OLYMPIA – State Treasurer Mike Pellicciotti reiterated the need to maintain state reserves and keep debt costs low following today’s meeting of the Washington State Economic and Revenue Forecast Council (ERFC). The latest ERFC report projected revenues would be down by just over $830 million through the end of Fiscal Year 2027 in the wake of lower-than-expected Real Estate Excise Tax (REET) revenues, reduced personal income, and additional increases in interest rates by the Federal Reserve as it continues to fight inflation.
Prior to the 2023 Legislative session, Pellicciotti delivered the Office of the State Treasurer’s (OST) annual Debt and Credit Analysis which outlined three key budget recommendations to the Legislature:
- Establish a minimum target for total reserves of no less than 10% of annual Near General Fund-State revenues.
- Manage the state’s debt burden so that annual debt service costs remain below 5% of annual General State revenues.
- Continue to improve the funding status of the state’s pension plans by fully funding the state’s actuarially determined pension contributions.
“Keeping these responsible financial guardrails securely in place as we face economic uncertainty is essential not only to maintain Washington’s strong credit rating, but also, more importantly, to ensure the State is positioned to preserve public services precisely when they are most needed,” said Pellicciotti. “Developing market conditions make it even more crucial that Washington maintain its strong financial position to weather upcoming economic challenges.”
Despite signs of slowing state revenues, state investments managed by OST continue to perform well, with an anticipated $1.05 billion projected in general fund contributions through the end of Fiscal Year 2027. This represents a nearly $50 million increase from the November ERFC report. This is in addition to the $385 million in debt savings secured by OST through refinancing all eligible debt since 2021 when interest rates were at historic lows.
Washington state currently holds Moody’s highest possible credit rating of Aaa. S&P and Fitch both maintain AA+ ratings for the state, their second highest designations.