The state treasurer, in the 2023 Debt and Credit Analysis report, recommends that Washington keep annual various purpose general obligation (VP GO) debt service costs under 5% of general state revenues (GSR). (Generally, these debt service costs are paid out of the operating budget.) Debt service costs were below 5% of GSR in 2021 and 2022. As a percent of GSR, they have been trending down since a high of 7.88% in 2002. Debt service costs have been growing, just not as fast as GSR.

Indeed, the treasurer’s report notes, “The Capital Budget’s significant reliance on debt in recent years has resulted in an uptick in the amount of debt issued by the state. Fortunately, the historically low interest rates of recent years helped to limit the cost and budgetary impact of the state’s new debt.”

Additionally, Washington is highly rated by the credit agencies, which means that Washington has access to lower borrowing costs than it otherwise would. That said, Washington is a high debt state: “Washington ranks in the top ten of all 50 states for debt per capita (7th), debt as a percent of revenues (5th), and debt as a percent of personal income (9th).”

Gov. Inslee has proposed adding significantly to the state’s debt. I described his historically large regular bond bill and his historically large homelessness and housing bond referendum here.

According to data from the Office of Financial Management (OFM), the $4.878 billion regular bond proposal would cost $7.780 billion through 2052. Operating budget costs would be $73.2 million in 2023–25 and $442.2 million in 2025–27. They would be $618.6 million in each of the next 11 biennia.

The $4 billion bond referendum would cost $6.377 billion through 2057. Operating budget costs would be $1.1 million in 2023–25 and $54.7 million in 2025–27. The maximum biennial costs would be $507.6 million for 2033–35 through 2047–49.

OFM estimates that if the governor’s regular bond proposal is enacted, state debt service costs would increase to 6.51% of GSR in 2048. If the proposed referendum is also approved, debt service costs would reach 6.83% of GSR in 2047. Under both scenarios, debt service costs would exceed 5% of GSR beginning in 2026.