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Economic uncertainty underpins state treasurer’s race

First-term State Treasurer Duane Davidson, one of two Republican statewide officeholders in Washington State, is facing a challenge from Rep. Mike Pellicciotti, a Democratic state House member from the 30th Legislative District.

Unlike four years ago, the Treasurer’s race this cycle is a two person contest. In 2016, Davidson and fellow Republican Michael Waite advanced to the general election after three Democratic candidates fragmented the vote. Davidson ultimately prevailed in the general election by over 400,000 votes.

In addition to the size of the field, the policy landscape and political context underpinning this race are vastly different from that which defined the 2016 race.

With the COVID-19 pandemic and a resultant economic downturn continuing to ripple across Washington State, the Office of the State Treasurer -the bank for state government – will play a critical role in shaping the state’s economic recovery.

The Wire reached out to Davidson and Pellicciotti recently to hear more about their campaigns, policy commitments, and points of contrast.

The Campaigns

When asked what he wants voters to know about, Davidson recently provided Shift Washington a list of initiatives from his first term. These initiatives include refinancing existing debt, increasing the ability of local governments to borrow money at reduced interest rates through the LOCAL program, and enacting financial literacy programs.

Pellicciotti told the Wire he is running on a platform that centers financial transparency. He says he wants to make clear “how the state’s finances work” in order to achieve equitable fiscal policy.

With financial transparency still a priority, Pellicciotti acknowledged that the economic landscape in Washington State looks vastly different from when he first entered the race in May of 2019, necessitating increased urgency around certain issues.

When I first announced a lot of the things that excited me about the office were opportunities to advance issues of financial transparency and to advance an economy that works for everyone in our state. Since then, obviously COVID has changed so many things in so many ways, but what it’s done for me is amplify the need to address these issues of economic development and making sure that when we go through economic recovery, we’re doing so in a way that is truly about serving all people in the state of Washington,” said Pellicciotti.

Special Session

Both candidates have been supportive of addressing the state’s budget ills in a special legislative session. A commonality between Davidson and Pellicciotti, support for calling a special session sooner rather than later is a point of divergence between the candidates and Gov. Inslee, as well as some Democratic legislative leaders.

I have been one who thinks that the earlier that one addresses the COVID related shortfall the better,” said Pellicciotti. “As soon as I am elected Treasurer, I will immediately sit down with legislative leaders to ensure that the supplemental budget is passed before the February deadline in order to balance our current budget.”

Davidson said the decision not to convene a special session to deal with the budget would result in starker economic consequences down the road.

Delaying the resolution of the budget issues that were brought on by the pandemic will only result in adopting more drastic measures in the future that could have been lessened by taking action today. Responding to financial situations as they arise is just good fiscal policy and financial management. I believe this is a huge mistake that will be regretted,” said Davidson.

Despite the candidate’s preferences, a special session in the near future seems unlikely.

Managing Debt

The Treasurer issues and manages the state’s debt. The Wire asked both candidates to explain the approach they’ll take to managing Washington’s debt during the state’s economic recovery.

Davidson: “Although this is a difficult economic time, interest rates are at an incredibly low rate. Just last week, we sold bonds at a rate of 2.51%. This is partially due to the fact that the state was able to achieve a Triple A rating from one of the major rating agencies last year. During my term in office we have taken the opportunity to refinance existing state debt reducing future debt service payments in an amount of approximately $450 million. We are hopeful that the next federal COVID legislation (which will be announced very soon) will include advance refunding restoration providing us the opportunity to refinance more of our debt.

I think it’s imperative that we should avoid borrowing to make up for lost tax revenue. The last Federal legislation provided for a program to do just that but at very high interest rates. We as a state, have always refrained from borrowing for cash flow; the last time it was done was in the early 1980s. We will need to pay that money back with interest which creates more pressure to increase taxes. This is not how we help stimulate the economy. We cannot tax ourselves to prosperity.”

Pellicciotti: We need to be doing all we can to reduce our debt. That should always be a focus of the legislature and the treasurer. A lot of the debt we have in our state has been tied to our capital expenses… I think that we need to make sure we’re creating as few debt obligations as possible going forward, especially related to our operating expenses. We need to make sure we focus on balancing our budget in terms of our operating expenses, as we always have.

There might be a need for looking at the way we handle our capital debt. I do think that having the better bond rating has helped in reducing some overall expenses but I’m also concerned with the lower returns that treasurer investments have made in the last year in a way that has cut into our ability to balance our budget.”

Fundraising

Thus far, Pellicciotti has opened up a comfortable lead in fundraising, bringing in $260,153 – over double what Davidson has raised ($125,323).

Pellicciotti has been endorsed by nearly every Democratic member of Washington State’s Congressional Delegation, including US Senator Patty Murray and US Reps. Pramila Jayapal and Kim Schrier. On the state level he’s been endorsed by Gov. Inslee as well as Attorney General Bob Ferguson and Lt. Governor Cyrus Habib.

Davidson has been endorsed by legislative Republican Minority Leader’s Rep. J.T. Wilvox and Sen. Mark Schoesler. He’s also been endorsed by former Washington State Treasurers Dan Grimm and Michael J Murphy, as well as 31 current Washington State county treasurers.

The Washington State primary is on August 4th and the general election is on November 3rd.


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