As the state’s chief financial officer, I believe that to be successful, government – just like business – needs innovation, efficiency, and continuous improvement. I’m pleased to report the success of my 2010 Legislative agenda. My six bills – including a proposed amendment to the state Constitution – all serve the central goal to save money by improving performance to get the maximum value from every tax dollar. And, I’m proud that all six passed with bi-partisan support from both the House and Senate.
2ESB 6221 – Providing local government entities better access to a low-cost, short-term investment option
This legislation clarifies and expands the list of eligible Local Government Investment Pool (LGIP) participants. Under this legislation state agencies such as the State Lottery and federally recognized tribes are allowed access to this voluntary program. The LGIP has been a popular and successful tool for local governments in Washington State since 1986, providing a safe, low-cost liquidity vehicle for its participants. Additionally, local governments have realized a significant yield pick-up compared to what they would have achieved in comparable privately managed funds. Past Legislatures had amended the statute to allow the State Finance Committee and institutions of higher education to utilize the LGIP. Other governmental entities that had been excluded from the LGIP because of the narrow scope of the previous statute now have access to the program.
Gov. Chris Gregoire signed the bill into law on March 31, 2010.
SB 6219 – Time Certificate of Deposit
This legislation allows the treasurer to utilize treasury surplus funds or funds from the LGIP for the TCD program. The LGIP is a short-term liquidity vehicle for local governments. Due to the shorter nature of the LGIP portfolio CDs are an attractive investment option. Local governments would have enjoyed a higher yield if the LGIP funds were utilized for the TCD program. Previously, the State Treasurer was required to make funds available for deposit into qualified public depositaries, if there were sufficient balances in the state treasury. Since the treasurer was required to place those funds, if available, into the TCD program, the core portion of the state’s portfolio was utilized for this program. This core would normally be invested in securities with longer maturities and higher yields than the state receives on the deposits. Since 2002 the new option provided by this legislation could have achieved $24 million in additional state earnings, while at the same time the LGIP participants could have received an additional $3 million in earnings.
Gov. Chris Gregoire signed the bill into law on March 19, 2010.
SB 6218 – Authorizing use of voter approved local excess tax levies to pay financing contracts under the Local Option Capital Asset Lending Program
This legislation allows local governments that have received voter approval for the issuance of “bonds” payable from excess property tax levies to issue the bonds in the form of a financing contract or financing lease with the State Treasurer under the LOCAL program. This was accomplished by changing the statutory definition of the term “bond” in 39.46 RCW to clarify that such term also includes a financing contract, financing lease or other evidence of indebtedness to which the voter-approved excess taxes may be pledged. This allows such a local government to accomplish its voter-approved borrowing through the OST LOCAL program. It gives them the ability to levy a special tax to repay the bonds, which provides flexibility outside the General Fund. Voter approved bonds are the strongest we can offer the market. The previous statue did not allow these bonds from being financed through the local program.
Gov. Chris Gregoire signed the bill into law on March 18, 2010.
SB 6220 – State Finance Committee (SFC - Governor, Lt. Governor and Treasurer) Request Legislation
Municipal bond markets have become turbulent due to global financial market conditions. States with agile and time-sensitive ways to sell bonds get advantages when entering this difficult market. Washington’s SFC statutes – largely unchanged over forty years – imposed clumsy processes that disadvantaged the state. This legislation allows SFC to make orderly, structured and timely delegation to the Treasurer so lower borrowing costs can be achieved for the state. Nothing in this bill changes the responsibilities the Legislature long ago granted the SFC. Doing this will let the state make even more effective use of new federal stimulus options like Build America Bonds, allow better timing for refunding existing debt to save more money. Since June, the state could have saved $46 million (NPV) if we had the flexibility sought in this SFC legislation.
Gov. Chris Gregoire signed the bill into law on April, 13, 2010.
SB 6833 - Management of funds and accounts by the State Treasurer
This legislation does four things (and includes a modest intent section that describes its purpose): a) Allow the Treasurer’s Office to negotiate lower fees for independently held investments; b) Clarifies that money in the custody of the treasurer and in treasury accounts can be co-mingled for cash balance and cash management purposes c) On an on-going basis, empowers the Treasurer’s Office to identify any accounts each biennium are deemed “obsolete” based on criteria and process to be determined by the Treasurer’s Office. d) Requires the Office of Financial Management to provide a list of all locally held accounts to the Treasurer’s Office, which then reviews each account (other than higher education) to determine if it is financially advantageous to move the account to the Treasurer’s Office. The Treasurer’s Office is then encouraged to request legislation to make those transfers. The legislature recognizes the significant financial benefits realized by the state through consolidated cash management activities. It is the intent of this act to encourage and, when financially advantageous, to expand those activities.
Gov. Chris Gregoire signed the bill into law on March 25, 2010.
SJR 8225 – Resolving to define "interest" in the state constitution
This would amend the state constitution and change the interest calculation on debt, used to determine the debt limit, by subtracting federal subsidies.
The Secretary of State must submit this Joint House Resolution to the voters in the next general election.
TThe state has already benefitted from the new federal Build America Bonds program to get excellent net interest costs – but only for transportation projects where debt service costs are not subject to the constitutional debt limit. Build America Bonds benefit the state because the interest costs on taxable bonds get a 35 percent subsidy from the federal government. To do this, Washington State must first pay the full interest cost before the subsidy and then get reimbursed by the federal government. Washington State cannot make effective use of Build America Bonds for its general obligation bonds because the state constitution requires the full interest payments – prior to the federal reimbursement – be counted against the constitutional debt limit. Amending the state constitution in the manner shown in the attached draft will remedy this problem. While the current federal Build America Bond program is slated to end December 31, 2010, it is likely to be extended. And, it is possible that other similar federal programs may be created in the future. If Build America Bonds with a 35 percent subsidy are reauthorized by the federal government and the state passes this amendment, we will be in a position to save an estimated 30 to 50 basis points on interest costs for bonds issued for capital purposes similar to what we are now saving for transportation projects. Saving 40 bps on the projected general obligation issuance for the period from January 2011 through the end of FY 2013 would save the state an estimated $118 million.
Will appear on Nov. 2 General Election statewide ballot.