State Long-Term Credit Outlook Rises Thanks to Rainy Day Fund Proposal

For Immediate Release: January 23, 2007

OLYMPIA � Governor Chris Gregoire today announced that Washington�s credit rating has improved, in part because of her proposed Rainy Day Fund. Standard & Poor�s (�S&P�) Ratings Services, in their report on state economies nationwide, revised the credit outlook in Washington to �positive� from �stable� and affirmed its 'AA' rating on the state�s outstanding debt.

�The outlook revision reflects the state's sustained economic expansion and robust revenue performance, which is translating into a much improved budget and financial position,� said Standard & Poor�s in its report. �The outlook also reflects the state's proposed move to formalize its rainy day fund (RDF) reserve, which will provide for increased financial stability in times of future economic downturns.�

�I am pleased that S&P recognized the strength of the Washington economy and the benefits of our proposed Rainy Day Fund,� said Governor Gregoire. �The Rainy Day Fund will help stabilize state spending and keep our economy strong, well into the future.�

Governor Gregoire�s rainy day fund will:

• Deposit $262 million as a part of Governor Gregoire�s budget proposal;
  
• Grow by making future automatic deposits of one percent of the state�s general revenue each year � about $150 million annually;
  
• Be constitutionally protected so that it can only be used with a three-fifths vote of the Legislature;
  
• Be available by a simple majority vote of the Legislature during a natural disaster or if the Governor declares a state of emergency; and
  
• Help state government ensure � even in tough times � that we keep our promise to Washingtonians to provide safe streets and neighborhoods, affordable health care, and world-class education.

Standard and Poor�s also commented on the possibility of improvements to the state�s credit rating in the future, thanks to the fiscal prudence shown by Governor Gregoire and the Legislature. �Given the state's prescient use of previous revenue surpluses, and the projected ending balance in the current fiscal year, the state is well positioned to maintain solid financial footing even if revenue trends soften. This, combined with the recently proposed RDF (whether constitutional or statutory), suggests a higher rating is possible.�

In last year's supplemental budget, Governor Gregoire kept her commitment to get the state off the budget rollercoaster by setting aside $947 million to help make future pension payments, pay for growing health costs for children and low-income adults and continue to reduce class sizes in public schools. This year, Governor Gregoire proposes to keep the state�s savings secure with constitutional protection.

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