from a purely a marketing standpoint. >> s.a. a free sample and what we know is then the of them have the opportunity to experience expedited screening with risk assessment rules that have applied with the rules of the program. . .>> "washington journal"

continues. host: fiscal health of states is the topic for the next 45 minutes and we are joined by two state treasuries. jim mcintyre, washington state treasurer. along with david miller, who was the tennessee state treasurer. mr. lillard, i want to begin with what do state treasurer is due? guest: they're usually the chief financial officers of their state and they managed hundreds of billions of dollars for state governments and local governments entities throughout the united states, including pension funds. they play a very important role in fiscal health. host: how do you go about doing your job? guest: a sickly investing monday

-- investing money and offering programs to citizens of that they can use in their state like that. host: jim mcintyre, who do you report to in your job? i elected, pointed, how does it work? guest: i'm elected by the voters every four years and we have nine statewide elected officials in washington state. other states have fewer, but we are very active and i report to the voters. i am there to try and make an independent voice on fiscal health and how we manage our finances. both short and long-term. this is a long-term focus. in our state, we issue a lot of bonds to finance schools and those bonds get paid off over 25 years. we invest pension funds for a very long term. so one place in state government where we have a real strong focus on long-term fiscal health for the state.

host: what are some of the short-term forces for states? guest: short-term, we have a lot of concern about transportation financing. i wrote -- and ability to finance school systems and build new schools. those are real challenges. host: why did you all come to washington this week? guest: many of the issues that we are concerned about as state treasurer's that affect the lives of our citizens, we represent in every state. there was that originate here in washington and our legislative conference addresses those issues and gives state treasuries and their staff not only a chance to have education, but to also meet with numbers of congress and their staffs to express thoughts about the best fiscal policies. host: president and vice president, what is your association, why do you think it is necessary to have it in washington? guest: the national association

of state treasurer is is a nationwide organization that includes officers from every state in the united states. we also have three affiliate organizations involving college savings and unclaimed property and debt management. it gives us an opportunity, like i said, to share best ethical practices among those organizations, but also to serve as a voice for fiscal responsibility not only in the states, but in the united states government as well. host: jim mcintyre, what is the message from state treasurers to washington? guest: we are very concerned about municipal bonds. it is our primary tool for financing the public infrastructure of state and local governments. we invest and build about 75% of public infrastructure. the schools, the roads, the bridges, the public facilities in this country.

they are largely financed by state and local government. the typical financing tool is a municipal bond. which is historically been tax-exempt under the federal tax credit host:. what is your message to washington specifically? guest: the specific message is we do not want to see the interest on those bonds tax. if we do that, it will mean that we will have to invest less in infrastructure. host: what is the impact overall on state health? guest: the impact can be quite significant. if we tax the interest on those bonds, it would add hundreds of millions of dollars to the cost of infrastructure that we have built over the last decade. mr. lillard, your thoughts? guest: there has been an estimate over the last 10 years or so that it has been the president's proposal to cap the interest rates of a bond. citizens would have paid $173 billion more in the cost for

infrastructure as he pointed out, we have higher education buildings with this in our state and many states use them to build roads. others have essential government service buildings to provide services for the public, and it is a very important thing. you think about a citizen and you think about the fact that the k-12 school building their child goes through was probably built with general obligation bonds and certain municipal bonds that have tax exception out. this tax exception on municipal bonds has been something that has been in the law for over 100 years, and it has worked well for our country. it represents one of the best public-private partnerships. it has made america great today. recorders of them for structure today was built with those bonds. host: jim mcintyre comics might have his miscible bonds work. guest: when we need to raise money to build schools or new bridges, for example in the seattle area, we go out to the

bond market and offer long-term bonds for 20 to 25 years, and we issue those bonds. and i'll you to investors -- an iou to investors and they give us good interest rates. we have been able to finance it had about three percent to 3.5 percent interest rates which is very effective for the state of washington. it keeps our taxes low and it allows us to do a lot of construction, particularly during a downturn. host: during economic recession what role do these minas up a bonds play, not only for your state of tennessee, but also what role did a play for investors who were looking to put their money somewhere? guest: they play a role for states because during the great downturn, they gave the states an opportunity to continue infrastructure building and acquire money to fund a project

at a relatively reasonable rate, then you have a greater chance of continuing to build infrastructure which maintains jobs and the economy during that time period. it does benefit people who buy the bonds who can use the tax exempt status so that interest in terms of overall tax savings but i want to point out that those bonds are not only for high income earners. there are many retired couples on rather limited incomes who can invest in tax exempt bonds so it is not just something that wealthy people invest in in that regard. host: we are talking with two chief financial officers of their respective states. they are in washington this week as state treasurers have gathered here to talk about the issues that impact them. the health of states around the country and we encourage all of you to call them with questions or comments and tell us what is going on in your state as well. these two gentlemen here will respond. david lillard, tennessee's state

treasurer and james mcintyre who was the treasurer for washington eight. the forget the calls, let's talk about pensions. -- before we get to calls, let's talk about pensions. david dillard, how does it work and what is the help in tennessee -- david lillard, how does it work and what is the help in tennessee? guest: we do the administration side, putting benefits out, keeping records, and we also do the investment side. that is about a 44 pension plan and it serves many retired employees at many levels. it is a very important thing for our state. we are one of the healthiest plans in the nation. we are 90% funded on a blended aces and we are one of the top five or six plans in the country in terms of overall funded status and that is because we paid the annual funding requirement 100% every year and

have since 1972. guest: washington has a little bit different organization. we have gathered all of the local pension programs and they are manage at the state level, so everything is managed and consolidated -- in a consolidated basis at a state level for state and local government. our pension system was reformed back in 1977. we put in place some benefit reforms at that time. we have done some additional benefit reforms since then. we are on a blended basis, 94% funded and all the programs that are open are still accepting people and they are actually funded 100% or better. we manage those funds very carefully. our investment returns are very good and our benefit schedules are really the idea of the rest

of the country. a lot of states have been scrambling to keep up with where we are, so i think we have two very good states. when you can find is that some of these states and pension programs are actually providing terrific returns. $.84 of every benefit dollar paid out in washington state was paid for through investment returns because we have made the right investments. host: let's get to calls. will is first. thanks for hanging on the line. go ahead. caller: thank you. i was wondering what does the national association of state treasurer think the president obama's proposal on infrastructure? guest: well, for qualified him for structure bonds and etc., they are constructed, but we prefer them as an additional tool in the toolbox. as we said earlier in the discussion, we believe the tax-exempt status forming

visible bonds must be maintained for the reasons we indicated. to the extent that anything, whether it is an alternative proposal or either aspect of it ceases or cap say, that is a problem from our standpoint. host: we will to akron, ohio, democrat collar. caller: i would like to make the comment that i don't know how -- good morning. [indiscernible] host: good morning, listen to your phone an opportunity. -- listen to your phone and not tv. have to move on. frank in georgia, go ahead. caller: i wanted to ask a question about where our money is going in social security and we have not had an increase. we want to know about the lottery, millions and millions and millions of dollars a year are going to the government from the lottery. why doesn't anybody ever say

what they are investing in and what they are doing with that money? instead of helping those people that need the help and where you can't retire at 65 no more and the kids that are working now have nothing to build up to until they can retire. where is that extra money going to? the taxes they are playing -- pain from 65 or 72 or wherever they can retire. host: two different issues, the lottery issue. how does that work? guest: in washington, i can't speak to georgia but the lottery produces about $120 million a year and has for several years, so it is actually not a growing revenue source. it is a pretty small part of our budget, but all of those funds are dedicated to education expenditures. in washington, we are pretty

clear about how we spend lottery money. host: why is it not a growing resource? guest: well, certain populations find the lottery to be fascinating and interesting and something they want to do on a regular basis, but it is a source of entertainment for people and it is not a growing population. it is just not a real growth revenue source. guest: in tennessee, the lottery has been a growing source of revenue and the money is used solely for education like treasury mcintire edging -- said. we have a hope scholarship program that is used to fund the tennessee promise, a program to provide free community college to residents of the state. tennessee's biggest need going forward is to have a 21st-century workforce ready population. we have to have postsecondary education to do that, but the key -- host: is it a large funding

source for you in tennessee? guest: it is a large source for those programs i indicated, the tennessee promise and hope foundation. it is not used for general fund purposes or any other purpose like that. i want to assure viewers it is being used for a very good purpose. host: what is the biggest source of revenue for states? guest: that depends on the state and how taxes are structured. in tennessee, we do not have a personal income tax on earned income, so sales tax is about six the percent of our general fund revenue and followed by the franchise tax. it is a corporate tax version and those are two biggest sources for the general fund of our state. we also received federal funding dollars. host: jim mcintyre? guest: in washington, you have two treasures from two of the six states that have no personal income tax. for most states, that is the largest revenue stream.

we get about half of our revenue from the general fund in washington and from retail sales tax and we get another large tax source from the gross proceeds tax which is about 20%. those are the major sources. some comes from property taxes. host: how much do you get from federal government? guest: in tennessee, 40% of our overall expenditures are from federal funds. that comes in a lot of different forms, federal highway money transportation medicaid, the 10 care program in tennessee is our version of medicare. guest: i think that percentage is lower. it is significant. host: ted, raymond, new hampshire, and independent collar. caller: my question to the gentleman is, they hold the bonds for a lot of the buildings and construction of state schools and stuff.

new england has had some of the worst weather in years and a lot of schools with flat roofs have failed dramatically, causing >> and cave-ins. why can't they design these schools and put like a pitched roof and have entrances to end of the buildings where they had a metal roof, it would be self-cleaning and nobody would get hurt and the roots and everything else would last more? host: getting into architectural details of local schools. guest: i serve on the tennessee state building commission and your met -- and the caller is close to my heart because we should be moving away from groups. some of the things he points out are very appropriate points to

take into consideration. guest: washington has all kind of weather experiences. of course, we have a lot of rain, but we also get a lot of snow. it depends on the part of the state you are in. frankly, the architectural work on our schools is very good. all of our school buildings that are being built now are green. just about everything we finance with our capital budget are green. i want to point out, one of the things we talked about in terms of lawns and having all this -- of bonds and municipal bonds these are issued largely to construct and build things that will be there long after the bonds are paid for. host: nick, pleasanton, california. a republican. caller: all these bonds, it takes over 30 years to pay them off and a lot of money they are

asking for. bonds have tripled the money and nobody talks about that. the people that can buy the bonds are restricted to millionaires. people who have a lot of money. the individual who lives in the area cannot buy bonds, you have to bite 1000 -- up to buy thousands of them or you can't get any money. when they do that, the price of the project goes up and you are left to borrow the money for something else. like governor brown, he likes to raid all the money that is being gathered for certain things and take some of the money out of there to put where he wants to put in. host: ok, nick.

jim mcintyre guest:. good point. we have to do pay attention to this. we do not issue bonds -- pabon's for more than 25 years. under federal tax law, the projects have to last longer than our bond payments, so as a result, we do think we are matching the time period for this. in many cases, we are building large project and it is very difficult for us to be able to do those on the pay-go basis. i think both of us have urged our states to do more pay-as-you-go financing for capital projects, transportation . to save taxpayers money. we lowered our debt limit to push that. host: do you have to be a millionaire? guest: no, you do not. to binding is supposed bonds you do not have to be a

millionaire. it depends on the practices of the particular state, many have a retail sales. -- retail sales period. we encourage retail purposes with our bonds and they are limited to 20 years. we are cutting that interest cost as opposed to a 30 year bond alike treasurer mcintyre was talking about. it is important to think about that. host: what is happening with the invisible bonds postrecession and into this recovery? are you think less investors? guest: not necessarily. i don't think there are problems with purchasers of bonds or willing to invest. there have been some of market uncertainties but they yields on bonds created a cap at about 20% and the president's proposal is an issue. guest: the bond market is about $3.6 trillion from invisible bonds. host: across the country? guest: yeah, it is very active.

i think it is a little over 50% of the interest it -- that is paid is paid to households with income. so less than. host: john, democrat of new jersey. caller: my question is basically, you are talking about college savings and i am paying off a lot of student debt and i have a younger sibling who will enter college. i want to know about college savings plans. i heard they want to do some other bill in the coming months. you have any idea to what the bill will entail a, could mean for potential savers? guest: in our state in tennessee, there is a bill filed on behalf of the college savings plan network which is an affiliated to the national association of state treasurers. that with among other things would make computers qualified education expenses. you can use those college saving funds to buy a computer. i think we could all agree for

postsecondary education, computers are very desirable and necessary. i would urge and i'm sure treasure mcintyre what, everyone who has a child or other relative or friend, etc., who is going to college or post secondary education and that qualifies for college fund, establish a college savings account to get out of the levels of that we have these days for college. guest: you can invest in these college savings plans and the interest on that, the earnings on that, are not taxed and can be turned around and paid directly into your tuition for child tuition. host: how do these funds help states? what is the benefit? guest: one of the significant bars post secondary education, the ability to pay for it. as the caller indicated, people aren't a lot of debt. sometimes from post secondary education. that is one of the main things this attacks.

studies have shown that a child with a college savings account established for him or her is much more likely to go to post secondary education. that is one of tennessee's greatest challenges, to have a 21st-century workforce-ready population. this is a big part of that. host: there is a revenue stream here for 529 college fund? guest: there is not one for this day, but i would point out at least in washington, tuition is an ever-growing portion of the state cost for education. so more and more, and this is true in most states, more and more of the education cost is being borne by tuition. this is at least one way we can help people save for tuition. washington has a guaranteed tuition plan, which you invest today and you can then be guaranteed it will cover the highest tuition cost in a public university in the state. host: william is calling from

washington state, republican. hi, william. caller: good morning. i've got a couple of questions. i will ask the first one. we put all of our money into wind energy and solar energy, especially in washington state. there is energies out there like water that make 800 times more energy than wind starting out. when you multiply that using the paddle wheel type generator, you multiply that by 12 times and you can keep multiplying because of the way the water hits the paddlewheel and we will multiply that by four, in the and run you have water making energy 24 hours a day, 365 days a year, at 100% power and it ends up making

1650 times more energy. host: ok, william, i had to jump in because we are running out of time. your question or comment. caller: well, why don't we look into energies like that instead of wind? host: jim mcintyre, this is in your -- guest: we don't directly invest in energy or power generation at the state level, but we do encourage a lot of energy investments and conservation. at the same time, washington our, a lot of it comes from hybrid electric power already and the waterpower, so waterpower is a real source of energy in washington state and it gives us some of the lowest power costs in the country. host: jeannie's next in new jersey. an independent. caller: hi. i was going to ask about the 529

plans but you answered that well. i have another question. just on news this morning, they were talking about how americans are living longer and a 70 is the new 50. i was wondering how you guys as state treasurer's or people as investors factor that into pension planning now? guest: that is a very good point. mortality is moving in favor of individuals who live longer. american society of actuaries revised the tables to show that both men and women are living longer. for defined benefit potential -- pension plan, it means your liability goes up as a plan and you can expect to collect benefits longer, so that is an investment challenge for plans for those who are in some type of hybrid plan. there is a need to look at how long you will need the money and to plan accordingly. also this emphasizes the need

to save regularly during your lifetime. whether it is in ndc plan or some other vehicle because people are living longer and that trend is not going to be any shorter in the future. host: weight in georgia, a democrat. -- wade in georgia, democrat. caller: i have a question for both gentlemen's. what has affordable care act impact -- what impact has affordable care act had on the state? guest: tennessee has not expanded medicaid and we do not run a federal exchange in our state. the federal government runs the exchange. so in terms of state government it has not had that much impact. it has impacted our version of medicaid because as people who were eligible for a sick medicaid who have not signed up, it is called the woodwork

effect, they came forward and signed up for the program which is basically a two thirds federal program and one third state match. guest: in washington, we had already expanded our health care program, so when the affordable care act was enacted, it actually lowered our cost because the federal government came in to help and pick up the cost of some of the health care that we were already providing. so it lowered our state expenditures by i believe a couple hundred million dollars. it was very effective. we have our own state exchange which we started before the federal care act was passed, and so we were able to get ours up and running. it has been very effective. one of the effects of the affordable care act has actually been to bring down costs for health care. that is one of the things i know cbo just did a study that suggested that the affordable care act is actually resulting in lower cost increases. host: ted from jackson,

tennessee. caller: i have a comment, not a question. this is for mr. willard. first about -- mr. lillard. first of all i was looking can give me an answer, anyway, a lot of kids have had minor drug sellers, and they have less than one month in jail and they get out and cannot get a job because it is on the record as a finale. -- record as a felony. they are not murderers or anything, i just wondered if tennessee is making any progress and i will listen to off-line. guest: thank you for that question, ted. the treasury department and my role in tennessee, i do not

directly address that. i would urge you to talk to your legislator or senator or state representative. they have various bills at various times to change requirements and to deal with the reality that you speak of. host: we have about 10 minutes left with our discussion with jim mcintyre and david lillard. i'm going to ask both of you, we asked about the largest revenue streams for your states, what are the biggest drains on the state budget? guest: one of the biggest expenses in tennessee, the ten-year program. the medicaid program i spoke of earlier. even the one third state match roughly that we put in is a significant amount of money in terms of general fund revenue for our state. that is billions of dollars, so that is significant. there are others but that is the most. guest: in washington, it is for k-12 education. our constitution has one of the strongest requirements that the state fully fund a-12 education.

and amply fund and currently, we are having a disagreement between the state supreme court and the legislation as to whether or not they are living up to the constitutional requirement. host: your two examples, are they pretty much the trend across all state education health care? guest: in most states. in tennessee k-12 education is a significant portion of our budget, so that is probably number one and number two in most states. host: let me ask both of you this, what impact is washington have on your states? what is the biggest challenge for both of you in dealing with washington? david lillard, if you want to go first. guest: having continual policy with respect to invisible bonds. keeping the tax exempt status of those bonds. aiding is in way of college savings and making commonsense improvements to the college savings plans for the country.

also, we have the issue of things like gas tax and a federal road funding and such. that is an issue for our state as it is for many states on whether it will continue and how. host: that is a debate happening in washington. the highway bill needs to be extended and a debate over what do you do about gas tax. guest: in washington, the senate on a bipartisan basis, just past and 11 sent gas tax increase. it is a big topic in washington. we have a lot of transportation and we are building some major replacements and transportation systems. for us, it is a major factor and to have a washington not be able to kind of come to terms on how to fund highways going forward we could actually use some help. gas tax revenues are on a downward trend. people are driving less. they are using more fuel-efficient cars and as a result, we are seeing that gas

taxes is a revenue source -- as a revenue source for transportation is beginning to dwindle a bit. we could use some of federal assistance and in thinking about how did we come up with an alternative to that for transportation finance. can we get developing taxes? host: they quickly, has your state had to raise the gas tax? guest: not in tennessee. as a developer i believe we should have a new construct before we raise it. guest: we raise in 2003 by a nickel and we raise in 2005 by almost $.10. they're are talking about at least another $.10 coming up. host: steve from florida, republican. caller: i have a question, why don't they expand you bonds where they have union workers investing the union bonds where they will causally create new

jobs and they can get a lot of things accomplished, through -- schools, bridges, and just have the unions primarily selling bonds to the union workers. guest: great idea. i have done that in washington. we do a retail sales once a year, and i have had several business leaders from the business officers from the unions come to me and say, let me know when those retail sale is coming. we would like to buy some of our own state's bonds to invest in washington. host: david lillard, let me give you this next call. caller: thank you for taking my call. state treasurer, he recently in the state house in tennessee a

measure came up about the governor's proposal, which he was working with the president on the two year free college and you would think that governor haslam working with the president on the two year college and in tennessee health care, it would be well received. but yet still, the state house of tennessee is still against that. so, i mean, how do you get that? and when you have the state of tennessee in the lottery and is supposed to be going into education and tennessee has one of the largest lottery returns ever, and we get no response to our schools. guest: we appreciate the question. i think number one, we do have the tennessee promise in tennessee that funds free community college for residents of our state. it is a direct result of governor haslam.

the president says we should adopt that for a national program and that is a matter for national debate. i do not think there is a real debate in tennessee about how much good tennessee promise is going to do. it will do a lot of good. the treasury department of tennessee makes that possible by investing those excess lottery proceeds to produce money for the program. host: some states have also moved toward having casinos in their states to help fund education. putting that on about for voters to decide if that is what they would like. what about your perspective states. guest: we have the lottery in tennessee, but i don't see casino gambling coming. guest: we have some gambling in washington paramount is on indian reservations, and that provides revenues for their government operations. there have been, in the past, proposals for gambling expansion in washington.

what we found is that the only way we will actually get more money out of that is to make washington a target state for people to go to to gamble. people don't really feel like that is washington state. that is not an image they want. host: livingston, louisiana johnny. independent caller. caller: my question is directed to the person from washington state. i understand that cannabis has been legalized like colorado. i understand that colorado is benefiting from the taxes coming from their. i just wondered if you feel like that the legalization has been positive or negative? and what is being to what the taxes received -- being done with the taxes received from the sales? host: if you want to weigh in. guest: briefly, we just started

recreational sale of cannabis in washington state. that revenue stream would be about $25 million for the first couple of years. host: $25 million? guest: 25 way dollars. that is not a lot of money when you have the state budget, but it is new money back is coming in and came in better than expected. i think it was about $30 million or $35 million for the first year. it is a new industry, startup. seattle only has one or two double stores. some of the local governments have not been very excited about providing space and they can actually say, we don't want any retail or recreational sales in our location, even though it is legal, they can keep it out. it is a small piece that is starting and we will have to see where it goes. we have to get the pricing right, because there is a black

market there. the tax that we imposed on it is pretty significant. host: what percentage? guest: somewhere around 25%, pretty high. the tax that is imposed makes it difficult to sell it below the black market price. host: has that been the only challenge to this new revenue stream? guest: there are several other. one is the fact that under federal banking law and regulations, many banks are concerned that they would be pulled back or the feds could come after them if the department of justice changed its tune and said we don't want to allow this to happen. so it is very difficult to get the money off the street if you can't have these businesses with a bank account where they can do transactions electronically. host: your overall state budget, you just said. what is the number? guest: it is about $16.5 billion

or 17.5 billion dollars. currently, it is likely to grow up as we increase education spending. guest: more than $30 billion including state and federal funds. host: there is a big difference. $16 billion and $30 billion. why the difference? guest: population is different. our population is smaller than that of washington state. economies are based in different areas and with issues like that, those are things that determine the size of your state budget. tennessee is a conservative state in terms of that. guest: that is just a general fund. overall budget is probably twice that. about $32 million. host: lets you from jim the house is about to gavel and for morning session, so a quick question or comment. jameson -- jim in winston-salem, north carolina.

caller: quick question, is there a proposal to try and collect medicaid long-term care cost from a state after a beneficiary use those costs ties? is there a proposal for that and what you gentlemen think about that idea? i may have misunderstood, so i would appreciate the clarification. guest: there are some provisions in tennessee law that are permitted by the federal state that allows recouping costs. we do not recoup long-term care costs, generally unless there was an issue. at the moment, that is not something we are looking at in tennessee. host: jim mcintyre? guest: i'm not aware that we are doing anything like that in washington. host: before the house, let's wrap up. biggest challenge is going forward on state-level? guest: funding for transportation investments and funding for schools. host: and the federal government

impact on that? guest: in terms of attacks and the visible bonds could drive up transportation cost dramatically if they start taxing. guest: in addition, investment market is an issue for us because as he indicated, a lot of pension earnings come from investments. host: