Washington's state treasurer-elect rode a blue wave into office

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Washington State Rep. Mike Pellicciotti, a two-term state lawmaker, was ushered into the Washington treasurer’s office on a blue wave that further reduced the number of Republicans serving in state positions on the west coast.

Pellicciotti, a Democrat, defeated incumbent Duane Davidson, a Republican, garnering more than 53% of the vote in the Nov. 3 election, according to the Washington Secretary of State's office.

Washington treasurer-elect Mike Pellicciotti said he doesn't have immediate changes planned for the state's bond program.

In Washington, the treasurer is responsible for cash management of public funds, arranging short and long-term investments and selling bonds.

The treasurer also is the sole elected official on the State Investment Board, which managed the state pension and other trust funds. He is also chairman of the State Finance Committee and Public Deposit Protection Commission and sits on other boards, including the committee that oversees the state’s prepaid college tuition program, the Housing Finance Commission and the Economic and Revenue Forecast Council.

Incumbent Davidson and Pellicciotti campaigned on very similar platforms, which historically would have given the incumbent treasurer an advantage.

But not this year.

“I think it’s always challenging to beat an incumbent,” Pellicciotti said. “I think this might be the first time a challenger has beaten an incumbent state treasurer in the State of Washington. But I have run against incumbents before and been successful.”

Davidson, a CPA, who served one term as treasurer, was Benton County treasurer and chief financial officer for that county’s auditor office before his election as state treasurer in 2016.

“I feel like we had a good message and voters like my value system,” Pellicciotti said.

The only Republican to win statewide in Washington was two-term incumbent Secretary of State Kim Wyman, who won a third term. In Oregon, where the state treasurer's office performs a similar role to Washington's, incumbent Democrat Tobias Read was re-elected.

“I think there are many voters willing to vote for Republicans and Democrats in statewide office,” Pellicciotti said. “I think our strong vote total was a result of people supporting the values I bring into the office and the message I put forward as a candidate.”

Pellicciotti’s stance on the issues wasn’t substantially different from Davidson’s.

Both candidates had asked the governor to call for a special session ahead of January’s regular session that convenes Jan. 11 to deal with a pandemic-induced revenue shortfall, with no success.

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“This is not a time to withdraw, or have resentment," Treasurer Duane Davidson said. "It’s crucial to have a smooth transition so the new treasurer will have the opportunity to have a good start.”

Both are also proponents of a judicious use of the state’s rainy day fund. Both oppose a proposal for a state bank to provide banking services to the state’s robust marijuana industry and offer savings on capital project financings.

“I knew it was going to be difficult with an R behind my name,” Davidson said. “Kim Wyman, who has a lot of name recognition, barely got by, but she did.”

Davidson was elected in 2016 in part because of the way the state's "Top-Two" primary works. That system puts the top two finishers in the primary in the general election regardless of party.

In the 2016 primary, three Democrats split 51% of the vote, putting two Republicans in the November general election that Davidson won. This year, Davidson and Pellicciotti were the only two candidates in the primary.

“This is a blue state,” Davidson said. “I thought because we had bipartisan support and because of the accomplishments made by me and my staff, we would prevail, and voters could grant me a second term, but it was a very partisan election.

Joe Biden carried the state easily in the presidential race, with 58% of the vote compared to less than 39% for Donald Trump. Incumbent Gov. Jay Inslee, a Democrat, was re-elected with more than 56% of the vote.

“Turnout was high, and I think there was a lot less ballot splitting, than in previous years,” Davidson said. “President Trump was very unpopular in the state. I think people were voting a straight Democratic ticket without analyzing too much. There were Republican losses in the state that tended to surprise people, and I was one of them.”

Davidson has conceded the win to Pellicciotti and is now focused on ensuring a smooth transition that brings the incoming treasurer up to speed when he takes office on Jan. 13, two days after the Legislature reconvenes.

The outgoing and incoming treasurer have been emailing.

Davidson hopes that Pellicciotti will continue his efforts to encourage a formal policy on what the minimum size of the state's rainy day fund should be.

“I think lawmakers should have a discussion about that,” Davidson said.

With the state struggling like others amid the pandemic-induced recession and shrunken revenues, lawmakers are looking at drawing down reserves.

“The policy people say this is what it’s intended for, which it is, so let’s spend it,” Davidson said.

“I have to say, 'No, no, no, because what if there is an earthquake or one of the major infrastructure bridges should collapse? What if something happens and we have already down reserves, so we have a low balance?'” Davidson said.

“We can’t overspend the rainy day fund, even for its intended purpose, because you never know what is coming down the pike,” Davidson said.

Moody's Investors Service rates Washington Aaa after an August 2019 upgrade; Fitch Ratings and S&P Global ratings both rate the state's general obligation bonds AA-plus. But the rating agencies also rank the state in the top ten in terms of debt per capita.

“I think we should be concerned about it because the level of debt that Washington state has has been noted as a topic of concern in our bond ratings,” he said. “If we were to lose our triple-A status, we would be paying a lot more in interest rates for debt.”

Davidson said those are the kind of things he anticipates speaking with Pellicciotti about in phone calls the two have arranged to orchestrate a smooth transition.

He also plans to advocate for Pellicciotti retaining the treasurer office’s staff.

“I feel very positive about the team I assembled,” Davidson said. “When I came in 30% of the state were eligible to retire, so there was a lot of turnover initially.”

Davidson developed a memorandum of understanding, which he calls a transition contract, that Pellicciotti signed.

The first thing the outgoing treasurer ticked off as a priority was a smooth, effective transition.

“That is the most important thing an outgoing elected official should do,” Davidson said.

“This is not a time to withdraw, or have resentment," he said. "It’s crucial to have a smooth transition so the new treasurer will have the opportunity to have a good start.”

Pellicciotti said he has spoken with Davidson to allow for an effective transition, and because he wants to continue a lot of the work and initiatives he has put forward.

“We will be setting up a transition team, so I am ready to take over in January,” he said.

Pellicciotti has a short list of things he wants to work on in his first 90 days.

Though he believes the state of Washington has been fiscally responsible, he wants to create more transparency through the use of technology. Instead of just having transcripts of the minutes available, he wants residents to be able to watch meetings live.

“So much of the power of this office comes from its ability to influence and persuade the Legislature,” Pellicciotti said. “One of the opportunities the treasurer has is to encourage economic development. As [Davidson] has, I want to work with the Economic and Finance Development Authority.”

As for the bond program, Pellicciotti said he doesn’t have any changes planned at this point.

“Our state treasurer’s office has been well-run for many years,” Pellicciotti said. “I think we can take pride in the way the State of Washington has been managed fiscally. That is something I look forward to continuing.”

As for reserves, Pellicciotti expects there will be some draw down to deal with the current economic challenges, but that he is going to advocate that the Legislature adhere to the financial guardrails recommended by the rating agencies.

“The first thing I am going to do is sit down with the Legislature to talk about addressing the economic challenges,” Pellicciotti said. “I am going to communicate with them about the importance of those financial guardrails, but also make sure we are doing everything we can to address the budget challenges.”

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