Tuesday, October 30, 2012

Yes on SJR-8221, Altering the Debt Limit

With about a week before my ballot has to be back in the government's hands, I'm filling it out bit by bit. So far I've voted yes on I-1185 and I-1240, approved R-74 and voted no on I-502.
SJR-8221, Altering the Debt Limit

The Issue: Engrossed Senate Joint Resolution 8221 is a constitutional amendment implementing three changes to the Washington state limit on debt payments:

1) The amendment would schedule three reductions to the state debt limit. Currently at 9.0% of general state revenues, the limit would fall to 8.5% in 2014, 8.25% in 2016 and 8.0% in 2034 (and no, that's not a typo, that's a reduction scheduled for twenty-two years after the amendment).

2) The current limit is based on the average of general state revenues over the previous three years. The amendment would change that to six years.

3) Whereas "general state revenues" currently only includes revenue that is not dedicated to a specific use, the amendment would redefine "general state revenues" to include the state property tax, which is dedicated to the specific use of funding public schools.

My Position: I'm no fan of government debt, and Washington state debt is already over 20% of GSP. I wholeheartedly support lowering the limit on state debt.

The Changes:

1) While scheduling the final drop to 8.0% for 2034 is nothing but cynical, a drop to 8.5% at the next biennial budget and 8.25% at the biennial budget after that is a clear win for smaller government.

2) Extending the the basis for the limit from the average of three years to six years stabilizes the limit against recessions. However, since revenue typically grows year-to-year, the six-year average will usually be smaller than the three-year average. The debt limit will be a smaller percentage of a smaller number-- again, a win for smaller government.

3) Expanding the definition of "general state revenues" to include property taxes further stabilizes the limit, as property taxes are more stable than other forms of revenue. However, this also raises the limit. The Commission on State Debt (PDF) found that property taxes are about 10% of general state revenue, but typically grow slower (2%) than the rest of general state revenue (4.5%). Even so, if these numbers hold true, the new limit would be about 2.5% lower than the old in 2014, and would drop to almost 6% lower than the old in 2016. Once again, a win for small government.

I will be voting YES on SJR-8221.