Some Washington State legislators are concerned that EHB 2561—a measure to finance large scale building upgrades and energy efficiencies in the state’s Schools—might adversely affect the state’s credit rating. The State Treasurer has stoked those concerns with his statements. We looked into the bond rating issue and found that the impact of EHB 2561 would be rather small.
See our new backgrounder, “Saving Money, Supporting Schools: Job Legislation Poses Minimal Risk to Washington’s Credit.”
Far more worrisome to the state’s credit rating is the rocky economy, Washington’s heavy reliance on sales taxes, possible passage of voter initiatives, and proposed bonds for expensive transportation projects.
Washington does have a relatively high debt level per capita, and ratings agencies have flagged existing debt and possible new debt for transportation projects as areas of concern. Consider this chart:
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As you can see, the debt service created by EHB 2561 is a lot of money, but when compared to how much we are already paying for roads and other projects it is really small. And consider that in the Seattle area alone the legislature and City Council are considering two large transportation projects (neither of which are included in the chart), the replacement of the 520 bridge ($4.6 billion) and the waterfront tunnel ($4.5 billion). Part of these projects would be funded with new debt, adding to the already large annual obligation the state faces in debt service.
While expensive transportation projects support commerce with freight mobility they also create an ongoing liability for the state in maintenance and operations, increase carbon emissions, and often suffer from cost overruns.
Contrast that to what EHB 2561 would do for far less: create new jobs, savings for schools, and extend the life of existing school buildings. And longer-lived schools means fewer obligations in the future for the state’s school construction funds; in other words, retrofitting schools now could reduce the state’s future indebtedness, addressing the concern bond rating agencies have about the ratio of debt payments to revenue.
We concluded that far from harming Washington’s bond rating, the passage of EHB 2561 may well help the state’s position. Furthermore, the Treasurer and the legislature might take a closer look at how much debt capacity is being used for truly unsustainable and costly projects like large scale highway expansion.