Election Prep: WA Substitute House Joint Resolution 4215

Ballot Text:

The legislature has proposed a constitutional amendment on investment of higher education permanent funds.

This amendment would authorize the investment of money in higher education permanent funds as permitted by law, and would permit investment in stocks or bonds issued by any company, if authorized by law.

Explanation and pro/cons here. Full text here.

Article 8, Section 5 of the Washington State constitution prohibits “using state funds for gifts or loans to any individual, association, company or corporation” and Article 12, Section 9 prohibits the state from “subscribing to, or having an interest in, the stock of any company, association, or corporation”. These both sound like very sound provisions that represent the proper distance a state government should have from the private sector.

Apparently over the years there have been a number of amendments carving out more and more exceptions to these rules for various funds set up for one thing or another. This amendment would make another exception, this time for a fund which backs state funding for various higher education initiatives.

The argument is that by allowing investments in corporate stocks, you can get better returns, and therefore do more of whatever those funds were set up to do. The counter generally proposed is that investing in stocks can be risky. And indeed, sometimes it can be. But it also does generally in the long term do better than the alternatives over the long term. And the long term is what matters for this sort of fund.

However, I think that is irrelevant. The real issue here is not how the investments would do, or if it is risky or not, it is that by directly investing in corporate stock a conflict of interest is set up, and the state governments interests are now tied extremely directly to the interest of making sure the stock prices of the companies they invest in go up. There may be overall economic interests that align those interests any way in certain situations, but I think creating a direct state increase specifically in the rise of stock prices is highly unadvised. I think the previous amendments were a mistake when they carved out exceptions earlier. I think this would be another mistake. So, my vote is:

REJECTED