JAMES L. 
State Treasurer

State of Washington
Of?ce of the Treasurer

 

 

January 14, 2015

The Honorable Governor Jay Inslee
Washington State

PO Box 40002

Olympia, WA 98504-0002

Dear Governor lnslee:

I have reviewed with great interest your proposed budgets which would make large, new investments in
education and transportation while also funding other critical government services such as mental
health care, public safety and higher education.

I want to commend you for advancing the public discussion about the need to expand the state?s tax base.
I have long argued that we simply cannot sustain an adequate system of public education with a tax base
that is a shrinking share of our economy it is mathematically impossible. Furthermore, it is absolutely
imperative that we begin now to develop new sources of revenue to maintain and improve our
transportation system as technology and consumer behavior shift away from fossil fuels. Thank you for
advancing the discussion on both of these fronts.

However, I have two concerns about the proposals you have submitted to the Legislature:

l. Spending from the Rainy Day Account: I am opposed to your reliance on the state?s
constitutionally-protected budget stabilization account to cover over half a billion dollars of costs
in the ?rst year of the 2015?1 7 biennium. I strongly recommend that this constitutionally-
protected reserve fund be allowed to grow from its constitutionally?required annual deposits as
the economy recovers instead of spending over half of this important reserve during good
economic times.

Investors and rating agencies closely watch state reserve levels. All states and nearly all
other states with ratings like ours have better reserves than we do. Washington?s reserves in
relation to the size of the budget are only one-third of the average for other states. If funded
as scheduled, the budget stabilization account will be at $584 million by the end of this ?scal year
and $987 million 5-17 biennium an amount that would go a long way to
help in a future economic downturn and ease concerns of investors who buy the state?s bonds.

2. Over-leveraging the MVFT: I am opposed to borrowing against 100 percent of the state share
of the existing MVFT revenues. Current debt service already accounts for 50 percent of total
MVFT revenues and is forecast to grow to 60 percent of these revenues within five years with no
change in policy. Your proposed leverage against the MVFT would threaten the state?s credit
rating and likely force the Legislature to use local MVFT revenues to make state debt payments
or raise the MVFT.

Legislative Building. Box 40200 - Olympia, Washington 98504-0200 - [360) 902-9000 TTY USERS: CALL I'll
FAX (360) 902?903? Home Page 

I share your desire to improve education funding and our transportation infrastructure, but we must not do
so at the expense of our reputation for sound ?nancial management. In general, your operating,
tranSp01tation and revenue proposals provide good starting points that set high marks for the long and
dif?cult debate to follow. Throughout this debate I will be a strong advocate for maintaining the budget
stabilization account, for less leverage against the MVFT, and for a broader and more sustainable revenue
system. Please know that my office is ready to work with you and the Legislature to help craft viable,
sustainable and financially prudent revenue and debt Options as 2015 Legislative Session unfolds.

Sincerely,

Man/2?

mes L. McIntire,
tate Treasurer

Cc: Senator Mark Schoesler, Senator Sharon Nelson, Speaker Frank Chopp, Representative Dan
Kristiansen, Senate Ways and Means Committee Members, Senate Transportation Committee Members,
House Appropriations Committee Members, House Transportation Committee Members