Estimated fiscal impact of SJR 8221 (Reducing Washington’s Constitutional Debt Limit)
This November voters will consider Senate Joint Resolution 8221 to reduce Washington’s constitutional debt limit over a twenty year period (2014-2034) from nine to eight percent while changing the calculation of revenue for purposes of determining the state debt limit. The proposed constitutional amendment would implement the recommendations of the Commission on State Debt. Servicing the state’s debt currently consumes nearly $2 billion of the $31 billion operating budget, or approximately 6% of spending.
To help assist budget writers determine the potential fiscal impact of what SJR 8221 would do to the state debt capacity, the Office of Financial Management prepared the following projection based on the June Revenue Forecast:
This means that if adopted, SJR 8221 would reduce the state’s debt capacity by more than $1 billion by the 2043-45 biennium (from $7.5 billion to $6.5 billion).
Supporters of SJR 8221 say it will:
- Stabilize and smooth the state’s debt obligations;
- Gradually reduce the state’s long-term debt burden;
- Lower the share of debt service in the operating budget;
- Create more stability for capital projects; and
- Protect the state’s strong credit rating.
Among the strongest supporters of the proposed constitutional amendment is State Treasurer Jim McIntire (D).
In comments prepared for TVW’s video voters’ guide, McIntire said (in-part):
This is a sensible idea that helps protect taxpayers, lowers our constitutional debt limit and improves our ability to make investments during hard economic times . . . Over the past 10 years we’ve learned that the current constitutional debt limit doesn’t work very well . . . Debt is a scarce resource and it needs to be managed wisely. This amendment will do that. Opponents of this measure argue that it would shift property taxes away from schools and cause higher borrowing costs for school construction. Let me be clear, nothing about this measure changes the dedication of property taxes to schools. Furthermore, local school bonds are already guaranteed by the state, so they get the same credit rating as the state. By protecting Washington’s credit rating with this measure you are also helping protect schools from higher borrowing costs.
We'll have additional details on SJR 8221 when we publish our Citizens' Guide later this month.