State Treasurer advises Legislators and elected officials on state’s debt limit

report on desk

OLYMPIA, WA. – On December 11, 2019, the Treasurer certified the state’s constitutional debt limit, filing a report with the Secretary of State, and providing an estimated projection of the state’s remaining debt capacity.

“This report is an important part of the monitoring that the treasurer’s office does to ensure that Washington’s debt remains below the state’s constitutional debt limit,” Deputy State Treasurer Jason Richter said.

Washington’s constitution limits the maximum annual debt service (principal and interest) that can be paid in any fiscal year. The limit is based on a percentage of General State Revenues (GSR). Specifically, the state’s maximum annual debt service in any given year cannot exceed 8.25% of the average of GSR for the six prior fiscal years.

With GSR averaging $19.4 billion for Fiscal Years 2014 through 2019, maximum annual debt service is limited to approximately $1.56 billion. The maximum annual debt service for the state’s debt occurs in FY 2020, in the amount of approximately $1.22 billion, which is $382 million less than the 8.25% debt service limitation.

“It is a ceiling, not a floor. Therefore, we need to remain cognizant of the fact that the state’s debt limit is not a goal to be reached, but a constitutionally mandated limit on debt issuance,” State Treasurer Duane Davidson said.

Requiring the report be filed with the Secretary of State, RCW 39.42.070 also requires the report to be sent to each statewide elected official and each member of the Legislature. Its purpose is to advise on the current available debt capacity of the state and provide an estimated projection of remaining debt capacity.

“For now, we are on track. However, unpredictable changes in interest rates or lower general state revenues could constrict debt capacity sooner than expected. It is in the best interest of the state to do everything possible to minimize issuance of new debt,” Treasurer Davidson said.