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The State Treasurer wants Washington residents and the Legislature to know just how much debt the state has amassed

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OLYMPIA, WA – The State Treasurer wants Washington residents and the Legislature to know just how much debt the state has amassed, releasing a study on the state’s debt portfolio and other financial obligations.

The Treasurer’s  Debt Affordability Study encourages transparency, educates the public on the state’s financial condition, and informs policymakers as they make budgetary and capital spending decisions.

“Washington is one of the most highly leveraged states in the country,” Treasurer Davidson said in a letter prefacing the study, in which he notes that the state’s total outstanding obligations at the close of Fiscal Year 2019 totaled $21.3 billion.

Despite the state’s high debt levels, Washington’s credit rating from Moody’s was upgraded to Aaa from Aa1 in August of 2019, which is the highest possible rating from the agency.

After the credit rating bump and several refinancings in 2019 that saved the state approximately $160.4 million on a present value basis, the state is heading into 2020 with a stable financial outlook. Yet the Treasurer recommends that lawmakers consider the long-term outlook, and make sure the state is prepared to weather a recession.

“Sixty-nine percent of the state’s capital budget is funded with debt. We need to bring that number down,” Treasurer Davidson said.

According to the study, Washington’s outstanding general obligation debt over the past twenty years has increased from $7.3 billion to $20.1 billion. While financings fund a variety of important projects, a heavy reliance on bonds has left the state with a high debt burden.

Washington has the 6th highest debt per capita in the country, according to Standard and Poor’s. In fiscal year 2020, the state will pay more than $1.275 billion in debt service payments for its various purpose general obligation bonds, which is approximately 5% of total revenues.

To capitalize on the state’s robust economy and strong credit rating, included in the Debt Affordability Study are a number of recommendations from the Office of the State Treasurer to help move the state closer to another credit rating upgrade. These recommendations can be found on pages 22–24 of the study.

To help more people understand the complexities of state debt, the Treasurer’s Office produced a summary version of the study called the Debt Affordability Digest. Copies of the full study and the digest were distributed to members of the Washington Legislature, just in time for the start of the 2020 Legislative Session.

“Now that the economy is strong, I urge the Legislature to ensure that the 2019-20 budget prepares the state to ride out the next economic downturn,” concluded Treasurer Davidson.