OLYMPIA, Wash — Following a lackluster revenue forecast and facing a multi-billion dollar deficit, majority House and Senate Democrats rolled out competing budget plans.
Both the $77.8 billion House operating budget proposal and the $78.4 billion Senate version involve spending cuts in various areas such as the plans to expand assistance for child care and early learning programs. Democratic State Treasurer Mike Pellicciotti is worried about an aspect of the Senate version that would envisions a transfer of funding from the Budget Stabilization Account to cover expenses one year then replenishing the rainy day fund a year later when new tax revenue becomes available.
“We would be the only state in the country to eliminate our entire reserves,” said Pellicciotti. “I certainly appreciate the focus on making sure that the reserve level stays what it is now at the end of the four year budget. But what we can’t have is the gap in between.”
Uncertainty about what to expect from the federal government is also a concern for Pellicciotti, who recently traveled to Washington D.C. to oppose the elimination of tax exempt bonds.
“Nearly every government issues bonds, right? Fire districts, school districts, states, cities, counties—that’s how infrastructure is funded. That’s how government services are met. Well, we’ve been able to do that because of tax exempt bonding. To have that cost be essentially lower for taxpayers because there is an increased incentive for the people buying our bonds because they don’t pay taxes on it,” said Pellicciotti.
The State Treasurer’s Office issued $1.2 billion in bonds earlier this year.
“We put those bonds at about 4%. If Congress eliminated the tax exempt status on bonds, those exact same bonds, with us having a Moody’s AAA credit rating, would be issued at 6.35%. That just means an extra one and a half to $2 billion, costing the state of Washington every year,” said Pellicciotti.