighed behind closed doors in final talks between the House, Senate and Gov. Chris Gregoire.
House budget chairman Ross Hunter said the constitutional amendment will be part of the budget negotiations’ “endgame.”
Jordan Schrader: 360-786-1826
jordan.schrader@thenewstribune.com
blog.thenewstribune.com/politics
