The following editorial originally appeared in The Seattle Times:
There is no free lunch, as the adage goes. That’s applicable for purchases large and small. In the case of Gov. Jay Inslee’s housing proposal, the price tag in question is very large indeed.
Inslee is asking legislators to put on the November statewide ballot a $4 billion referendum to fund housing construction over the next six years. It would add 5,300 housing units in the next two years, and 19,000 after that.
“I’ll say it again: Until we fix our housing crisis, thousands of people will remain homeless,” Inslee said in his State of the State address this month. “This is why I’m proposing a $4 billion referendum that will significantly speed up the construction of thousands of new units that will include shelters, supportive housing and affordable housing.”
Why is a referendum necessary? Since ratification in 1889, the Washington Constitution has limited the amount of certain types of state debt that can be issued. Inslee’s plan calls for borrowing $4 billion above the state’s current debt limit, requiring legislative and voter approval.
According to the state Treasurer’s Office, the state debt limit is important to accomplish three things: stabilize the state’s ability to borrow, gradually reduce the state’s long-term debt burden, and lower the share of the state’s operating budget used to pay principal and interest on debt.
In its “Debt and Credit Analysis” released earlier this month, the Treasurer’s Office recommends managing “the state’s debt burden so that annual debt service costs remain below 5 percent of General State Revenues.”
Debt service would rise above the recommended level, according to the Treasurer’s Office, if the Legislature authorizes the typical amount of debt for the capital budget, and the proposed $4 billion referendum was passed by the Legislature and approved by voters.
Going outside of these recommendations would be viewed unfavorably by credit rating agencies.
This means the state could pay a higher interest rate for debt, diverting tax dollars from Washingtonians to Wall Street financiers. This wouldn’t happen overnight, but it is the likely trajectory.
Even though it is judged to have great credit with low risk, Washington already has a high debt load compared to other states. According to a Moody’s report last year, Washington has the fifth-highest level of debt service as a percent of general fund revenues.
In fact, Washington exceeded all the other states that also received Moody’s highest credit rating of “Aaa.”
These are serious choices. Although public financing makes most people’s eyes glaze over, the conversations in Olympia now may impact the state for decades. Increasing public debt deserves informed scrutiny, and an honest appraisal of trade-offs.