While the Evergreen State is ranked top nationally in long-term financial stability, Washington Treasurer Mike Pellicciotti says residents and business owners are still at risk of feeling the brunt of President Trump’s “chaotic” tariff plans.
Pellicciotti reminded Tri-City leaders during a recent visit of the resources his office can provide municipal governments as they deal with cuts to federal funding.
One is the LOCAL Program which lets small governments pool requests for equipment or real estate projects and use the state’s strong credit rating to get low-interest loans.
Statewide, the funded projects range from equipment for small fire agencies to help for large community libraries.
Last year, the Kiona-Benton City School District used the program to finance two new school buses for about $380,000. The city of Richland and West Benton Regional Fire Authority also have used this program.
Pellicciotti said he wants public officials to know about the program to reduce the borrowing costs for taxpayers and get critical equipment into the hands of first responders.
‘Chaotic’ Trump tariffs
The reminder comes at a time when local governments of all types in the Tri-Cities are dealing with major budget crunches and struggling to pass levies for new equipment such as emergency communication upgrades or to meet the demand for increasing EMS needs.
Now they also have to contend with the economic fallout of Trump’s push to reshape the American economy.
Pellicciotti, a second-term Democratic treasurer who unseated Tri-Cities Republican Duane Davidson in 2020, spoke last week with the Tri-City Herald about his concerns about the impacts of the MAGA agenda and the lack of financial education in state schools.
But he also praised state legislators for maintaining the state’s “rainy day” budget reserves and for keeping the state’s debt service ratio low and its pensions well funded as state leaders work to correct a $16 billion shortfall.
That helped the state retain its sterling Aaa rating with Moody’s. Last Friday, that agency downgraded the U.S. credit rating — from Aaa to Aa1 — due to concerns about the nation’s growing $36 trillion debt.
Pellicciotti said in a statement that the downgrade signals that the U.S.’s role as the financial bedrock of the global economy was “cracking” and it was a clear message that the feds need to “get our house in order.”
“It is not cause for celebration to note that many states, including Washington, now hold a higher credit rating than our federal partner,” he said in the statement. “As Congress deliberates our next federal budget, it should soberly consider how it has contributed to the explosion of U.S. debt and whether continuing that trajectory to benefit the wealthiest among us through tax breaks is a trade off we can survive.”
On April 2, Trump signed the nation’s most sweeping package of tariff hikes on foreign countries seen in nearly a century, sending the stock market and retailers reeling.
Pellicciotti said it’s been disastrous for Washington state farmers, business owners, buyers and diverse economies — all of whom rely on the smooth flow of international trade.
“What we’re seeing is a COVID-like disruption that is entirely based on economic policies that are hard to understand,” he said.
The federal government provides the Evergreen State with more than $27 billion in funding, according to 2024 fiscal numbers.
Pellicciotti says the Trump Administration already tried to unlawfully withhold some of the congressionally authorized funds, starting with the Jan. 28 federal freeze on grants, which was later paused by a federal judge.
That means, it’s more important now than ever to have healthy reserves, he argued.
“I can’t sugarcoat it: There are more challenges on the horizon,” he said.
He admitted one of those challenges is the additional $9 billion in new taxes passed by the Legislature in what state Republicans are calling the “largest tax increase in state history.” Businesses are expected to bear a majority of the new costs.
He said there was a real “push and pull” between new taxes and no budget cuts.
“I think what the Legislature ultimately decided on was a compromise of those two, which was half reduction in spending and half in new taxes. I’m not sure that made anyone happy,” he said.
“And so I think a lot of the times people talk about wanting compromise government, or government meeting in the middle, but I think they also realize that when that happens, it leads to everyone being frustrated to a degree.”
The third option — cuts to rate reserves and pensions — would have been the easiest politically, but would have done the “most harm” to the state’s long-term financial health, he said.
Lack of financial education ‘completely indefensible’
This legislative session, Pellicciotti was one of the most prominent advocates for a state bill requiring all high schools to teach financial education.
A key supporter is Rep. Skyler Rude, R-Walla Walla, ranking minority member on the House Education Committee, and Southridge High School graduate Ashwin Joshi has played an important role in lobbying for its passage.
“It is rare today that you can have legislation proposed that over 80% of Washingtonians think is a good idea, that has broad bipartisan support,” Pellicciotti said. “It is completely indefensible at this point that the Legislature hasn’t passed a requirement for financial education to be taught in our schools.”
Pellicciotti says the legislative chambers are at odds on whether to tack on a computer literacy requirement, which he says goes beyond the bills original intent.
“The Legislature should take a win and pass it, and not get bogged down on trying to add on additional things that create an inability for the current proposal to pass,” he said.
Threats to tax-exempt bonding
On the national level, Pellicciotti said he’s concerned about plans by some Republicans in Washington, D.C., to eliminate tax-exempt bonding in order to fund extensions to Trump’s 2017 tax cuts.
Those types of bonds pay for 75% of the infrastructure projects nationwide and are attractive to buyers since they don’t have to pay a federal tax on the interest earned, he said.
If congressional Republicans cut the tax exempt status on government bonds, Pellicciotti argued, that cost is going to be on the taxpayers.
For example, the state issued $1.2 billion in bonds about a month ago at a rate of about 4%. If those had been issued and taxed, Pellicciotti said the rate would been about 6.15%.
“What that means is that the average Washington family would have to pay an additional $1,600 to make up that additional cost for the exact same government services. And that’s just at the state level,” he said.
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