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Wednesday January 30, 2013

Treasurer testifies about a Council on State Debt in Senate Ways and Means Committee

SB5138 - Council on State Debt

I’m here today to ask you to pass SB5138 to create a Council on State Debt. This bill is about transparency, improved information and decision making for all of us.

Washington is a growing and economically diverse state that borrows money to build its capital and transportation infrastructure. Meeting our capital and transportation needs with bonds has been an important part of how we have improved our quality of life. Ways and Means uses bonds for capital budgets while Transportation uses them for transportation. However, investors who buy our general obligation bonds don’t see any difference between most of them.

The market clearly wants to invest in our bonds, as evidenced by last week’s very successful $1.3 billion sale – more than half of which was a refinancing to save over 10%. And, new bonds were sold at historically low rates.

Although I am glad the market wants to buy our bonds, with $19 billion of debt outstanding, that demand is not unlimited. This can make our capital and transportation bonds compete with each other - and that can increase the cost funds when we borrow in the future. A complete, up to date picture of all of the State’s current debt and other liabilities can be found in our third Debt Affordability Study published this month.

A debt council, which was recommended by the bipartisan debt commission I chaired, will help us manage this problem by creating a way to better plan for how and when we use state debt to pay for our capital and transportation needs. Why let the market decide things for us when we can take charge of these choices ourselves instead?

Modeled after the state’s successful revenue and caseload forecast councils, the council will recommend debt spending levels the Governor and Legislature will use when preparing their capital and transportation budgets. This effectively formalizes the informal working group that now determines the debt capacity for capital purposes under the constitutional debt limit. Like the revenue and caseload forecast process, this recommendation binds the Governor but not the Legislature.

The Debt Council will have 7 members - 4 legislators, the OFM Director, the DOT Secretary, and me (who would be the non-voting chair)). My office would staff the council and continue to provide an annual debt affordability study too.

I’m glad voters amended the constitution in November to lower the debt limit for capital budget bonds from 9% to 8%, smooth debt capacity over time by replacing a 3 year moving average with a 6 year average, and to count property taxes as general state revenue. SB5138 deletes changes to State Finance Committee statutes that let it act to smooth debt capacity, but with passage of the constitutional amendment this is no longer needed. SB5138 also repeals the 2011 state debt commission because its work is done.

Monday April 18, 2011

Dialing Back State Debt

April 18 Testimony on – SSJR8215

Last year, the Legislature directed us to prepare the first-of-its kind Debt Affordability Study for Washington state. Thank you for including the proviso in last year’s budget that directed my office to prepare it. The main story from the Study is that debt is a limited resource that must be used wisely. Borrowing makes sense to pay for assets that last longer than the debt service, as is the case with capital facilities that taxpayers use over time.

But, Washington is a high debt state - in the top ten in several measures of debt. Gradually constraining our borrowing by moving the 9 percent limit down to 7 percent will create a better balance between debt financing for capital projects and the burden created for the general fund to come up with debt service payments in the future.

I support SSJR8215 because it creates a more sustainable and consistent capital budget capacity for the future by replacing the current 3 year moving average with a 10 year moving average. This lets the state make better plans for how and when it will make important capital investments.

Read more here...

Wednesday February 23, 2011

February 22, Testimony before the Senate Ways And Means Committee Debt Affordability and Debt Limits – SJR 8215, SB 5181

This Debt Affordability Study is the first-of-its-kind for Washington. Thank you for supporting it with a proviso in last year’s budget that directed my office to prepare it. This study recognizes that:

  1. Debt is a limited resource that must be used wisely. Borrowing makes sense when the asset lasts longer than the debt service, as is the case with large capital and transportation facilities that taxpayers will use over time. Washington does not borrow to pay operating expenses.
  2. Today’s choices about borrowing have consequences for future debt capacity and future operating budgets that reach far beyond the two-year budget cycles typically contemplated in the Legislature.

By every measure, Washington is a “high debt” state. Reinforcing fiscal discipline so we can better manage scarce debt capacity will reduce costs for capital and transportation projects.

Read more here...

Tuesday January 25, 2011

Comments on the Washington Investment Trust SB5238/HB1320

State Treasurer McIntire is firmly committed to building on and extending Washington states’ hard-won reputation for fiscal discipline – a reputation that at its core requires that public funds be safe and secure at all times, and that these funds are available to pay to state’s bills.

He could not agree more that we need to promote economic vitality, create jobs, and strengthen our communities in the wake of the Great Recession. Recovering from the past two years of economic and financial upheaval will take a lot of effort from both the public and private sectors – but also requires that the unique roles of each sector be enhanced and respected.

This bill not only fails to achieve these important goals – but if adopted would place both public funds and the state as a whole at significant risk.

This bill violates the state constitution…

The proposed bill could only work if the state constitution were amended. Specifically, Article VIII - Section 5 – in the constitution unchanged since 1889 – says:

    CREDIT NOT TO BE LOANED. The credit of the state shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation.

Our attorneys have no doubt at all that this provision directly conflicts with the proposed Washington Investment Trust – which either directly or through loans to banks, would loan public funds now safeguarded in the treasury for home mortgages, businesses and students.

Read more here...

Tuesday March 3, 2010

A Few Concerns About a State Bank

Much like the Move Your Money movement (see previous post), another well-intentioned banking idea has been circulating around Olympia in recent weeks. It calls for setting up a state bank and is described in detail in House Bill 3162. Supporters want the state to step in since private banks are reducing business lines of credit, tightening lending requirements and in some cases unable to accept public funds from local governments.

This week, I testified in the House Financial Institutions and Insurance Committee to express my concerns. I told the committee members that I appreciate their concern about the limited access to capital for private individuals, small businesses, and even local governments. But regardless of the good intentions behind this proposal, I have several serious concerns about its practical application:

Read more here...

Thursday February 25, 2010

We Need a Thoughtful Approach in Supporting Community Banks

In the wake of the financial turmoil that has shaken the national and local
economies over the last year and a half, the public is understandably
frustrated and hungry for reform.

I was recently asked my opinion about a proposal called “Move Your Money,”
which calls on everyone to move their money from banks that accepted bailout funding to local community banks that didn’t take bailout funds from the government.

Read more here...

Tuesday November 24, 2009 4:00pm

Keeping the State Treasury on a Solid Footing

The tough task of balancing Washington’s budget this coming year got a lot tougher this week as the revenue shortfall increased by $760 million. Our state’s chief economist, Arun Raha, cited continued weakness in consumer spending and lower than expected collections as impetus for the large downward adjustment in his forecast.

But Raha also noted that growth is beginning again in the national and state economies. As we brace for worse revenue and budget conditions, it is important to keep sight of this bigger picture and to bear in mind the often understated or unmentioned resilience of Washington’s economy. The task at hand for state government is to weather these difficult times without undermining the institutions and ideals that have contributed so much to Washington’s core strengths and values. And I am confident this is possible.

Read more here...

Friday November 6, 2009 12:00pm

Homebuyer Tax Credit to be Extended

I am happy to report that Congress passed an extension of the successful homebuyer tax credit on Thursday. This legislation extends an $8,000 tax credit for first-time homebuyers and provides a new $6,500 credit for current homeowners to purchase a new home and have lived in their current residence for five consecutive years within the previous 8 years. The new legislation, which President Barack Obama is expected to sign Friday, extends the tax credit through next April. The original tax credit was set to expire at the end of November.

While that's good news for homebuyers, the benefits don't end there. Every 1,000 home sales generate $112.4 million of economic activity with $71.9 million of it directly from home-sale preparation and the actual real-estate transaction. In addition, more than 700 new jobs are created.

Read more here...

Wednesday, October 21, 2009 6:00pm

A “Sun Break” for Washington Banks

I’m pleased to announce some good news for Washington banks this week. My office received $3.5 million from the Federal Deposit Insurance Corporation (FDIC) that we are returning to the public depositary banks that were called upon to replace public funds lost when Bank of Clark County closed in January.

We mailed pro-rata rebate checks to 88 banks today.

Read more here...

Friday, September 11, 2009 6:00pm

Comments on Venture Bank Closure

This evening, the Department of Financial Institutions together with the FDIC helped manage the sale of Venture Bank to First-Citizens Bank and Trust Company.

Venture has more than $57 million in state and local government deposits – a fact that underscores the importance of the Public Deposit Protection reforms my office led this year. No public money was at risk and the government entities with deposits at Venture Bank will continue to have full access to those funds.

Read more here...

Tuesday, September 08, 2009 2:30pm

Housing Market on the Mend, But Challenges Remain

I’d like to take a moment to discuss the housing market. Housing is a key component of Washington’s economic outlook and stabilizing the housing market is crucial to the state’s economic recovery. We have seen some encouraging signs.

Home sales have picked up over the past several months due to low interest rates, reduced prices, and an $8,000 first time homebuyer tax credit. People are once again finding it possible to purchase a home. But much remains to be done to reduce the financial strain on Washington families. One of these important areas is the foreclosure market. In order to prevent foreclosure, education is critical.

Read more here...

Thursday, August 27, 2009 11:30am

FDIC Extends Deposit Insurance

Good news! This week, the Federal Deposit Insurance Corporation’s Board of Directors voted unanimously to extend the Transaction Account Guarantee Program until June 30, 2010. By insuring non-interest-bearing deposits larger than the $250,000, this program has been invaluable in our effort to protect nearly $8 billion of public deposits.

Almost immediately after taking office in January, a bank failure revealed that the majority of state and local government deposits were not insured or collateralized, creating an untenable risk for both the public tax dollars and the financial institutions that held them.

Read more here...

Monday, August 10, 2009 8:05am

Greeting from State Treasurer James McIntire

Welcome to our new web site.  Thanks for visiting!

I’m pleased to launch our new site today.  The old site was designed nearly a decade ago and needed a major remodel.  Our new site - built on the strengths of the old site – incorporates new ideas and technology along with a more intuitive functionality to help support a rapidly changing financial landscape.

Read more here...