On voters and state borrowing
Published: June 3, 2011
Time posted: 7:52 pm
RALEIGH — Despite their protests, Democrats in the state legislature can’t get around a simple fact: It’s now been 11 years since legislators asked for North Carolinians’ permission to borrow money.
Nonetheless, legislatures controlled by Democrats have authorized more than $3 billion in borrowing during those 11 years.
Legislative Republicans want to end the practice of taking on debt by “special indebtedness,” bureaucratese for state borrowing that doesn’t require voter approval.
That inconvenient fact, the total lack of traditional borrowing since 2000, is surely their biggest stick to beat back critics of a proposal to end nonvoter approved state debt.
Traditional borrowing — typically done to build schools, university buildings or prisons — involves putting a referendum before voters. If voters approve, as they did for major university and community college construction back in 2000, then the state treasurer borrows the money by issuing general obligation bonds backed by taxpayers.
The bonds are typically paid back, with interest, to bondholders over a 20-year period.
That’s how it used to be done. Then came certificates of participation and other forms of borrowing that the courts said weren’t really backed by the “full faith and credit” of the taxpayers. That interpretation meant that the politicians didn’t need voters to borrow money.
And lo and behold, the state’s general fund-supported debt rose pretty dramatically.
From 2001 to 2005, the total debt doubled, from $2.8 billion to $5.6 billion. Annual payments on that debt, paid by taxpayers, increased from nearly $300 million to nearly $600 million.
In the years since, the debt and debt payments have been fairly stable, with payments on the debt staying in the $600 to $700 million range.
The figures show North Carolina to still be one of the more frugal, fiscally responsible states in the country. Those debt payments represent less than 5 percent of the state’s general operating fund.
Too bad that the federal government can’t say the same.
Although the state’s financial responsibility may be better than most states’, it’s not as strong as it once was. By any measure — on a per capita basis or based on the size of the state’s economy — state and local government indebtedness is significantly higher today than it was two decades ago.
House Majority Leader Paul Stam, a Wake County Republican, is a key supporter of legislation to end nonvoter-approved debt.
He raises a important issue in the debate: “If all this debt was responsible and a good idea, why can’t you sell that to the people?” Stam recently asked his Democratic colleagues.
Elected officials who fear a vote on debt are really frightened of their own inability to lead and inspire the people who elected them.
Legislative Democrats enjoy some high ground, too. They didn’t borrow recklessly in the absence of voter-approved debt.
But there’s no reason to believe that they couldn’t have convinced taxpayers to support the same worthwhile building projects while asking for their acquiescence.
Scott Mooneyham writes about North Carolina politics for the Capitol Press Association.