The Senate 2012 supplemental proposal includes a constitutional amendment that would change the state debt limit.  ESJR 8221, which passed the Senate by a vote of 41-7 on March 5, would first change the calculation of the state debt limit so that it is based on six years of general state revenues.  (The constitutional limit now states that principal and interest payments on the state debt may not exceed 9 percent of the average of general state revenues for the 3 immediately preceding years.)

ESJR 8221 would also reduce the constitutional debt limit (which is currently 9 percent) to

• 8.5 percent for the July 1, 2014 through June 30, 2016 period;
• 8.25 percent for July 1, 2016 through June 30, 2034; and
• 8 percent thereafter.

Lastly, the amendment would include property taxes in the definition of general state revenues.

The proposed ballot title for the amendment states that it is in regards to “implementing the Commission on State Debt recommendations regarding Washington’s debt limit.”  The Debt Commission was established by 2011 legislation, and its report is available here.

The Debt Commission (which included our own Kriss Sjoblom) recommendations included:

• Using a six year period for calculating average general state revenue
• Including the state property tax in the definition of general state revenue
• Reducing the debt limit from 9 percent to 8.75 percent

The Commission anticipates that

The combination of these three changes will result in a more stable and predictable projected bond capacity without significantly changing long term debt capacity. These changes will also stabilize the amount of debt service required in the future.

In the Thrive Washington paper, Nine Steps to Budget Sustainability in Washington State, we recommended that the debt limit be lowered.  Washington is a high debt state (see the Debt Commission report for a comparison of state debt statistics); as we wrote in the Thrive paper, “When the state authorizes bonds in the capital budget, those costs are repaid in the operating budget.”  For 2011-13, general fund debt service is estimated to be $1.9 billion (6 percent of near general fund-state expenditures).

The Debt Commission report has a good chart on how debt service compares to other budget areas in terms of growth over the past ten years.  Spending on public schools increased 35 percent, higher education increased 1 percent, human services increased 35 percent, natural resources decreased 18 percent, other areas increased 34 percent, and debt service increased 62 percent.