Washington State Treasurer Mike Pellicciotti gave his outlook on the state’s financial challenges and more during a presentation Feb. 5 at the Greater Federal Way Chamber of Commerce luncheon.

As the state’s chief financial officer, Pellicciotti was elected to the position in Nov. 2020, following two terms as a District 30 state representative. The State Treasurer’s Office handles nearly $35 billion in local investments and acts as the state’s banker by cutting checks for legislators’ projects, issuing bonds and managing debt.

Washington’s economy is projected to generate $66.5 billion for the budget cycle that runs through June 30, 2025, according to Washington State Standard, which reports the state’s budget reserves at $2.4 billion.

“We have a lot of winds blowing against us,” Pellicciotti said about building up the state’s budget reserves, which were depleted during the pandemic. “Every government did that. That’s how they stayed stable.” But when times get good again, he said, “you have to replenish those reserves.”

Pellicciotti also discussed the state’s pension system, which he said is a priority to protect and fund properly. The state is rated among the top in the nation for the administration, maintaining and funding of its pension system, he said.

“There is no more expensive debt you can have than underfunded pension liability,” he said, noting that the state earns about 7 percent to 8 percent a year on those returns. “If the funds are not there to be invested, that’s 7 to 8 percent you’re losing.”

In addition, one of the treasurer’s main responsibilities is managing the debt service ratio, which is the percentage of total money coming into the state that is going toward debt. He said the Legislature has followed his recommendations for managing bonds and debt.

Pellicciotti also touched on tariffs that are being enacted on U.S. trading partners, specifically Canada. He said Canada is one of our largest trading partners, with Washington exporting nearly $11 billion in goods to Canada and importing about $20 billion in goods from Canada every year. He expects the extra costs from tariffs will hit every consumer by up to an extra $3,000 a year.

“There’s a symbiotic relationship there,” he said of Washington’s trade partnership with Canada.